All Forum Posts by: Nathan McBride

Be sure to take into account that banks will look at your situation much differently once you no longer show solid W-2 income.

Could impact you access to future capital and borrowing costs/equity requirements.

Just my two cents.

I had never heard of this until this morning when I was weeding out Google Ad keywords of all places.  We inadvertently paid a couple dollars for some clicks on "second chance rental" searches.  Glad you posted the link so I could educate myself.

We try to work with folks as best we can, depending on the situation, but the quickest way to get an application denied is to lie on the application or pre-screening questions.  It's honestly pretty amazing how brazen some folks can be.

We are upfront with our requirements and screening process, and we absolutely keep application fees if denied due to undisclosed background/credit/eviction issues.

Typically, we would keep the deposit if a tenant moves out early, and we clearly state that in the early termination agreement that we and the tenant execute.

In the case of an early termination, the security deposit covers the cost of the vacancy to the landlord.  It is there to make the landlord whole in the event the tenant does not perform according to the original lease (i.e., does not stay the full term).

That said, I have returned partial deposits if no damage and we had another tenant lined up to move in because I don't think it's fair for the landlord to take advantage of the situation to make extra money.  In that case, the amount withheld is to cover the admin costs of the move out, paperwork, new lease, etc..

I have all of my properties in an LLC. That said, you will most likely not be able to close the purchase using conventional financing (FHA/30-yr resi) if an LLC is taking title to the property.

That said there are likely ways around this issue that a decent title attorney should be able to guide you through.

I own several near LSU.  It is a very strong rental market in certain areas.  

Just be aware that values vary street to street in some spots, so be sure to familiarize yourself with the area, pick your criteria, and stick with it.

I second Keller's Millionaire Real Estate Investor. 

IMHO it should be considered required reading for any aspiring investor before making your first offer 

@Richard F. I have not thought about the double deposit from a Fair Housing Perspective, so I'm glad you pointed that out.

We would typically recommend that our mgmt clients to accept a double deposit to remedy a credit score that is slightly below our general acceptance criteria if the prospective tenant meets income requirements and has good rental history.

We do this for every prospective tenant (pending owner approval), so I don't see it being a Fair Housing concern.  That said, I like your suggestion regarding going over and above on the documentation and having it clearly spelled out in our procedures.

My first reaction is that seems like a pretty steep HOA for the expected rent. That will take a pretty sizeable bite out of your potential cash flow for something you do not ultimately control.

One other concern I have in these condo-type deals in a market like BR is the long term appreciation potential.  By and large, we don't appear to have seen the historic appreciation in the condo market like in other areas of the country.

Also as a property manager, I tend to avoid cash-only type tenants, but that may be a personal preference.

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $200,000
Cash invested: $20,000

First deal. Went in with a partner 50/50 on down payment and ownership.

The house needed some work, but it looked mostly cosmetic. I was the first person to look at it and new I needed to act fast, so I made the jump. Learned about commercial lending in the process, as I found out this property would not qualify for conventional financing.

The appraisal came back for more than our contract price (like the real estate equivalent of an A+ on a test).

I still own this one and have used the equity to purchase other properties since.

How did you find this deal and how did you negotiate it?

MLS. The only property I have purchased on MLS.

How did you finance this deal?

Commercial loan

How did you add value to the deal?

Cosmetic updates/repairs and increasing rents to market

What was the outcome?

I still own this property and have used the equity to purchase another nearby property through a refinance/purchase transaction with the commercial bank.

Lessons learned? Challenges?

The property did not meet conventional financing requirements, so I was forced to purchase with a commercial loan.

Also, the property requires flood insurance, but I was able to get it surveyed and recieved a $2000/yr reduction in premiums.

Yes, that is an unfortunate situation, but it does sound like they are trying to make it right. 

The good thing is you are now at the height of the annual rent cycle, so you should be able to find a new tenant relatively quickly.

From my mgmt company's perspective, we do not show units that are occupied, but we do pre-lease units ahead of move-out.

I would recommend getting some professional photos taken for use in pre-leasing in the future.  I would also like to point out that our mgmt co includes that in our leasing fee ;)