All Forum Posts by: Jason Risley

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $640,000
Cash invested: $200,000

Single Story SFR

What made you interested in investing in this type of deal?

Bought undervalued based on the recent comps in 2015

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

MLS

How did you add value to the deal?

Cosmetic updates

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Jason Risley

Hi Bigger Pockets Community,

I have a potential eviction and I have not had to deal with an eviction before. I’d love to hear you weight on the pros and cons given the circumstances.

Our tenant is still catching up on 2022 rent. The property is in Dana Point, CA (rent is $4,500) and our tenant is $30,500 behind on payments. The tenant started in 2019. He’s a speaker at conventions and while I want to believe him because he always says “he’s going to catch up,” I just get too many “dog ate my homework excuses.” In March of 2023, we had him put together a payment plan so he could catch up and he came up with the below plan.

“The following payment plan will bring us current by April 15, 2023. This is weighted for delays from my current projects (example-CES call today pushed to March 13). I will accelerate the payment schedule if the revenue comes in ahead of this schedule.

Balance $30,500 (7 payments @ $4,500 minus $1,000 Dec 19&22 overpayment)

Payment Schedule:

$15,000 March 17, 2023 (includes March rent $4,500)

$10,000 April 1, 2023 (includes April rent $4,500)

$10,000 April 15, 2023

This has been a very difficult few years but happy to see the light at the end of the tunnel.”

We are now past April 15th and he has not made one of the payments that he put on the schedule. He says he’s going to get a large lump sum soon, but there has been countless delays.

What option is best?

• A) He seems sincere (though his excuses have been many so it’s hard to trust him anymore) and hope he gets current soon. He says his number one priority is to pay the back rent. I'm not sure if I believe him because he's promised this before. Does this option have the best chance of re-cooping the $30,500)?
• B) At a RE investor event in 2019, a fellow investor told me if you ever need an eviction, you should contact this company: https://www.fastevictionservice.com. He says they are fast and not that expensive. I contacted them and they said, “we should give the tenant a 3 day notice to pay.” Do you agree with this choice? If I go this route, is the percentage chance of re-cooping the $30,500 get way lower? My thought is by evicting him, the tenant will leave, but the chances of re-cooping the $30,500 go way lower, but I’m open to what others have found.

Open to all suggestions. Thank you,

Jason

Thank you! Residential home about 3,000 sq. ft. I appreciate the suggestions and I'm open to getting insurance quotes.

Hi Bigger Pockets,

I have quite a few rental properties in Orange County, CA. They all have loans on them. I am replacing a couple roofs in Orange County, CA and my cost is $16K to $22K. My roofers here will tell me that they will last 30 to 50 years. As a side note, most of my insurance policies for landlords are with Safeco and around $800 per year.

I also own a couple of rentals in OKC (Oklahoma). I understand the weather is very different. I have never been to OK. Neither of them have loans so I can get rental home insurance or pass. My insurance agent is telling me that roofs in OKC last 8 to 9 years and cost between $60K to $80K. That seems crazy to me. The insurance that I would be paying is around $2,600 per year. The insurance agents justification is that they will replace the roof after their nasty hail/ice storms which go bad every 8 to 10 years.

I understand labor costs are different in other states, but it's not like Home Depot charges different costs on materials. Can roofs really be that much more expensive in OK than CA?

Any recommendations on paying $2,600 for insurance or just taking the risk and when it's time to get a new roof, pay for it. 

Thank you, Jason

@Brandon Sturgill The house I sold was a home with an ocean view in San Clemente ($1.7M). Most commercial has a 4 cap around here so that's not so good. However, sometimes I find ugly homes that I can put $30K and the values will sell for $125K more. For example, this San Clemente home, I bought as a short sale for $800K, put in about $35K, and the value was probably $950K after I put in that $35K. Rather than flip and pay capital gains tax, I rented it out so I could qualify for a 1031 exchange. Now, that home sold for $1.7M after holding it for 6 years.

At this point in my life, I would probably prefer dependable cash flow and more passive so it's why I don't mind investing out of state even though I know Orange County, CA like the back of my hand and have a real estate license so that helps quite a bit.

@Scott Wolf: Thank you! Yeah, I know I just have to identify properties in 45 days and close in 180, but any properties that I don't put under contract by day 45 will risk being bought by someone else. So, I figure it's best to have some solid options that are easy to put under contract or already under contract by day 45.

I have done quite a few 1031 exchanges in the last several years. I used to buy undervalued properties/fixers and looked at the numbers like I'm planning to flip, but rather than sell and get killed with short term capital gains, I tend to rent out the properties to A plus tenants long enough to qualify for a 1031 exchange so that I can 1031 exchange to the next cinderella. However, now that my kids need more time from me (7 year old and 9 year old), I'm looking to be more in the passive investor spectrum since I've done a lot of "active" investing and it's great, but takes more time than I have.

@Frank Rodrigues: I own a duplex in Dana Point, but if I went out of state, the most important piece would be cash-flow and property management since CA tends to appreciate well (50 year average is 7.3%), but doesn't have the same cash flow at all that other states can provide. Property out-of-state would be ideal to be in an area that would yield quality tenants so probably looking for something around B-class that still offers good passive income. I know the cap rate and cash-on-cash return can be very strong in tougher neighborhoods so while numbers are important, I'm looking to avoid headaches too.

Hey @Zachary Beach, Thank you for the info! I've had several people tell me that AirBNB's in Big Bear work really well! I have done an AirBNB in 2 different cities in Orange County and got in trouble with the local cities for both. Can you PM me more info? Or post it here? I'd be curious about taxes for STR charged by Big Bear if any as well as best ideas on property management for AirBNB near Big Bear. I'm open to buying multiple properties if the numbers make sense. The last 1031 exchange I did was in 2018 and I sold one to buy two so I'm familiar with going for multiple properties.

I sold a home in San Clemente, CA yesterday and I'm doing a 1031 exchange. Since I'm good at finding undervalued properties in Orange County, I might find the best deal I can locally and maybe look for a home with ADU potential so I can create 2 income streams. However, if you know of a good deal (units or SFR's) that's great for cash flow in another state (outside of CA), I'm definitely all ears on all opportunities currently. Let me know. I believe I have to have a purchase price at $1.7M or greater and my funds for down payment with the 1031 exchange company is just over $1.3M. Thank you for brainstorming!