All Forum Posts by: Michael J.

Sorry I am using the phone app and accidentally replied to Megan instead of a new post.

@Megan Phillips Sorry for your troubles. It can be hard when you get a bad tenant but there are a lot more that will work out fine. Screening is one of the most important steps in the process. Make sure you review state law. I would also document everything and get a judgement for ALL of the damages. Even though there is no chance you will get anything from this tenant there are two good reasons to follow up with the judgement. 1. It marks their record and could help another landlord avoid a terrible tenant if they do prober screening and check the court records. 2. If this tenant gets their act together and buys a house and then sells it they will have ajudgement and will have to pay you before they get any money. Same with with an inheritance and possibly settlements, can’t remember for sure on the last one but either way if there is a judgement you have a much better chance if getting paid someday.

my area is more in the 70% range that’s good if you can get 80% but the numbers and cash flow still need to work. 

I don’t think it is uncommon to have to leave a few thousand in the deal after the refi but even a few % in after the refi is still a great way to build a portfolio. 

For those of you that do new construction do you hire a GC or do you act as the GC yourself? I know many use a GC for rehabs but wondering if it is different for new construction. Most of the builders I know in my area run it as a business and are the GC.

If you do use a GC any tips on finding a GC that is competent with new construction projects? The people in my local REIA clam up when you start asking about GC's.

How did this turn out?

After being burned by tenants that get behind and never end up paying and lead to eviction I now state in my lease that we start the eviction process the day after the rent is due, but I make sure that is clear form the beginning and if they fail to pay then we charge a late fee and start the process of eviction based on my states requirements.

The reality of the matter is that if they don't take the rent out of their paycheck then they most likely wont pay the rent, if they do then they are borrowing money which will put even more financial burden on them and make it less likely to pay on time the next month, or they are waiting until their next check to cover the rent and then will have a hard time catching up in order to pay on time snowballing into perpetual late payments.

If you really think about it allowing a tenant to get behind on the rent ends up hurting the tenant, you are not helping in any way. When you have a low wage earner they must pay the rent on time with their checks or they will never catch up.

One tenant of mine got a month behind on rent because I allowed it to keep going. I dealt with it for a year trying to be nice to them, I wasted many, many hours writing and delivering late payments and eviction notices, texting, calling etc chasing rent and making payment plans. Oh yeah and they also bought a 60" TV and some other luxury items during this time frame to boot :) . 

In the end they ended up a few thousand dollars in debt, evicted down to the last minute before the sheriff setout, and forced to move in with the guys parents and a several thousand dollar judgement to me for rent and a few small damages.

I much prefer educating them up front with the lease and then sticking to it, filing for eviction as soon as they are late. In my case this tenant strung me along with "I can pay on" and "As soon as we get our tax return" etc. in fact the tax return excuse is what kicked of the late paying snowball that led to eviction.

My mentor does this and has a large portfolio and his results have been great with this system, evictions and late pays have drastically been reduced. It is amazing how people can come up with the rent if they know they will be evicted immediately.

Bottom line is in most cases, especially with low wage earners, if they miss the rent because they spent the money on something else then it will be near impossible to catch up without some big infusion of cash.

From the light research I have done it would only make sense if the area is good and the land might some day be repurposed as another commercial unit and the location makes enough money that it can cover all expenses including an employee or two to clean and do maintenance etc and cash flow. 

I definitely would not do it based on doing the work myself to cash flow.

It might be different where you live but I would never even consider paying a up front fee to a REA as a buyer, or seller for that matter. To me it sounds shady, maybe it’s different in your state or city but I would contact the Keller Williams HQ and ask if that sounds right, they don’t want offices doing shady things in their name.

Most people I talk to with large rehab businesses all say that you should never pay for work before it is completed, especially with a GC or sub that you have not done a lot of business with already. Maybe hiring a GC complicates this but I would be extremely careful with parting with any money up front before work is done. Even if you have to cut a check every week for work already completed and purchase the materials yourself. IMO I would rather go to the site, inspect work and cut a check every day or few days than to risk losing a large deposit.

I know a GC needs to pay subs but I don't know of any company that pays employees in advance before the work is completed, my job pays me after my work period not before or in advance, Every job I have ever had pays me after the work week, never before.

Another thing to consider is, you have no recourse if the contractor takes off with your money and you don't have more than a name and UPS box address, the contractor knows the property address and can file a lien if they don't get paid, they have the advantage so you have to protect yourself.

Way too many stories of a GC or sub asking for a large several thousand dollar deposit and then you never hear from them again. I think this is another reason it is better to get referrals from other investors that have worked with a contractor.

I remember overhearing a conversation at a UPS store. Someone came in and was trying to track down a GC because all they had to go by was a UPS box and a name, the UPS store could not give him any more info. The guy paid the crook a $25,000 deposit up front to remodel their house and then never heard from him again.

What tips do you all have for keeping up with what is hot in housing? One example is someone told me recently that a red toned door was hot now, in their area at least. They would have something like grey siding, white trim with a red toned door and it looked really good.

So other than going to home shows of big developers in the area, which is probably one of the primary ways, what other sites, magazines, apps etc do you use to keep up with trends?

IMO, the way I think currently, I would put about 75% in to all cash C+ or B SFH rentals that I buy distressed and rehab then rent for great cash flow. The remaining 25% goes into the house rehabbing business to grow it faster, provide more security etc.

Once that was all said and done it would provide a good amount of extra cash every year to continue the same strategy and grow more, or possibly put the extra money in large multi's if the market will support it.

My first goal would be to secure the capital in the safest investment and IMO all cash SFH's can weather a LOT of ups and downs in the market short of a total local economic collapse, like company A provides 90% of the jobs in your town and they go out of business over night.