All Forum Posts by: Tom Goans

Mehran,

I had excellent luck with this idea. Most properties were well cared for. You always get some that have a different opinion of the terms clean and good condition. But it was far better than when they were just tenants who have been trained to think they are pouring their money down a dry hole.

There was less turnover rate.

My monthly rental rates were much above the other properties in the area.

I have a rule of thumb. I do not inspect properties. I respect and value privacy and allowing the people to quiet enjoyment of the home they are buying. Just like a banker does not come by your home, even though the Deed of Trust probably allows by some interpretations. I did drive by occasionally to make sure there were no dead autos or campers in the front yard.

My agreement states no pets. Yet, I would occasionally have people bring in pets. I left them alone. Now I have a place where pets are allowed. Problem solved.

My turnover costs were general very low and about the same each time ... clean the carpets and paint at least one wall to give the place a fresh smell.

I stopped doing lease only back in the 1990s because of the tremendous success of the lease-option concept.

I found there to far more advantages to the lease-option than disadvantages. This better fit my business model and lifestyle. It is not for everyone, but it works well for me. At the least, my tenants seem to have more bounce in their step. Is it because they are buying their home and not just paying rent?

Sometimes we create our own problems when we try to squeeze every penny out.

Rob,

It is best you operate your business the way you feel best and I will do the same.

Rich is correct. The varibles to consider are a very long list. The cost overruns could eat up your dream and cost you many nights of sleep.

If you need to ask the question, at the very least you may want to consider bringing in an experienced partner. A builder may be an idea. You supply the land, the builder does everything else.

Here is how I solved my time management concerns with my rentals. Lease with Option to Buy. The option is not exercised until I received 100 percent of the purchase price and all lease payments, fees, services charges, etc. due at the time the lessee wants to exercise the option to buy. The agreement states the lessee is 100 percent responsible for all maintenance and repairs. If the P-trap leaks, they you fix it.

This reduced my management to making bank deposits. I love making bank deposits. I had more time to focus on more investments.

It also helped me to rent the places faster and find better tenants. I continually stressed they are buying their home.

For those investors who are worried about the property being bought and losing the cash flow, in all my time, only one property has gone the distance. Plus, properties need more attention with age, thus, there is a reduction in net income. By rolling the property, there is an opportunity to find newer replacements that need less attention and may provide a greater net cash flow.

Great point Steve. Don't let it out that one got me. My reputation will suffer.

From what I later learned, this young couple got into an argument that got heated. The police were called, he was put in jail, and she moved back to live with the parents in another town. I guess he got prison food instead of pizza.

The rental business is full of unexpected surprises. And, it will really teach you a lot about people and life in general.

Our government employees in Washington D.C. would benefit greatly if they left the marble hallways and managed a number of residential properties. Laws would change.

I have many years of consulting in the hospitality industries, including restaurant and bar. My former girlfriend's father founded a high-profile steak restaurant in Amarillo, Texas. I have dear friends who own restaurants.

After the founder died, the family continued to operate the Big Texan. Even though the sales numbers where in the multiple of millions, at time the business could not meet payroll or pay the vendors when the invoices became due.

An industry study reported that 80 percent of the employees will steal from you.

Ask any lender, the failure rate is astronomical.

My 2 cents, run from this idea of getting in the restaurant business. Being a trained chef is not business training. The girlfriend I previously mentioned is a university graduate with a degree in hospitality management. However, she had no ability to manage the business. Her family fired her and so have 4 other companies.

I have been hired by restaurant and bar managers and owners to create methods to help them manage inventory and track theft. My methods are so good, that one owner was having employees arrested during a lunch or dinner run.

I am telling you, this is an extremely tough business that makes others seem like child’s play.

Of most important, consider the worse. What happens should there be challenges for your friend? What happens to your friendship should the plans not work out? I suggest you keep your friend as a friend. Eat at his restaurant. Just do NOT loan him money or go into partnership. 20 years later, the family of my former girlfriend still hold animosity towards her for failing in her leadership of the family restaurant. This is family, what about your friendship?

Great points Tevis. I would think there are also different rules that apply should an active member be deployed. Especially should the rent become delinquent.

I understand. I had a bank in Walsenburg approach me to buy their REOs. I do very thorough research that includes checking the recording records. The one property that caught my eye, they took back about a year ealier. Yet, the Deed was not recorded. The bank had no idea.

Closing day can be exciting ... and then closing day can be disappointing.

My military friends tell me the government issues an I.D. card that all are required to carry. I have one friend who has been retired from the Air Force for more than 10 years that still has a card issued by the government.

If you get the person's rank, you can search the Internet for the monthly salary for that rank.

Mark, I agree with you. I omitted that I already have questions I like to include in the conversation. I have been doing it so long that it is almost as natural as breathing. Organized thoughts prior to the conversation are important and help it to be a more natural conversation.