All Forum Posts by: Ralph R.

Just to excite things a bit I was curious why you would or would not need/want to have your properties all financed in the same way? wouldn't it be prudent to split it up? For instance if you have 4 properties finance 3 at 30 yrs. to 1 or 2 at 15? This way you would split equity to CF any way you want. I agree it depends on what your trying to do or are comfortable with. I bet nobody here has every dime they have invested in real estate. I bet many here have stocks, IRA's etc etc. That provides protection against a catastrophic loss in one investment from causing financial ruin. Wont you have a more solid foundation if all you eggs aren't in one basket? Maybe the right answer is to finance according to your desired out come while affording a risk factor /growth rate you are comfortable with?

RR          

Kathy C

I have 4 mortgages, and the only thing that changed is the down payment.  It was 25-30% instead of 20%.  that being said Its prudent to remember that leverage can be your friend.  it might be prudent to buy a "better house" with some leverage than a "cheapie" that can be paid for cash.  repairs, location, turnovers, etc. all cost money and can all lower cash flow, thereby reducing the return on your investment.    $30,000 buys a $1000,00 rental with a mortgage.  add another $30,000 and you have a $60,000 debt free  property.  the same $60,000 would buy 2 $100,000 properties.  If you did your homework the 2 100k properties should cash flow more than the single $60k property, even though its mortgage free. Plus with the mortgage the tenant is paying your principal for you.  I almost made the same mistake.  just my $0.02 worth.

RR         

Brian

One thing I didn't see mentioned here is the fact that most lenders require a 2 year period in whatever field your career is.  Its ok to change employers as long as you stay in the same field.  If you change fields you will have trouble trying to finance any real estate through a conventional lender, for a year or 2.  Also you are moving out of state?? (I don't know if WA. has any warm beaches?)  if so they may look at length of residency as well.  That's different than moving a couple blocks  Stability is a key thing with a lot of lenders.  check it out first.  just saying.    

RR

Kevin

I'm not seeing why a guy would pay all cash for any rental.  I cant see why an investor would buy one investment property for $100K, when he could leverage them and buy 4 properties for a 25K down payment each?  at least if one goes empty, or needs some repair you still have the others that are performing well.  I agree with @Sarah Cunningham.  buy a little cheaper houses and don't fill the basket too full of eggs.  In the long run it will yield better return on less outlay. 

The other thing I see is the house obviously doesn't meet the 1% rule.  I never look at a listing twice if it won't rent for 1% of the initial cost MINIMUM.  including closing costs.  this is more important in multifamily dwellings as most appraisal's use at least a percentage of the propertie's ability to produce income to establish the propertie's value.

RR

Kujtim

Looks to me like your maintenance might be a bit low....if a refrigerator goes out your maintenance budget is shot.  I don't see any allowance for vacancy's either. 

RR

2 of my properties are turnkey. (Both duplexes) They have worked well for me, as I am a long distance landlord. I will say I think you can make more rehabbing and renting yourself, but you take bigger risks and work much harder. It also requires you to either be in the same town or have a lot more dependable contacts than simply buying a turnkey property.

I have to agree with Ali Boone. The management company is key. My management company also handles the sales for me, and its been a total winner. I tell the Realtor when I am ready to buy, and what I am looking for. She gets with the PM, and together they look for a suitable property. It takes time and patience, but I end up with solid properties, good tenants already in place, and get a rent check right away.

The downside is this restricts me to one location and one market for both buying and renting. No I don't get a super bargain basement price, but I do get properties in good condition that are in good repair, with rock solid tenants. No complainers, no late/short/rubber rent checks.

I have never seen one of the properties, as I felt I wasted the airfare checking out the first property in person. I had a third property I purchased as a turnkey property, but I did have trouble with the first PM. That one was a bit of a headache until I got rid of him.

I am a firm believer that a well thought out turnkey property is less risky, and a whole lot less headache than rehabbing and renting. Buying an established rental allows you to research both the property as well as the rental history, and even the tenant. When you buy a rental that has had the same tenant the last 2 years or more you can be pretty sure the rent will be there on the first. If the seller was a veteran landlord he either trained the tenant for you or found a good tenant in the first place. If not he got rid of them. The hardest part about buying a turnkey property is doing the due diligence, and having the patience.If done correctly I think its one of the safer ways to buy a rental property. The trade off is you won't see as much gain on the investment. (smaller appreciation, higher initial investment) Buyer beware' a real "bargain" turnkey property is likely a troublemaker.

RR

Andres

OUCH!! this exact same thing happened to me. My single worst lesson in property managers. It got even worse. after signing the contract, I realized the management company got all late fees, and if the tenant left early the management company got the last months rent as well. whose rental is it anyway? The contract had an auto renewal every time the property came up for rent with a penalty for my breaking the lease. Here's the catch. my copy of the contract said the penalty for breaking the lease was 50% of the remaining commissions on the tenants lease. The copy the PM had said it was a flat $750 dollar penalty. 2 entirely different pages in the 2 copies of the same contract. The contract was nontransferable, and it said the PM had to send me copy's of all work performed.

Long story short, 2 months in a wind storm comes up and I find out the PM is negotiating for a roof repair with my insurance company. He never told me anything about it. He is doing this behind my back! I don't know what would have happened when that check came to me in the mail and I knew nothing about his negoiations. I stop the $3500 dollar insurance claim and tell the PM I want to pay out of pocket. Total cost for roof repair when I paid out of pocket was $750 dollars. 6 Months in and I am being charged for maintenance and no receipts. Then the renter tells me the handy man tells her he is not getting paid for work from the PM. Funny he's charging it against the rent he pays me! The contract says he must provide me with copies of paid bills. $350 spent with a lawyer gets him a nasty letter and notice we are going to terminate the contract unless he provides me some paid receipts. He complies immediately.

First year passes, and 6 months into the second year (Renter had a 2 year lease) I get an e-mail saying he has merged his business with another company and they will be managing the property. (The contract specifically said it was non transferable) Another call to my lawyer, and some research finds there was no merger of the 2 company's! AH HA!! I have him now. I put the new company on notice that we have no contract and I am looking at another company to manage my property. They are very nice and tell me they are ok with that. I find another PM, and when the company turns over the damage deposits they withhold $750 dollars. This results in a nasty exchange of letters between my attorney and them and cost me another $650.

At this point I realize the money they withheld wasn't mine, but rather the renters. A call to The Colorado Dept. of Regulatory Agency's, a complaint filled out and I soon had the renters $750 back! I never heard another word. I do know as a result of my complaint the PM. did get a full audit of their books.

If I were you I would call an attorney, and find out how to get out of that contract ASAP. If he hasn't got any of your money to withhold, it will be too costly for him to come after you to get any.

A good PM has enough business they don't need a contract with a penalty for early termination. My current PM has been excellent, and even found me investment properties to buy before they are listed.

no legal advice

RR

Hey @Polly Reutov

Welcome to BP. I too live in Alaska, but most of my investing is buy and hold outside. What seminar did you attend? was it in Anchorage? There are a few Alaskans here on BP. I Live in Bethel, and I think it would be very hard to do some of the things here that people talk about in the lower 48. When a house runs out of oil, or freezes at -30 degrees its tough to fix. Sometimes they just wait till spring. Lots of different rules and customs here. I don't know about in Anchorage, I have looked at housing all over big lake, Houston, and some of the smaller areas. Just havn't found the right deal yet.

Good luck!!

RR

It has been my expierience that mortgage companys want 2 years in a job in a new field before they will consider the income for repayment of the loan. When I first started investing they wouldn't consider rent's from my properties as income until I had declared it as income on 2 consecutive years income taxes. Same thing goes for your spouse. My wife had to be in her job 2 years before they would consider her income for any new loans.
RR

I just replaced a roof 1 year ago. Both the insurance company and the building code only allowed 1 layer of shingles. Some places will allow up to 3 layers. I would check with my insurance company as they not only will have a preference, but mine paid the extra to have the old roof removed. they also had several contractors they recomended.
Ralph