All Forum Posts by: Alexander Merritt

Never had to go through anything like this but my first inclination would be to just cut your losses and move on. Looking at the situation, the tenant was delinquent in rent payments for 4 months. Even if you were to win your judgment, do you really think you'd be able to collect it? I'm guessing it would be extremely difficult and would take a long time. Plus, I'm not an attorney, but I would think that if you did win your judgment for your full asking value, that you would then not be able to re-rent your unit until the lease was up. Otherwise, you could be accused of "double dipping" (new rent coming in, plus lost rent collections). It just doesn't seem worth all the hassle.

Keep in mind if you collected a security deposit you can use part or all of that money for repairs.

Your best defense against this is to thoroughly screen your tenants. IMO it's better to loose one months' rent with a vacant unit searching for the right tenant, then it is to fill the unit with someone who will cause you more headaches (i.e. damaged property and lost rent)

@Sonya B. My opinion is to steer clear of these types of courses. I've never attended one, but from what I hear, they usually "rope" you in by offering you a free seminar for a day. They get you all hyped up about how it's so easy to make all this money and that they have a proven system to do it and they'll show you how to do it. But they don't do that at the seminar. At the end of the day, they then tell you that if you want to know the secret of how to do that, you can take the training course. Oh and then they'll charge you a lot of money for it... I've heard anywhere between $5-$20k or more.

I don't know if these courses work or not (many people say that don't deliver what they promise), but to me... you can learn everything you need to know on Bigger Pockets (BP), the internet, YouTube, from your local Real Estate Investor Association, etc....

@Kenny Lewis

As @J Scott said... it's really up to you and your lender. Since your lender will be a family member you actually have more flexibility in the terms of the loan then a traditional Hard Money Lender (HML) or Private Money Lender (PML) because you already have a relationship with them and you won't need to go through a big background check.

So, if your family member lender will agree to a 30 year loan, then you can just pay it like a traditional mortgage. If the family member wants their money back with their return in a shorter period of time, then you'll need to work out exactly what terms they'll be willing to accept. For instance, if they want their money back in 1-3 years, you could agree that you won't pay them anything during the life of the loan, but then you'd pay them back fully with their return at the end of the loan. That way you wouldn't have to worry about paying them at all for the first 11ish months. During that time, you'll probably need to refinance the house into a traditional mortgage with a bank. You'd then use that money to pay back your family member.

To refinance, you'll need to make sure that the Appraised Value of the house is enough to cover the existing mortgage, plus any return you've promised your family member lender. So, the most common way to do that is to rehab the property (aka force a higher appraisal). When you get the back loan, then you can draw out some of the equity value in the house (called a cash-out-refinance), or you can possibly open a Home Equity Line of Credit (HELOC) and then use that, plus the mortgage, to pay back your family member.

I hope that answers your question.

@Jay Helms

Hmm... that's a wacky situation. You stated you got several quotes before hand and was just waiting for a closing. The closing was delayed so that pushed out the 30 day quote factor from the broker. I would expect it might change a little bit, but 3X the cost is absolutely unacceptable when just a few days ago they were willing to quote less. I think you did the right thing in choosing a different broker. If the same underwriter can have that drastic of a quote, then who knows what kind of problems you might have with them in the future. I'm not sure there's much more you could have done.

First off let me say Congrats for a great income and no debt at such a young age!

Here's my view. I would say it depends on the kind of life you want to have. Since you are younger, I would probably suggest that you hire a property management company to mange it for you. Why? Because you'll want to have fun with your friends and have a nice social night/weekend life. If you are self managing the property, I'm not sure how much of that will be possible unless you get a super great tenant who doesn't give you any problems.

As an alternative, you might consider doing what I did. Buy a 2 or 3 bedroom house, and just rent out the rooms to roommates or friends. After a few years if you get sick of roommates, just don't renew the lease and you have the whole house to yourself (and/or significant other)

Financially it's a great move as you already know. You'll be able to live rent free or nearly rent free which is excellent.

@Ewan Tong

I'm still new at this but I disagree with @Account Closed. I don't think there is a landlord tenant relationship in place. If you were buying this home as your personal residence, would that automatically mean they are now your tenants until they vacate? Personally I don't think so. Also, you have no verbal or written agreement. In fact, you have written contestation from a lawyer to the opposite! You can't prove to a judge they are your tenants let alone that they owe you money for rent. I would talk with a RE attorney that specializes in evictions to see if you can even file for eviction.

Having said that... it may not be a bad idea to file anyways. This then starts a legal paper work trail that shows that you are not willing to let them live rent free in the house, unless you can work out some sort of written agreement agreed upon by both parties. I would send them an official notice through certified mail that they either need to sign a lease, or they have 45 days to vacate the property from the time the notice is received. Also, I would possibly contact the police and see what their view is. If necessary you might consider filing a trespassing/squatting charge. Again, I'm not sure if that will work, but it will give you legal paperwork form the police saying there was an issue.

I'm not a lawyer and this is not legal advice. This is my own personal view. Good Luck.

Hello Ahmad,

That's a doozey of a question. I'm assuming you mean for fix and flip properties.

I don't think there's one single answer. It's up to the individual investor based on their risk tolerance. Some investors can handle a lot of risk while others don't want a lot of risk. There are so many factors that can influence what makes a good property. It's kind of like asking "what makes a good car". Everyone has different opinions on that. Some people don't like certain brands, while others love them. There are basic things like the condition of the engine and body and tires and interior... but then there are other things like how did the owner treat the car, or was it involved in a crash, is it stolen.... etc...

Again, it comes down to your risk tolerance and knowing your market. Maybe there are areas that are just war zones and you know you don't want to be in, even if the numbers say you can make a really good deal. Others might be really nice areas but perhaps the profit margin isn't high enough to warrant the project. It just comes down to personal risk and evaluation. But, you should get familiar with running the numbers on your property. I'm not an expert in flipping, so maybe someone more familiar with that can weigh in on how to run numbers for a flip. Or search the forums for how to run numbers for a flip.

Seek legal advice on getting squatters out!

However if they are actually squatters, since they are illegally squatting, if you buy the property, you (and a few of your friends) would go to the property and ask them to leave. Once they left, you would then change all of the locks and secure the property. Sometimes squatters will come back, so you'll want to be sure that the property is properly secured. I large dog on the inside might deter them enough from breaking in.

Perhaps the owner is just terrible at managing the property so expenses are high. Perhaps he/she had someone come in and set a sales price for them. Perhaps he/she is an absentee owner and higher someone to sell the property for him and doesn't really understand MF valuations.

 All you can do is put together an offer that you feel comfortable with. Never offer something you aren't comfortable with. If your numbers don't support it, then submit an offer with an explanation as to why you are offering 822K with your numbers for support.

I too am interested in this strategy and would love to hear more.