All Forum Posts by: Michael Rossi

Mindlessroller,

Operating a rental property business is all about the numbers. Your plan does not cover what's important. Being successful with rental properties is dependent on cash flow and equity. Buying at a big discount is a better way to generate cash flow than putting down a big downpayment.

If you REALLY know what you are doing, you might make $100 positive cash flow from each rental unit. Therefore, to make any significant money with rentals, you need a lot of rental units. How many rentals can you afford to buy if you put down 25% to 40% on each one? In addition, buying at a big discount is your insurance that you can get out if you decide that rentals are not for you.

Hiring a management company and having paid maintenance sounds like a good idea, but it is not. That 10% of your gross rents that you spend on management will eat up a bunch of your potential income. The same is true of maintenance. As a rule of thumb, your spendable income will at least double if you do your own management and maintenance.

The key to being successful with rentals is to really understand the business. The vast majortiy of new landlords fail in a short period of time. The number one reason they fail is lack of cash flow. The number two reason is tenant issues.

I would recommend that you study very hard and really try to understand the real world operating expenses and tenant issues before you buy anything. You should also go look at dozens of properties in your target investment area so that you KNOW your market. Finally, you should develop a short business plan that clearly indicates what you plan to do and HOW YOU PLAN TO MAKE MONEY! Be specific.

You should be able to do all this in a couple of weeks if you are serious about succeeding.

Good Luck,

Mike

The BEST way is to go look at 50, 100 or 200 houses (whatever it takes) in your target investment area so that you KNOW the value of property in your area. As an experienced investor, I almost never get "comps" because my opinion of value is more accurate than that of any realtor or appraiser. Realtors and appraisers work on past sales and can slant the numbers any way they like. Did you ever wonder why appraisals come in at almost exactly the loan amount for home sales? It's a big joke.

In my opinion, if real estate investing is going to ba a serious venture for you, then YOU must become an expert in your local area. If you look at (inside and out) dozens of properties in your target area, you will KNOW the values as opposed to needing someone else's opinion.

Mike

strive for the life,

I'm near Columbus. Finding cash flow properties is not easy in ANY market, especially if you are using real world expense numbers. It is hard work here and I'm sure that it is hard work there. The vast majority of new landlords don't make it because they pay too much for their properties. My advice is do whatever it takes to buy every property at a BIG discount.

Good Luck,

csickler1,

Most states will not allow you to evict a tenant in a month in which you accept partial payment. Therefore, if you accept partial payment, you lose part of that month's rent plus all of the next month. That's why you should not accept partial payment. In addition, most professional landlords and property managers begin eviction proceedings immediately upon the tenant being late with the rent. This is a business, not a game of hide and seek. In my businesses the rents are late at 5pm on the 4th. We post 3-day notices on the morning of the 5th and file the eviction in court on the 8th.

You could number the computer receipts and use carbon papar or just have them sign a second copy.

A couple of thoughts:

First, never accept partial payments (landlording 101).

Second, print the receipts off of your computer. You can design unique forms with programs like Publisher, etc.

Mike

Noobdog is 100% correct. You can make all the excuses you want, but being a realtor is a GREAT way to be an investor. The side benefit is that you will make some extra money along the way, which certainly doesn't hurt when you're trying to start a business.

The advantages to being a realtor are:

1. extra income
2. better knowledge of the market
3. access to the MLS
4. networking with other agents
5. networking with other real estate professionals such as title agents, lawyers, bankers, etc.

The disadvantage to being a realtor:

1. you must pay fees to the broker out of your commissions

You're right, I don't think that it's worth it either.

Get SERIOUS!

Nightowl,

I am a little concerned that you have taken real estate classes for 2 years and that you head is still swimming. I guess I really don't understand that. By comparison, when I started I studied hard for one solid week and then bought my first rental.

You said in your post that you want to start a rental business. If that is the case, you should ignore all the other strategies and learn the rental business. The truth is that the vast majority of newbies fail in a short period of time. The number one reason that new businesses fail is a lack of cash flow. Therefore, it is imperative that you learn this subject well. The number 2 reason that new landlords fail is that they don't know how to deal with tenants. You should also learn this subject well.

In my opinion, paying a mentor is a waste of money. There are many good books available and there are many successful investors at your REIA that will help you for free. Learn everything you can from books and then make friends with a SUCCESSFUL LANDLORD at your local REIA. Your new friend will be glad to help you for free (although don't expect them to spoon feed you the basics).

Starting a real estate business should NOT take years. If you're serious, study hard for a month or two and then get started.

Good Luck,

Cindi,

It is hard enough to make money close to home. Trying it at a distance can be a disaster. Just ask all those California investors who have lost their rear end throughout the midwest.

Good Luck,

Let's look at this logically. If they were successful in their wholesaling business, they would be making a lot of money. In that case, they wouldn't need you. That leads me to believe that they are failing just like the vast majority of newbies who don't succeed.

People do NOT offer genuine business opportunities because they want to "give something back". That's just b.s. meant to make uninformed newbies feel better about parting with their money.

If these guys were legitimate businessmen, they would be looking for a successful partner, not a newbie.

My best advice is to study hard and learn the REI business. Take on an extra job if you need to. Pay your bills and repair your credit. Then, start your own business and control your own destiny.

DON"T FALL FOR SOMEONE'S SCHEME!

I agree with BiggerPro that the amount of money you put down can control the amount of cash flow. However, most investors don't have an unlimited amount of money to put down. Therefore, the number of rentals they can buy is very limited.

I do things a little different. I believe that the money with rentals is made when you BUY. I buy every property at a huge discount, which ensures that I will have a positive cash flow for every rental. Is it easy to find properties at a huge discount? NO! In fact, I haven't found anything to be easy in the rental property business. However, if you want to rapidly build a large rental portfolio that generates enough cash flow to live on and build a significant net worth, that is what you need to do.

Please note that I live in Ohio. Prices here are not insane like they are on the coasts. If you live in California, it may be VERY difficult to find properties that cash flow without putting money down.

Good Luck,