All Forum Posts by: Neil Hauger

I am trying to purchase a 4 plex with an agent I have a buyers agreement with. I have placed two offers on this property, neither have even garnered a counter. Asking price is 255K. I offered 235K the first time. That offer expired and then the property was taken off the market. A few weeks later I told my agent to write the second offer at full price with contingents I get to see the units and the financials as part of the contingencies. This full price offer got no response either!.

In talking to my agent I found out that this seller has a number of properties that he wants to 1031 into a large property but they have not identified the larger property. My agent has a 14plex he is trying to sell and divulged to me he would like to get this seller to buy that as part of the 1031.

I told my agent with this new information the price is not the issue, the timing is the issue so I am no longer in at the full price. I can use the sellers desire to sell a package of properties in a relatively short time as my leverage to get him to come down on price. My agent said he did not feel the seller was hard up to sell so he would not come down as he has a few buyers ready to go if I do not buy this. I asked so why then has he not sold them? If he had to he could but a 90 day close contingency to buy him some time to ID the larger purchase and then do the exchange??

My suspicion is that my agent is playing both sides. He has a buyer (Me) and a potential larger price property this seller can 1031 into. I had looked at the property myself but it did not fit my analysis. I think He needs to buy time to help sell the other agents properties and I suspect he is keeping me on the hook for this 4 plex while he and the agent sell the other units.

Basically, I suspect collusion despite having a buyers agent agreement. This agent and me are fairly good friends and I really hate thinking this way but my suspicion is I am being strung along. I have even suggested that I am at the next presentation of any offer I make just so I know my interests are not being leveraged in some way as I think I was here.

Comments?

The best you can do is your best effort due diligence.

1. Credit check/criminal history check. We do this using a service for every tenant and provide them a copy. It costs us $50. Make sure there is a non refundable charge for this.

2. Reference letters. Although they can be meaningless, the effort will show you are looking and possibly scare away bad renters. If they provide letters, ask that person for another name and contact of someone not on the list whom can provide info and then call that person yourself.

3. Have a lengthy list of do an don'ts and explain that you run a tight business which is professional and thorough. You mean business! Provide this with your lease. Reading this list, signing off on it if you move forward trains your tenants forward from the start. Have a personal sit down with them and go over it line by line together. Again, set the standard from the start. You are running a business!

4. Meet them in person and make sure your first impression of yourself says "I mean business". Dress professional, be pleasant but in control, you are not buddy buddy, you are the owner of the business. It sets a high standard from the start.

5. Be consistent in this due diligence for all tenants to show your process. Protects you from discrimination issues.

6. Be sure to clearly explain the ramifications of trashing your place up to and including legal action if need be. Then do it if you need be!v No idle threats.

Finding good tenants is always a crap shoot but the land lord can do these things to at least try to weed out the obvious bad ones. The simple process of looking into history, credit, background and references has scared away many bad tenants for me. The just fall out on there own. The process also gets them nervous and talking and then they reveal even more information to me. It my "spidey sense" starts talking to me it us usually because my experience is sensing something. Listen to that and don't cut corners on your processes. It can be hard when you are looking at a lost month rent but the lost rent can often be much better than the mess you create because of the bad tenant. Hope this helps.

Thanks for the input. It is a vacation rental that I use. If you look at the 800/mo payment vs the 4000K I get in rent it does not look good. But, I have already matched that income this year so I expect that the rent situation will change for the better going forward. The land in fact has a much higher value to me than just the ROI I get from the rent. I enjoy working on the land and enjoy the recreational use my kids get to experience. Cant put a number to that.

My tax guy says the tax write offs I get don't over ride the mortgage payments annually so there is not an advantage there. I get a lot of personal enjoyment out of managing the woods so that is part of the my thought process so selling is not something I want to do. At least at this point. In fact, there is a iron ore mine that is likely to open 5 miles away so I expect a jump in the value of the property as development land in this city is limited. The city sits between a state park and a national park. Sell in 5 years may be a good idea once the mine goes in.

The ROE part makes sense but I it is not that simple to me. The pure pride in ownership and pleasure factor is over riding my financial logic! I have plenty of $ in the market, in savings and in earned income so this "spurge" is worth it in my opinion . If anything, it is a safe place to park this equity. I can always draw against it some day.

So the question still is pay off and not have the burden of debt or use that 87K to purchase cash flow props before the rates go up? I will own 9 doors very shortly so I have a nice portfolio. Enough for now at least-I am 50 after all. I want to see them get paid off in the next 15 years as they will give me plenty of passive income. Paying this debt off also free's me of my last debt (not including mortgages of course) so that is attractive.

Maybe I pay of 1/2, invest the other. Not a bad idea.

II think I may have answered my own question. I appreciate the opportunity to lay this out. I appreciate the input.

Ok, I have an 87K mortgage on a vacation property I currently rent. I just started renting it last year and grossed about 4500 in total rent. I think I will double that this year at the pace it is renting.

I have expenses for cleaning, sanitation and PITI of course. So my net is somewhere south of that but not important to this question I do not believe. I can write a check today and pay the entire balance or, keep the mortgage which is sub 5% on a 30yr fixed mortgage an invest that 87K in a few other cash flow properties. I am leaning toward paying it off "one less thing" Forest Gump.

I guess I am leaning toward just paying it off. i already own 5 doors, and I plan on a 4 plex purchase shortly so, I have a nice nest egg of property to grow with, create the coveted passive income. If I pay this off I am 100% out of debt except primary mortgage and the rental investments! Opinions?

welcome shout out from the Midwest Yari. Think of this as a get rich slow scheme. Persistence and patience. Develop a trusted team of advisors. The team I am building includes a realtor, contractor, lender, CPA and lawyer. Also, find a software to analyze properties unless you are good at spreadsheets. I'm not so the software really empowered me. I use property tracker and property evaluator currently. Also, be a student. Start to listen to podcasts. They really help develop your knowledge base.

Take it slow. When you do findable house due your do diligence with the tenants. Expect work and issues. This is a hands on active investment but worth it. Good luck.

Brett, thanks for the input. All my purchase cash flow day one. The rec property I bought for me then thought "hey, if i can rent this place out I can take the money I get and buy new tools, farm implements, tree stands etc. So, getting rent is just making the bleed a bit easier to take. But I agree, rentals all cash flow day one with a full analysis or no purchase.

As for handling more debt... I guess for me it depends if I get involved with another Med Device company or not. If I do, income will be stable for a few more years (3-5 hopefully). Then I would take this low interest rate market and make a few more acquisitions. Use the cash for the down stroke. A good place to be.

Matt suggests taking basically suggests reinvesting profits into paying off properties I already own. Good point and yes, I agree. Kinda doing that but likely need to do the numbers to see what that timeline is.

Boil it all down, no easy answer. comes down to personal decisions. Fun to discuss though!

I think we are taking a bit of each of your advice. 1. Sit on the cash for awhile. 2. Finance the 4-plex as rates are so good. See where we go from there.

Ok, really opening a can of worms here but I am interested in some diverse opinions. Basic question: Should I pay cash for properties or get them financed and leverage myself.

Background. I plan to retire professionally in the next 5 years. At least not do my current job. I am 50. Debt free except primary mortgage and a rec property ( i am renting it, 50% of annual debt covered at this time). My personal and investment goals/desires are to be home more time to enjoy life, spend a lot of time with my kids, not worry about meeting debt obligations all the time, excercise etc. Live off of my passive income, sell some RE with my newly acquired license and supplement that with income from Brokerage funds. I am getting a real estate license so will work at that, but realize that those earnings will not likely be a full replacement for my current income. So, cash flow is king for my investments and goals. I have the cash to invest and my thoughts are if I use it, I make immediate cash flow and can cover my annual expenses with approximately two more multi family purchase. I have analyzed a few deals and from what I can tell the cash flow from them combined with what I have now, I am covered 100% if all goes well. Of course, a few vacancies and I can fall short monthly. Hence, I will supplement with my RE sales once I get rolling. That is the plan.

The idea of not having any debt ( not including my primary mortgage ) is attractive to me. I have been working toward that for some time and I am 80K from that point (80K balance on rec property) My investments are all cash flowed very well so I do not include that as my debt even though officially I guess it is.

I have the ability to pay off all my investment properties 100% in the next 1.5 years. I am to receive some stock pay out from my recently acquired Medical Company.

If I boil this all down I guess I come to this. 1. leverage my self and then carry the debt until it is paid off (or maybe never paid off). Or, 2. simply pay cash, bank the cash flow and live off that (plus whatever supplement income I can earn with RE sales). I like the simplicity of the cash deals. The thought of always outsourcing the debt to my tenants is possible but potentially, has no end in sight if I keep following the finance/buy model. I am rambling a bit, but I hope you see the basic issue here. Debt free or financed?

thanks for the tip j Martin and the welcome ZE. Appreciate it.

Hi Brandon,

I will keep listening and will try the key words. Podcasting is cool, even contemplated trying my hand at it for my industry some day. Keep it up.

N