All Forum Posts by: Mariah Jeffery

A few times a month, I get tips that are usually something like "So and so is really sick of being a landlord, and wants to sell his properties ASAP." I got one such tip last night. Potential sellers own a duplex and a triplex, purchased in 2005 for more about what they're worth now and certainly a whole lot more than what I would pay for them.

Typically in situations like this, I call and say something like "I heard you may be interested in selling your property. I'll be very straight with you, so I don't waste anyone's time. As an investor, I am a bargain hunter and never pay more than the tax assessed value [in my area, this is designed to be 20% below market value]. However, depending on several factors including the condition and rents, I often offer significantly below the tax assessed value. On the plus side, I can close quickly and take care of any deferred maintenance for you, so you don't have to worry about prepping your property to go on the market."

Is there a more effective way to approach these potential sellers, without wasting a lot of time before they tell me they want full retail price?

Welcome, Dan! Good luck with your endeavors!

I have, on several occasions, recommended to newbies that they invest in the stock market instead of RE. This is because they were considering buying a rental where the rent would barely cover the mortgage, and would get a much lower return than the market with much more work.

On the other hand, my properties are in the 1.5-2.1 percent range. I projected that they'll earn an estimated 20.6 percent IRR over the next 30 years, and guestimated the stock market's return will be 9 percent. The roughly $150K or so I've invested at 9 percent should yield about $1.8M after 30 years when I'm ready to retire. However, at 20.6 percent, it will be worth about $34M. Of course, these are estimates with a lot of assumptions, but you get the idea.

I have a full-time job, so fix-and-flip and wholesaling are too time-consuming for me. The only thing I have time to do are analyze deals and buy properties that I turn over to my property manager to manage.

Mack -

I was in your shoes less than 6 months ago. I did have one duplex, but in the 2.5 years after I bought it, I couldn't find any other good deals and was getting very frustrated. Now I have 14 units! The key was being very, very patient and waiting to find good deals. Finally, I met a motivated seller who had 60+ properties and didn't want to list them all of the MLS and flood the local market. Plus, he was scared of his tenants moving out if a bunch of people started looking at the houses and they found out the place was for sale. His only method of advertising was word of mouth, so as you can imagine, he wasn't getting far selling them. I was able to buy 4 properties from him at about 30% below market value, and these properties needed little or no work and had tenants in place!

The amazing thing that happened next is that I bought a property off of the MLS. I noticed a 3-bedroom house listed for $59K, and it's market value is ~$80-$85K. I called the listing agent and asked her why it was priced competitively. She said the landlord lived out of town and was having problems managing and maintaining the property. It needed some cosmetic repairs (new flooring and paint) but nothing major. He needed to sell fast, because he was in danger of foreclosure. I ended up buying the property for $49K and I have a tenant moving in next week at $795/month. Not bad for a single family. I later found out the seller had to bring cash to the closing table. He paid $65K for it in 1998!

The moral of the story is - be patient, stick with the course you're on, and good things will happen. It won't be easy, but it will be worth it in the end.

Good luck!

MJ

I wish my husband would be more involved in our rental business. We both work full time, 45+ hours/week. His dad is our PM, so you'd think he'd be the one who'd talk to his dad most often. Nope. When his dad calls, he hands the phone to me and leaves the room. He at least pretended to be involved in our first couple of deals. Now I do the analysis, decide what to offer, and he says "Whatever you think, honey." I make decisions about when to evict, when to raise rent, and do all of the bookkeeping on my own. Of course, there are advantages to this, but I'd rather have some support. At least that way I can't be solely to blame if it doesn't work out!

I forgot to mention that this is very common in my area. I recently bought two that have multiple structures on one lot, and I know there was at least one more similar sale within the last 6 months, so comps shouldn't be an issue. However, we may run into the issue that there are too many structures on the lot and the property is grandfathered in (since it was built in 1928) and if one burns down, the city would not allow it to be rebuilt.

I'm interested in purchasing a property that is currently rented as a 5-unit. It's got 4 structures on it - a duplex that at one time was rented as a single family, and 3 cabins. It only has 4 gas and electric meters, so I probably would prefer to rent it as a 4-unit when the current tenants move out, since the current landlord is paying all utilities on the duplex/single family. The property is zoned commercial. The county records/tax assessment have it listed as a 4-unit property.

Thanks,
MJ