All Forum Posts by: Steve Hall

@Sean Harris

You'll never get "BIG" if you have to over analyze everything. In fact, you may not even get started. This issue is a common personality trait; it's very difficult to overcome. My advice is to partner or JV with an investor who does not have the same personalty trait, or just do syndication if you are able to pull the trigger on that.

Small SFH and duplexes are for those just starting out with $20k-$30k to invest. If you have 100k to invest, you could JV with an investor on a $800k or more multi-family, and you could be earning $20k or 30k per year.

If you want to be BIG, you have think BIGGER.

@Travis Hargreaves

You are very wise to want to prepare for death or divorce, but you have overlooked preparing for liability and taxes. You need an attorney (or several attorneys if you want to do estate planning too) and you need an accountant.

You seem to be confused on the difference between a partnership and a joint venture. You should read this post.

Make sure you have an attorney and an accountant involved BEFORE you make your offer.

@Matthew Patrick

You need an attorney.

@Vince Scolari

Buyer is crazy... sell it to him. 

Since people are going to ask why I say the buyer is crazy: Because he's buying the LLC's liabilities... all the way back to the day the LLC was formed.

So why would a buyer do this? My best guess is that he's probably trying to avoid/reduce taxes.

@Theresa Harris Who said anything about a one month vacancy? It sounds like you are disagreeing with something you inferred from my post to @Frank Pilipauskas

Maybe the laws are different in your state Theresa, but in Florida, you can't just charge a tenant an entire month's rent because you are mad at them. As the landlord, you would have a duty to re-rent, and if you re-rent in 5 days, the most you could charge the holdover tenant is 5 days rent (plus any applicable fees agreed upon in your lease and allowed by your states laws.)

You are more than welcome to go and babysit a holdover at 6am on move-out-day, but giving that as advice to a fellow landlord is just bad advise. I would be asleep in my bed until 8am, at which time I would tape a large 8.5" x 14" piece of yellow paper to his door with the word "TRESPASSING NOTICE" in big bold letters at the top and the details of breach and criminal trespass below. I would also drop a copy of the notice off at the post office and mail it to the holdover via certified mail. (Yes, he would be charged for the notice fees.)

Regarding your showing up to help the holdover pack on move-out-day:

1.  I am not getting up early to help the tenant do anything.
2.  I am not "showing up with other people who can help move boxes" since I would have to compensate those people.
3.  I do not want any liability for damage to any of the holdover's belongings.
4.  I would never advise another landlord to do any of the above.
5.  I most likely would have avoided all of this by negotiating 3 extra days with the outgoing tenant @ $50 per day.

@Frank Pilipauskas

Why don't you try solving the problem instead of complaining about it, or trying to figure out how to sue a tenant for staying 2 extra days? I don't re-rent units while a tenant it still in the unit, so I never have this problem.

This is a pretty simple problem to solve: The tenant staying another 2 days owes you 2 more days rent. If your lease has a clause that allows you to charge holdover fees for not moving out on time (and your state law allows you collect those fees) then maybe you could collect more. You don't need to go to small claims court to collect it, you can just take it from the last months rent in escrow. (or possibly the security deposit if your state allows that.)

Regarding the new tenant. If you like him, you could put in a call to his old landlord and tell that landlord your situation. If I were the old landlord, I would allow my outgoing tenant to pay me, in advance for the 2 days (or even a week) so he could stay there until your place was vacant.

You could also just be up front and tell the new tenant, "the old tenant has not moved out yet. You can have it on May 3rd if you want to wait. If you don't want to wait, I understand but I need to know today, because I am going to rent it to someone else if you're unwilling to wait."

BTW, do not accept any money from the holdover tenant, and don't forget to serve the holdover tenant written notice on May 1st!

@Idan Narotzki 

This can get tricky:

Tenants have no interest in hiding any housing defects from the inspector. Most will be more than happy to point them out!

Here is what you need to do regarding buying a rental with a tenant already in place:

• Talk to the tenant(s) and ask them everything you can about the home. Most will tell you everything. 
• Also, keep an eye on how well they keep the unit (and their car!) when you are at the inspection. I've looked at many units/homes where the place was a disaster (and the tenant knew I was coming.)
• Talk to the owner (or agent) and get a copy of the lease. Read through it and make sure you are ok with everything it says. 
• Ask the owner (or agent) for copies of the tenant's application, background check, credit report, etc. If he doesn't have them, that's a bad sign.
• Ask the owner (or agent) for an accounting of all rent payments (and the date of each payment). Try to verify this information with bank statements or ideally, third party processors (e.g. property manager or a rent collection web site).
• I assume you ran the numbers to see if the property is profitable before putting in an offer. Did you check comps to see if the rent it priced right? If not, raising the rent after purchasing it could cause the tenants to leave.

Bottom line:

If you feel you have to raise the rent, don't buy it with the current tenants.

If they are month to month, don't buy it with the current tenants. (Most states only require 14 days notice for month to month, so the seller can have them out quickly)

If you can't be sure the tenants were properly screened or that they've been paying on time, don't buy it with the current tenants.

Welcome to BP @William Pieper

It is quite common for new investors to confuse a partnership with a joint venture. Even some experienced investors don't know the difference.

What you should have done is formed a holding company, and your "partner" should have formed a holding company too. Then for each property deal you would have had an operating LLC whereby each holding LLC would have been a 50% owner (or 60/40 where the split was uneven.)

This is why you will often read on BP where sophisticated investors tell new investors to consult with an attorney AND an accountant first. Bet you wish you had joined BP sooner now...

BTW - It's pretty obvious that you don't have an attorney, but how did I know you don't have an accountant? Because you mixed earned income (the flips) with a passive income investment (the buy & holds) in the same company! When you go to hire a CPA, don't be surprised if his/her prices are a bit high.

Going forward, I would create a holding company, and then invest your newly earned money in other properties, either by your self or with other partners. Just do it the right way going forward.

@Sami Gren

Have you read "Crushing it in Apartments and Commercial Real Estate" by Brian Murray?

This brings to mind a funny story he told about a surgeon living in one of his complexes. (If you haven't read it - I recommend it.)

Assuming he meant an exotic dancer and not a ball room dancer, I would just let the dancer know that he/she is not allowed to operate any business from my complex (legal or illegal), so, if he/she is making any money on the side, I don't care as long it's not happening at "home".

Bottom Line: You'll always guess wrong about who you think your best/worst tenants will be.