All Forum Posts by: Robert Schumacher

@Michael Ritrovato If you aren’t sure which direction to go, I would start by asking yourself about your goals. I think understanding good vs bad debt is important as it will likely affect your ability to get to your long term goal.

I’m not a fan of negative cash flow but selling the property comes with some significant costs. I don’t understand your current financial situation well enough to guide you, as it’s possible you make 250k a year, with 300k in the bank in which case your intentions may be to pay off the 30k tomorrow.

Bad debt is a wealth killer and so is negative cash flow. Selling the house and paying off the 30k would increase your personal cash flow, eliminating both the negative cash flow on the property and the negative cash flow your payment on the 30k strips from your personal finances each month. Do the math and see the effects that holding the house creates.

Good Luck 👍🏻

@Anthony Wick I posted a different perspective because it’s really easy for everyone to just say Evict the tenant on an open forum. The reality is we are still in a people business and I wanted to stress the situation could potentially be de-escalated with a conversation.

My goal as a business owner/landlord is to be fair but firm, and I will listen because people want to be heard. I’m also firm in that we don’t waive late fees either. I stress that we are all adults and we agreed to “X” pointing back to the lease. It’s worked well for me so far.

I strongly believe in routine rent increases and my tenants are not surprised when they get them, but to be clear, I don’t have 120 Tenants that are asking for a reduced rent or I would be forced to re-evaluate my market conditions. We strive to maintain 94-96% occupancy, and utilize this to ensure we aren’t leaving money on the table.

Appreciate your thoughts 👍🏻

@Anthony Wick I think you missed the 2nd 1/2 of my post. The OP has an upset tenant and I’m smart enough to “Listen” to my tenants point of view. The purpose of asking them what they think is fair is to “start” an amicable discussion, and this is where SALES comes in.

Only a fool would raise someone’s rent from $695 to $725 and lose a tenant. If the discussion led to $710 being fair, I would accept it and be grateful. It’s a math equation and turning a unit over for $180/year is for rookie landlords.

I’m not a “soft” landlord. We evicted 10 tenants during the last 11 months for various reasons. We have 120+ tenants and I value their choice to do business with us, and I’m always happy to listen to their position.

(Renewing a lease is a privilege given to residents that abide by the rules and are not a PITA).

@Judy P. I’m going to take a different position than the other posts. We all know how expensive evictions are and I think it’s important to remember that our tenants are our customer. Have you considered explaining the increase and asking him what he felt was fair?

Maybe he was just having a bad day because his tattoo ink didn’t arrive. Maybe a family member passed and finances are tight. I don’t really care about the excuse but start a discussion and work toward a win/win. You may find he is willing to absorb a smaller increase, and you end up with a long term tenant willing to absorb smaller increase.

@Marianna Osipenko - I would encourage you to make sure you attract the right property even if it takes you longer.  I'm not a fan of buying in anything less than a "C" neighborhood.  I don't want another job having to collect rents.  We give tenants each a separate checking account number to deposit their rents so we don't need to own a collections company.  Have you thought about what happens if you buy a 4-plex every 2 years and seen what it would do for you?  Buy & Hold is a long term decision and it doesn't bring in a lot of cash.  We get paid in 4 ways though and this works out pretty good.  (1)  Cash Flow; (2) Principal reduction on mortgage each month; (3) Depreciation; and (4) Appreciation.  The last 3 don't really help toward getting the next unit but the combination of all 4 works out in the long term.  

I encourage you to make sure you have sufficient cash reserves for repairs ... I know this is basic but having 12 mortgage payments in the bank can certainly make you sleep much better.  Many think this is too conservative.

The realtors that I work with know what I'm looking for. I'm looking for mostly "C" class neighborhoods where I can rehab a few things to bring value to the residents. I'm looking for an 8 cap (but will consider 7 cap) with 10-12% COC returns. If I can't get the returns, I will remain patient and keep looking in other areas. PM me if you have any other questions.

@Marianna Osipenko We started with SFH and 4-plex. We then found a crazy 10-plex but the bank would not finance due to condition. We borrowed the money from another source and paid $285k cash and put $140k cash into repairs. ARV - 750k | $81,600 annual rents | Refinancing to get $425k out at present. This lead to a 74 unit building and yes the previous experience & success played a role in the bank being comfortable.

We learned how NOT to screen tenants at first ... Then we learned after a few evictions.  We now require a minimum credit score, Income needs to exceed 3x rent, Length of employment for 1 year, prior rental history required (min 2), no criminal record, no cats or dogs exceeding 25 pounds.  Hope this helps

@Joshua D. Congratulations on getting a quick start with your business.  I was given some really good advise from my banker about a couple mistakes entrepreneurs often make.  (1st) They don't pay themselves and if the business goes under, they are left with nothing to show for their efforts.  (2nd) Bankers want to see that you have built both business equity and personal wealth.  They want the personal wealth to be able to cover is the short term if the business goes through a tough time, and they want the business wealth because it shows stability and an ability to cover home expenses if needed.  If these are not balanced, you will struggle to grow your wealth.  

More importantly, you were given 2 ears and 1 mouth so that you can LISTEN twice as often as you SPEAK about your successes with your wife.  She is not experiencing being listened to if your throwing this up on the board.  I think you really need to listen and understand why she is struggling with you not having a W-2 paycheck.  Reminder her that the reason that you have been able to build this so far is because of HER W-2 paycheck contribution to the family.

My wife gets a W-2 paycheck and its OUR money.  My business income is OUR money.  The rental business that I built is OUR business.  I think you get my drift but when we speak with the right words, our spouses feel included.  HINT !!!

CHEERS & CONGRATS ... Your doing great on the business front ... and you have an opportunity on the relationship side of things to work on.  (What is your W-2 price to grow my portfolio?)  LOL !!!

@Marianna Osipenko ... Our 10 & 11 unit buildings provide better cash flow than the smaller units, but the QUALITY of the tenants is the key. Personally, I struggle with buying an Investment property that requires my time & energy to break even. Let the numbers tell the story but stay out of the “D” neighborhoods.

@Michelle Eisenberg ... I “Manage the Manager”. If they demonstrate they have my best interest at heart, they don‘t need to be micro-managed, but remember, it’s your business so watch over it. If you have a vacancy, squeak and get it filled. Once filled, review your statement each month. Trust me ... the other owners are pushing to get their rentals filled too.

@Melanie Hartmann I never left my job to start in the real estate business but I did leave my job to start a business so I’d like to share with you about starting a business in general. I hope some of this will be helpful. 1. it was easier to leave a 6 figure income than it’s been to rs-create it. This is not a negative. It just means be prepared to GET TO WORK !!! 2. SET GOALS that will push you and don’t be okay with missing them. Follow through and complete the goal, even if it takes an extra week. If you don’t follow up to complete it, it was probably not a goal worth setting. 3. TAKE ACTION by evaluating what activities you spend your time on today and whether or not they DRIVE REVENUE. This is the sales side of the business. (I do not wholesale but I would imagine this means activities that develop meaningful relationships with other buyers that have the ability to close, and on activities that put you in front of sellers.) 4. INTEGRITY & SERVICE are still expected from your customers. Make sure your pricing is fair to you & your customers. Most customers will pay for service. Your integrity is free for your customers and both servIce & IntegrIty determine your repeat business. 5. EMPLOYEES are one of the most important tools to create a business that can be duplIcated. My 1st goal was to build enough business that supported a decision to hire. I took no income for nearly a year but with 2 people, I was able to start to build staff & income. 6. It’s very hard to run an organization without having your PROCESS in place. Build your processes so that each employee knows what’s expected, etc. 7. SURROUND yourself with smarter people that have different experIences and LISTEN. Ask good questions and don’t be afraid to go against the grain, but make sure you understand what your WHY is. 8. Starting a business is HARD WORK. I found myself waking up in the middle of the night with ideas. GET OUT OF BED & WRITE THEM DOWN. Your not likely to remember them in the AM. Lastly ... Life is short so enjoy this experience. You may be doing this the harder way without an income, but it doesn’t mean it hasn’t been done before. Just determine if this is the type of business you want to own, or if being a passive invested is more desirable. Determine YOUR WHY !!! Please read “The E-Myth Revisted” and remember to read weekly for knowledge. There are lots of nuggets here & I wish you well on your new adventure. 🤙🏻