All Forum Posts by: Grey Stone

It's all about the lender. Our first two rentals we used VA loans. Less than 10 minutes apart, but we were able to explain it to the underwriter that I was pregnant and we needed a larger home. You definitely have to talk with a few lenders (not Chase or BofA, a broker). There are also low down loans with conventional. Using a lender that invests and works with investors can create a plan for your business. The main lender we used, we had an hour consultation and we told him what we wanted, he asked questions and we came up with a game plan together. They will know how much you make, the loans you have, etc. I'm not a lender, but can tell you from experience working with true professionals will help you so much. I think you might be making it more complicated. I'm not sure how many properties you own, but I am guessing you can easily buy another property with 5% down conventional loan for a new property that you may want to turn into another rental in the future. When you're buying another property your other loans will show up and your lender will need to know how much you are collecting in rent. Sometimes it will be a wash and they won't count the income and sometimes they may count a percentage of expected rents to help you qualify for the rent. Btw, I've only used VA, conventional and private money, so I'm not sure about FHA requirements. Also, the main benefit of this strategy is you are using as little down as possible 3.5 or 5% down payment, because if you have to pay 20% or more, it is the same as buying with an investment loan with higher rates.

I like my rentals to be as passive as possible. With that said I hate the idea of allowing the daughter to find a replacement. It works in some in some situations, but I just imagine a high probability for drama. I would allow them to break the lease early upon them both leaving, not just one. It's one thing if you liked the mother as a good tenant and she came up with a replacement, but again, not my cup of tea. I am also a firm believer in procedures because I naturally tend to be too caring with people and you have to remember that it's business. If they break the lease, they are breaking a contract and possibly leaving your business in a bad situation. Also, this is a great time for getting tenants, you might want to ask yourself why you chose these tenants, no offense.

One of the absolute best and easiest ways to get started is by renting the home you are currently living in and buying a slightly bigger home to move into....assuming you own the home you're living in. If you do not own any rentals, it may work in your favor because you can buy a multifamily with better terms if you live there for atleast a year. After a year you can move out, buy another and so on. That imo is by far the easiest and cheapest way to get a portfolio. This is how I started and soon was able to buy properties with the cash flow from my properties. As long as you buy right, and have a few ways to make the numbers work, you will be good. And finding an investor friendly agent is awesome, but more importantly is finding a local investor friendly lender. This is much more valuable. If you don't have a huge portfolio or can pay cash, your lender can vouch for you and even refer you to agents that can help. The easiest way to build a team is to use the best people in your area and ask for referrals. You really get so much in RE by the quality of the relationships you have.

In my area many PM will charge one month's rent to find a tenant and a percentage of the rent or fixed amount on a monthly basis. So, if the amount they are charging you includes the advertising, etc I absolutely do not think you should advertise and screen on your own and only use them for showing the property, while being charged the full fee. Just have them do everything and make sure to ask questions along the way. If you are hiring them to do a service for you that you may want to do for yourself in the future they can teach you their process and fill your unit for the same fee. Having a lockbox on a property in some areas may work, but others may not. If it's a rough area you'd be advertising for people to come in and strip it or squat. If it's in a nicer area it might work. But I am more hands on and manage my rentals. I want to see the person and see their body language. I've had people in the past on the phone seem one way and in person be completely different. How far are you from the property? Maybe just schedule an open house and have everyone that's interested in the house show up within a one or two hour window.

Just wanted to give an update. I just gave her a new key. The key isn't a big deal. My concern was keeping everything streamlined and making sure I treat every tenant the same. A few of the properties I bought and rented out early on, I never got a mailbox key and every property since we just sent them to USPS and made sure they knew the cheaper option of purchasing a lock on their own. None of our other tenants ever had an issue with it. So when this one did I wanted to see what is common practice. Thanks everyone for sharing your experiences. 

Why change what you're doing if it's already working? If you are getting closer to retirement or are concerned about job security, I can understand wanting to make a change. If you can tell us why you feel being debt free is safer, it would help us a bit in giving options. And I would definitely speak with CPAs that specialize in helping RE professionals. It's nice having a CPA that has many clients that are in the same industry. They will have so much more knowledge because they can see first hand what businesses are working because they know how much they're making and ways to avoid and defer taxes. I have even met other investors through my CPA and RE attorney. If your CPA is not bringing new ideas to the table, they're not providing you value and you may want to rethink giving them your business. 

 It's a cluster mailbox. The home is in a tract neighborhood where it's not a mailbox directly in front of the home, but many mailboxes for the neighborhood grouped together. For me to get a key, I would have to go to USPS and pay $85 or Walmart to get a new lock and key for about $15. 

I recently rented out a single family rental. They have moved in and are asking me about the mailbox key. I told them they would need to go to USPS. However they are upset by this because USPS is charging $85 to give a new lock and key, also saying I must provide them one by law. I live and invest in California and have never given tenants a key to the mailbox. What do you guys think? Is it my responsibility to give the key to the tenant or is that the tenant's responsibility. 

A lot of people that target $100/door are usually using brrr and have very little to no cash in the deal. They continue to recycle the original money they put down and take profit along the way, while getting $100/month per door. I prefer to focus cash on cash return and stay above 15% CoC. The property must have a clear benefit (special zoning, value add, path of progress, etc). My properties have a cash flow between $640-980/month per door. They didn't all start out like this, rents will go up over time and so will your equity through tenants paying down your mortgage and inflation. Every market is different too, and you have to see the opportunity and know why you are buying something before you make an offer. Some of the properties, we had idiot agents literally tell us it was not a good investment or we are buying at the peak, but they had equity and cash flow....go figure, lol.

Originally posted by @Kyle J.:

Originally posted by @Grey Stone:

 This is exactly how I feel. She even said in email that they were not able to take showers, do the laundry and run the dishwasher within the hour. Yes, within the hour. I feel like a reasonable person would just wait and I was looking online to find the laws of determining what is "adequate". Unfortunately, I haven't had much luck. I really just want her to leave. I feel whenever tenants complain a lot, they really don't want to be there and I don't want to force them.

Well there you go.  That was exactly my point.  6 people are just not going to be able to take a shower within the hour while they're running a load of laundry and the dishwasher.  That's just not realistic.  

Here's a worksheet from energy.gov to give you a ROUGH idea of what you would need based on that usage:

If you do the math, 6 showers in an hour + a load of laundry and a dishwasher cycle would be 73 gallons of hot water.  So you'd need about an 80 gallon hot water heater.  That's not realistic for a tenant to expect you to install that large of a water heater in a 1300 sf, 3 bdrm, 1 bath house.  Your tenant's needs are just too great and they need to learn how to conserve hot water, or space out the demands on the existing hot water heater.  

One final point to help you out...the reason you're not finding much in your online searching for laws that address what is "adequate" when it comes to this, is because there is no law that addresses it specifically (at least not in California, where it appears you're located).  

The basic law you need to comply with is the Implied Warranty of Habitability.  You can find a list of the conditions you must ensure are met in order for the property to be considered legally livable (and by default, rentable) under California Civil Code 1941.1.  For example, the property must have hot water, but it doesn't say anything about needing to provide hot water for 6 people to take a shower within a single hour while they run a load of laundry and the dishwasher.  

So you're good.

 You are so awesome!!! This is exactly what I was looking for. Thank you so much! This is exactly why I love BP. Thanks so much for your help.