All Forum Posts by: Steve Milford

There is something we investors call a "buy box". That is what you are comfortable with as an investment, all things considered. The buy box of what you and your wife want - needs to jive.

The question I have is, "Is your wife on the same page?" I am not trying to be a jerk, but if your wife and you are NOT on the same page with this investment, it is irrelevant how good the deal is - because if she doesn't believe in it then she won't be supportive. And she will let you know EVERY DAY - it will kill your marriage.

I would say that you have to figure out what she wants regarding stability, and you have to go slower, baby steps. With my first wife, I really wanted a house ASAP after marriage. I convinced her to buy, planned to stay a few years, but was bankrupt in 3 but able to stay 7 because they don't take your primary residence. We could never get on the same page regarding money, and thus we could never claw our way out. We finally sold, for bigger and better, in our minds anyway, but 2 years later were more broke and in foreclosure. We survived that by a miracle but within a few more years - we were divorced and with more debt than ever. My desire to save money and be an "investor" did not jive with her desire to "live today". 

With my second wife, I really wanted to upgrade last year. However, I found that she had too many fond memories of where we live to "allow" a renter to move in and potentially ruin the place. She said no to every house I brought forward. Then a friend suggested I let her pick the house - and none has come yet, lol. I took a step back and just decided to change focus to fit the situation. Now I help others buy and sell homes, and do other projects for "cash flow". It has really worked out for the best.

Buy what you can afford and house hack or rent a room if you can. Every Realtor is hoping for a buyer right now. Here is the problem with the consensus, rates have not yet come down like they were "supposed to" and appreciation is dwindling fast, in my market anyway. My reco is if you buy, buy down the rate as much as you can, that compensates for any immediate refi needed. In my market prices are still going up, although at a slower rate, so it is also a good time to buy.

That being said, is it the best investing option? Make sure you have savings and also compare this to other investments.

1) I use CL and Zillow and then add a little just to see if someone will pay.

2) Don't give favors. You are supposed to be fair to everyone the same. That being said, if they are great tenants after a year +/-, maybe you don't raise the rent to max market rate, etc. This is a business, treat it like one. Read the tenant code for your area to know your legal responsibilities. What happens if your friends fall behind in rent; Are you going to be able to evict them?

3) Tenants tend to pay the lower bills first, leaving rent for last. If rent includes all the utilities, it is still the last thing to be paid.

The #1 problem and answer with rentals has to do with tenant screening. If you screen less or are in a rush, on average you will have more turnover and more cost. In the future you don't need a Realtor to screen. Sign up for Apartments.com to advertise and collect applications, the platform will also be a payment portal for you, costs you nothing; the tenant pays the application and background fees. There are other platforms too. Read the tenant-landlord code in your area to know your responsibilities. Since you already have a good tenant, that part is done. There may also be a landlord association in your area that offers best forms. A lease builds security for the tenant of no price increases, until they trust you to be fair. If you want a lease, my reco is you add a section that states, "at the end of this lease, tenancy will then be month-to-month. All other terms of this contract remain the same." Or some version of that. The rent increases and other components of the contract are individual components. Then raise rent once a year, every two years whatever. The point of month-to-month, its so easy to get out of, but few do. Tenants think, "if I have to move, I can 'next month'," but that happens far and few because it's a pain. But with a lease, tenants think, "I don't necessarily trust my landlord and I don't necessarily want to commit to another year here, so I am moving." And they do. But if a life event happens, and they HAVE to move, they will - lease or no lease. I was a renter for many years, I moved when leases ended. I have a tenant going on 5 years MTM, and I raise rent every year. I am fair, I don't price gouge, and they know it. 

Run......fast......now!

Everyone loves these when they get atarted until they do one. It's a lot of work. Get an inspection. That will tell you what really wrong with it - and then start working through that list snd asking contracyors questions.

Look, the property manager is a go-between you and the tenant. They are acting "on your behalf" contractually. Read the tenant/landlord code in your city, county, state. Some of it is garbly, but on the whole, managing your own properties is not hard. Once it's up and running, you will wonder why you even considered a PM in the first place. They don't prevent liability, they just collate processes when you have a lot of properties. I've always heard, once you have 8-10 properties, then hire one. Keep your 10% fee. Want to know who to call? Join your local REI club, they will gladly tell you the contractors they use. But don't pay a fee just because.

I think the hard thing to realize for most is that evaluating the market is not just 1 or 2 percentages "making sense". In my market those "discussed" percentages never worked. No different than stocks, buy on one criteria, and you might get lucky once or twice, but in the long run you lose.

He is informing you so you are aware. Great. Now he has to figure out how to pay the rent. Being a landlord is like being a parent, you get lots of little info that may or may not be helpful. It all depends on the day. My tenants tell me all sorts of things, my answer, if I answer, is always the same, "Oh that's unfortunate, I hope you have a plan." 

I think you should switch to month-to-month. People want leases because they have become fearful of crazy rent increases. Just treat your tenants how you want to be treated. Read the tenant law/code in your area. I.e. in my area, I have to give 60+ days for rent increases, but I usually give 90+ days. If they want to move they can move, not a big deal, but I don't tie down rent in a lease. But in my experience month-to-monthers stay years.

I would look at the action of the tenants. Some people you just can't make happy, let them go and educated the next tenants. Another thing, I hear more and more stories about tenants that pay ahead, are just a pain the rear after a few months. I think people's perspectives get outta wack because they forget the amounts they paid and think they are "helping" the landlord, but then seek more "value" versus what they paid for. These people are just going to keep bugging you, let them out of the lease minus time served imo.