All Forum Posts by: Bryan L.

@Seth Mosley John T. Reed has some great books.  And you will also find that most people here on BP use a rule-of-thumb that expenses with be 50% (actually, a little more than what John T. Reed suggests).  Now remember, this is an over-all average.  Most people don't understand math well enough to understand the concepts of variation, deviation, and distribution (think, Bell curve).  Maybe you do, I don't know.  But, taking this idea and thinking about it from the viewpoint of a Bell curve, it is very, very, very possible to come in and grab a small sample size and get any number within that distribution for expenses - 10%, 80%, 64%, 37%, ertc.  Obviously, if the mean is 50% and the distribution is normal, the most like result is 50%.  The odds of getting something else depend on the standard distribution.  What's the standard distribution for expenses on a rental property?  I've never seen data published for that.

Anyway, in a nut-shell, what you have to consider is your sample size (and your time frame).  If you have properties that are running less than 50%, it may be just because you have been lucky so far.  You've been flipping a coin, and it's come up heads 3 times in a row (or 3 years in a row or whatever).  Those same properties that are doing so well for you right now may have a furnace go out tonight, or a roof leak to show up tomorrow, or a $5000 eviction/repairs come up soon.

There are things that one can do to move the mean (45 or 50%) more into one's favor, and also to shift the shape of the curve.  Most of these things have to do with great property management.  But still, over-all, with a large enough sample size, and over a long enough time span, those expenses are probably going to average at least 40% or more.  I mean, you have things that you really can't reduce much like taxes and insurance.  Vacancies WILL happen, and so will maintenance and repairs.  And my PM requires me to pay him.  You also have to realize that it is entirely possible to have MORE than 50% in expenses.

John T. Reed (and others on here at BP) have at least shined the light out to all the newbies that expenses will probably run higher than they might think.  But, unfortunately, most people don't understand the math behind the statistics well enough to REALLY understand this rule-of-thumb.

@Drew Denham You're young and new to this.  You still have a lot to learn, a lot of money to be made, and a lot of money to be lost.  Hang in there.

Also, be careful on this.  In some locations, a utility company can charge the property owner for bills that are not paid by the tenant.  It doesn't happen much at all in my area, but one small town where I invest does that with the sewer bill.  Ask me how I know.

I'm not sure what you are trying to accomplish. But you, or another person, could become a licensed agent and hang you license at a non-Realtor firm (without becoming a Realtor). And then have a Realtor with MLS access make offers for you and list your properties. You could also ask this Realtor to pay the broker at the non-agent firm a referral fee (although they wouldn't be obligated to, but probably would), and then that broker could pay the non-Realtor licensee their cut.

@Sandra Han Tell us more about yourself.  What kind of experiences do you have.  Your profile said that you have no investing experience.  And that's OK, because none of us did at first.  But, I see so many newbies on here who do not even realize a basic fundamental - knowing that one can actually LOSE money in this biz.

Do you own your own home, or do you rent?  Any college education?  What have you accomplished so far in your life?  Have you ever done anything mechanical or electrical (worked with your hands, rebuilt a car, remodeled a house, built a computer, etc)?  Do you have any accounting or project management experience?  Any experience in sales and/or marketing?  Any experience dealing with people?  Especially difficult people?

I ask all of this, because you may not be ready yet to invest - especially not in foreclosures, and especially not long distance.  I am a combo investor/Realtor.  And, as a Realtor, I just about won't assist a buyer in buying a foreclosure as their first RE purchase.  I myself focus on buying and rehabbing foreclosures, so I know and have personally seen the risks.  I often see foreclosures hit the market for sale, and then see them back on the market for sale as a foreclosure again 2 or 3 year later (same house, new house-loser).

If you have an internet connection, you can get started.  I recently made a little money on a deal that was located about 250 miles from me.  And I never got into the car to go see it.  If it can be done from 250 miles, then it can be done from 2500 (or more).  But, be careful.  One can lose money in this biz too - especially when additional risks are added in like this.

I don't consider there to be any difference between maintenance and repairs.  I think they are both treated the same for income tax purposes, so I see no need to separate.

@Drew Denham I don't know the laws in MI.  And I'm no attorney and can't give legal advice.  Would this be considered "stopping utilities on a tenant" or just "ending your service"?  I don't know.  People do this all the time when they sell a house.  They call the utility company and say, "hey, I'm selling the house on the 23rd, please take a final reading on that day and send me a final bill".

"Yep, hello.  My name is Drew, and I own the house at 123 Maple Street.  I rented it out recently, so would you please go by and get a final reading tomorrow and take it out of my name?  Thanks."

Will it be a good deal?

Who knows?  You haven't provided any numbers.

You are looking at this totally from the wrong perspective.  The only thing that makes a lead (and that's all that you have right now) a good deal is great amounts of equity and/or cash-flow.  Keep reading, studying, and learning.