All Forum Posts by: Sean Honeycutt

How is the Lafeyette market?  Indianapolis/Suburbs seem okay so far, but you can just tell in 8 to 10 years we'll be over inflated like Chicago - especially if we keep having Chicagoans move in. Lol!  

@Peter Korty that's a lot of dumpsters!  I can see how a hoarder house can make some good money, but the smell and the potential unseen damage just seems like such a huge risk.  

I've done windows a few times on homes I've lived in and in homes I've leased.  If it was **my** home, I have no problem with going with an off the shelf Home Depot window - but I've found that those tend to be smaller than the opening allows (because you have to buy off the shelf, not custom) and if you do go custom with Home Depot, it's more expensive than Window World.

So while doing the windows for my own first home was acceptable, now I tend to just hire Window World when I need windows.  They're almost always the lowest price, there's only so many factories that actually make Windows in the US, and since Window World will replace a broken window for almost any reason on the planet, they make great windows for tenants.

https://thewindowdog.com/windo... This guy goes way into the weeds about Windows, a lot of it is humorous, but their is a lot of information there!  

A) Ask them to resubmit the paperwork and include the rental income as part of your income.  Make sure you have a signed lease to submit, and the longer you've been leasing that property the better for getting it added.

B) Apply somewhere else.

C) You can try to do what @David Kelly suggested.  I'm not sure what success if any you'll have however.  I've personally had more fights over student loans and banks...it's a battle each and every time (I win every time, but man it's like pulling teeth.  You'd think these guys have heard of Income Based Repayment before, it's been around since the Obama Administration!)   But I digress.  It's worth a shot, but it's an uphill battle - always.

D) or finally, you could give up.  Hey, I don't like this answer, but it's a valid option.

I like @Account Closed answer, find a local bank and see if they will write you a note.  If you use a property manager, ask them if they have a relationship with a bank.  If not, credit unions where you are a member are always a good option.  

You say you are taking over the loan from your Mother-in-Law (MIL)?  I am just thinking, rates are really good right now, you may be better off doing a Cash Out Refinance to cover the repairs.  Then again, I am running into a lot of issues with banks just not doing cash out refinances right now (BMO, USAA, Wells Fargo, and a few other national banks) so that may not be an option for you.  (In each case they said they would do it, but only if it was my main residence - so you might look into it if you keep your MIL living there?  Not sure what your options are in that regard.)

There are some companies that do short term loans.  Something along the lines of lending you $100,000 at 10% interest over a 6 month period (you'd have to make payments and then pay the entire loan off at the end of 6 months.) I've never done it, I don't handle time lines well, but I know they exist.  BTW, those numbers are total guesses, the interest may be significantly higher, they may charge points, etcetera.

If it were me, this is what I would do:
A) Figure out how much MIL can afford to pay.  Whatever it is, just accept it and pay the rest out of pocket for a year which gives MIL time to figure out an exit plan.
B) Spend that year slowly fixing the house up yourself.  Unless it's an electrical panel, or dealing with a water main, most work can be done by a homeowner and Professor Google.  Major issues like foundation, roofing, etcetera I am assuming are not a concern?  You said renovated, not repaired - so I am assuming you need new sinks, tile, paint, maybe some demo work to open a wall or something, nothing drastic?
C) Find a bank that will refinance the loan into your names, preferably with a cash out option (as I said, you may have better luck here if you argue that family is living there.  Right now, I'm having zero luck getting a cash out refi.)  You'd want to refinance anyway just so everything is in your name; I've heard horror stories of deeds changing hands and the bank (even though you are still paying) showing up demanding payment in full immediately.  

At the very least, at least consult a property attorney.  Tell her/him what you want to do, what your goal is, see if there's any legal paperwork you need to cover yourself and your MIL.  It never hurts to talk to your attorney!  

I will freely admit that I am:
A) Not an attorney - my comments and thoughts are opinion only!
B) New to the game - I've only been leasing homes for two years so far.
C) Based on the idea this is a side business, not my main source of income.

That said:
I require my tenants to sign an ACH authorization for rent and tell them the rent is due on the first of the month, every month.  If the debit is rejected, a $75 late fee will be applied for each rejection and that it will auto reattempt on each Friday until successful.  If there are 3 rejections from the bank, a form letter is automatically issued with a 30 day pay or quit notification and my attorney is notified.  

I've been informed that being "nice" is an invitation for abuse.  That said, have I ever waived the late fees?  Of course.  She was a single mother of three and was in the hospital with CoVID with her boyfriend babysitting her kids.  She was highly communicative via phone and text and she made up the late rent within 30 days of returning home.  

Would I recommend you accept excuses to get out of late fees?  Not really.  Again, being nice seems to just invite abuse.  Being reasonable is a different story.  I do, highly, recommend getting those ACH approvals from tenants if you can legally request them.  It's saved me a lot of headaches in collecting rent (through my PM of course.)

Oh yes, and I do use a PM.  For me this is a side job and not my main revenue stream.  It's worth it for me to pay 10% for eviction coverage, tenant screening, not having to answer the phone at 2am, not having to schedule showings, etcetera.  The properties are still cash flow positive with a PM, which is important (you don't want to subsidize someone's home, right?)  So for me, in my case, a PM makes sense - especially since the PM gets to be the bad guy and explain to the tenant why they just got billed $225 + rent because they failed to fund their checking account (not that it's happened yet, ACH has saved having to collect late payments entirely IMHO.) 

So I read through the replies, but no one seemed to raise this question:

You said the tenant was month-to-month, correct?
"She's on a month to month lease. I swear, the minute the eviction moratorium is over, I plan to raise her rent by 20% (it would still be arguably within market rates in that town), and the second she is late, file eviction on her."

So why would you need to wait until the eviction moratorium is over?  Her month-to-month lease expires at 23:59 on the last day of the month.  Just notify her that she will need to move at the end of the month (though I'd probably be more forgiving and try to give the tenant closer to 6 weeks notice).  If she balks, tell her she doesn't have a lease currently and if she wants to continue staying there, the new lease lists the rent at (whatever you are planning to raise it to.) 

My understanding is that the moratoriums just prevent you from terminating a lease early.  She doesn't have one, so you are not terminating anything.  

I had a similar issue, I had a tenant who figured because of the moratoriums she didn't have to pay rent.  However, she failed to account for the fact she had never signed a new lease and was month-to-month.  We (the PM with my permission) sent a 30 day pay or quit notice and within a couple of weeks she was paying on time. 

I know this site is kind of down on PMs, but to me they've been a godsend.  I don't have to learn to screen tenants, more importantly, sob stories don't work on me if I never hear them in the first place!  Sure, I lose some cash and that sucks, but it's a side business not my main source of income, so I can afford it.  Something to look into - no more hubby running out at 3am to relight a pilot light on a furnace, for instance. ;)  

Investment Info:

Single-family residence buy & hold investment in Indianapolis.

Purchase price: $107,000
Cash invested: $30,000

Single Family 2 bed, 1 bath on 1/2 acre

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

I was looking to expand my portfolio.

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

This home was in a neighborhood that my PM and realtor (separate people, different companies) recommended. It has a positive cash flow, but it needed a LOT of elbowgrease and some professional help to get up!

How did you finance this deal?

Traditional financing

How did you add value to the deal?

I remodeled the bathroom completely from floor to stall, new floors, new paint, new vanity, new sink, new mirror, new hanging rods, new tile, even the plumbing was replaced. The kitchen needed new counter tops and a new floor, and the cabinets needed a really good sanding and a repainting.

Believe it or not, there was over grown trees and brush taking up about 30% of the backyard, it was a good 40 feet deep. After clearing that out and cutting it down, I found an old basketball court!

What was the outcome?

Well, the basketball court was interesting! I think it needs some remodeling, but the neighborhood and comps don't support it. I might add a half bath, when the water header and HVAC goes (i.e. when I have to buy new, I may as well buy small to get some room.)

Lessons learned? Challenges?

I put a bit too much trust in my PM company's estimator on repairs. Also, things I knew had to be fixed, I did not calculate into my purchase offer. I probably good have gotten a better deal if I had just outlined for the out-of-state seller all the items that had to be redone (Windows, Roof, full repipe, new driveway, etcetera) just to bring the home up to code and make it leaseable (I don't deal in junk, I like happy tenants.)

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

I mean locally, T&H Realty does a good job communicating, getting tenants, etcetera. There are cheaper agents, but these guys are pretty good. I wouldn't hire them as realtors however, I like Anna Stout at Tucker. She knows her stuff, the realtors at T&H are good at calculating rent expectations, but not investments - IMHO.