All Forum Posts by: Robert Leonard

INVEST IN REAL ESTATE WITH YOUR IRA OR 401K WITH NATHAN LONG

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Our BP Lake Charles real estate investors' meetup group will host Nathan Long, CEO of Quest IRA, Inc,.

Quest helps change people's lives and financial future through self-directed IRA investment education.

Get smart on how Self Directed IRA and 401k strategies can help you do more in the real estate business!

It's free to attend, but space is limited.  RSVP at meetup.com/bpacadiana if you would like to join us.

"first come, first serve basis. This is a best practice."  NOT.  I've seen and heard that so many times.  It has a whole lot to do with why I manage my own properties.  

I'm a licensed REALTOR and I know and live by the Fair Housing Act.  That being said, I tell all potential applicants, "I treat my vacancy like a job opening.  I'm not going to rent to the first person who meets the minimum qualifications - I'm going to rent to the best applicant at the end of my application period."  That's usually about two weeks.  

Sketchy background and marginal applicants self select and never submit their applications.  Great applicants get excited, because they feel appreciated for having their stuff together.  The creme always rises to the top and I have great tenants!

What areas to invest, really depends on what your investment objective is? I can say there's a very broad range of strategies that can work for you here. I wouldn't let the dramatization of "adverse economic impact" between ferociously competitive SEC schools lead my investment decision making. The low inventory, strong post-Great Flood recovery/rebuilding and continued job & population growth are driving strong home sales and a strong market. I'm not looking to encourage any added competition, but I know this market and I am investing here.

That's based on a rule of thumb used by some investors I know who invest in this price range.  You multiply the gross rent by 60 to establish a cashflow based value for the property (some state it as 5 years, or 60 months, of income).  I should have said $113k minus repairs.  The multiplier goes down for tougher (war zone) neighborhoods.  I know some investors who use 40 as their multiplier.

Yes, it makes sense that the lease is transferred to the new owner.   I would also ask the seller to write a letter to the tenants to let them know they sold to you.  I would write a letter explaining the new ownership/management and rent payment process.  I would hand deliver these to the tenants after closing.

I would request all tenant information, like applications and background information from screening, so you know who you are inheriting.  If the seller doesn't have that, I would request completed applications from the tenants (when you introduce yourself as the new owner if you will self manage) "so you have complete tenant records for your system."  I wouldn't charge any fees or run their credit - these tenants are already in your property and they are yours.  

I hope you are having an inspection completed?  Make sure you let the tenants know that you will fix any things that are found during your inspection, so they understand that it is a priority of yours to take care of the property.

I think you need to negotiate a better price that will make it worth taking a trip to see what you are considering buying during your inspection period.  What's that number?  By rule of thumb, that's in the range of about 113k.

Why do you need to see them?  One man's "full rehab" is another man's "lipstick on a pig."

Your PML is pretty awesome!  I've never heard of one lending at 5%, but that's awesome if you really have it!

Good comps come from the MLS. They should be sales of the the most similar houses to what you are trying to put a value on. i.e. Updated comps for an updated house, dated comps for a dated house etc. You have to know the market well enough to know the value boundaries to know what is a good comp too.

I am glad you are asking these questions and looking into all of the numbers.  That's how you learn.

Are the current rents below market?  $53/month per property doesn't sound very compelling for a hold.  $600/month rentals can be management intensive and your operating expenses will be much higher. 

 Property condition is a huge concern.  A single HVAC repair can easily wipe out a year of your projected capex for all 3 properties.  Tip: Check all labels on HVAC systems for age and refrigerant type (R-22 is bad, 410A is good).

$5,250 Down Payment? That's 3.5% of $150k.  That's only available for owner occupants unless you know about some kind of special program?

I wouldn't call that whole $60,250 equity.  $14,750 is coming from somewhere and real equity is based on your total cost basis.  So $40,250 is a more accurate number to count as equity - the rest is your money that is "in" the property.

Are these brick or wood frame structures?  Painted or wrapped in vinyl?

What are the roof conditions and approximate ages?

What are the repairs that will cost $6,500 and how did you get that estimate?

I think you are definitely overthinking this, if we are talking about maximizing the ROI on $2,000 in 2 years? If you found the great XYZ strategy and made 30% ROI, you would have $600 more in two years. That same strategy probably comes with the risk of losing 30% just as easy and you would have $600 less. Small beans (within the range of $1200) in most scenarios of buying a house or car as you stated in the OP.

Sure you might "want to have a new lease with tenants after the sale," but the law usually requires that you honor any existing leases in place.  If the tenants are on month to month leases, it will probably take 30 days for any changes in their rental/lease terms from what they are currently following.  

Each state and some municipalities have specific landlord/tenant laws.  You need to get smart on what applies locally, so you'll know the rules whether or not you buy this tenant occupied property.

 In my state, a security deposit is the tenant's property until I provide a written notice of why any portion of it is being withheld upon termination of the lease.  It is not a matter of negotiation between me and a seller of how the deposits are handled or who gets them.  It's the tenants money and it's protected by the law most places, as a matter of consumer protection.

This is not investment money.  If you could need it at any minute, it's short term money that shouldn't be in anything more complicated than a money market mutual fund account that you can write a check from.