All Forum Posts by: Todd Brittingham

Cheryl,

You're absolutely doing the right checks here. Just because they are section 8 doesn't mean they don't need addtional money for food, utilities, clothing, etc. Utilities can be a big issue if you are in a colder climate and the gas gets turned off in the winter. 3x rent is a good start, and I would include the section 8 money as income to them. Under this guideline they would not qualify...

Also, with our policies, anyone living in the house is a tenant and is put on the lease. There are way more things to consider in the lease other than who is paying the rent. If you live in the house, you need to abide by the lease, and therefore you must sign.

Hi Peter,

I would strongly recommend you link up with a good team on the ground that will help you with the day-to-day issues like the one you're talking about. There are so many different things like this that will come up, and having a representative on the ground acting in your best interest will save you much wasted time and money.

I can tell you numbers of stories first hand of investors who have come to me with similar stories. We get them on the right track immediately because we have a team in place to get things done. If we don't know the answers we can usually go out and find them a lot quicker than you can. This agent is feeding you a line of crap because he is lazy...if he won't give you the information, someone will.

The key is finding the right people on the ground. I would search here on bigger pockets, on Facebook, and and other outlets. Once you find someone, I would go there and spend a week with them reviewing properties, their systems and feeling them out.

Once you have this setup you will rest much easier and things will go much smoother for you.

Financexaminer,

To me vacancy is not a set number. You can look at an area's average statistics and assume that's what your property will perform at. However, remember this is an average number which means some units will perform better and some will perform worse. You need to ask yourself why some perform better?

I fully believe the answer lies in how you manage the property. It starts with the property itself and its location. Next, what amenities are you offereing in your properties to lure tenants in? For us, one of the big things we're starting to do is make the homes very energy efficient. In Michigan the winters are pretty cold and the idea of lower heating bills is very appealing to our prospective tenants.

Next, how do you select your tenants...do you go through an appropriate screening process? Do you utilize programs like section 8? And then once the tenant moves in how do you manage the property. Do you treat them like tenants, or do you treat them like your clients? We treat our tenants like they were clients. Little things go a long way, and that can make all the difference on the vacancy rate on your properties.

Next, how are you filling your vacancies? Do you wait until the unit goes vacant to begin marketing, or do you always have a list of potential tenants that you're marketing for...we're always marketing.

So to me, I don't look at the averages. I look at the whole system and how we can take advantage of different aspects of what we're doing to minimize the vacancy rate for each particular property. If you do this, your properties will perform better than the averages as well.

Yes Jared, you need to keep some for yourself. We're keeping every 4th or 5th property we buy...I'd keep more, but don't have the capital at this time to do that. Nevertheless there are so many deals out there that we're not passing on any of the good ones, and we're setting up the properties for other investors. It works out well for everyone involved...

Jared, it sounds like we have similar strategies. We're doing the same thing finding houses lower pirced but good stable neighborhoods. The houses we're buying are solid, we're finding excellent tenants, and the cashflow is great.

Jared, again I would be careful with these $10k houses. I had one come across my desk the other day and the house looked great! 3 Bedrrom, 1200sqft, new mechanicals, new roof, clean throughout, being offered at $12,500. I wouldn't touch it though because it is in the wrong area of the city. High crime, many burnt up or boarded houses in the area, and generally speaking the area was declining.

I'm sure I could pick this house up for the $12,500 and rent it for $600-$700, but there are going to be issues. Furthermore, if the area continues to deteriorate it might get to a point where you need to decrease your rent to get tenants in, and that just opens the door for less desireable tenants. In essence it's a downward spiral.

To me the location of the property is the first thing you need to consider...the numbers come next...

Yeah Jared, one thing to watch out for is what is your exit strategy. I have an investor that I'm working with that is kind of stuck right now. He purchased the property for $10k about 2 years ago and since then he's pumped about $25k - $30k into the property. The property is rented, but he see's some of the properties we're putting together and he'd like to move his money. However his problem is that he can't sell the property for what he has into it. It's not the worst case scenario because the property is cash flowing, but I'm worred that the area is going to deteriorate further in the next few years and it's only going to become harder and harder to keep rented.

Remember that location is the one thing on a property you cannot fix...once you choose you're locked in!

Chad,

I definitely recommend you setup a business plan as it will force you to thoroughly think about your business and act as a compass for you. It will set boundaries for where you will go and what you will do which will focus you on what you're trying to accomplish (Your Mission).

Remember, it is a living document and should be updated from time to time as your business develops.

Another thing you may want to consider doing is writing out your goals. This can be a very powerful exercise in conjunction with writing your business plan. Your goals are the "What you want to accomplish", and your business plan is the "How you are going to do it".

Mark,

I think there's something to what Jared is saying. I don't agree that you can buy properties for $10K that are in good areas. You can find houses that cheap, but the plain and simple fact is nobody wants to live there, or the home will be in very poor condition and you will have to do quite a bit of work to get it rent ready. We're working with a lot of investors that have gotten lured in by price only to find they bought in the wrong location or the property was not in the condition they expected and their dreams of 25% returns disappear when they can't keep the place rented.

Now with that said, we're putting together properties in the range between $30k - $40k that are renting in the $750 - $900 range. The returns on these properties are going to be higher than your apartments because the rent is higher, and on the back end you're going to have a much easier time selling.

For us, the key is location. We're investing in Pontiac and Detroit, MI, but there are very specific areas of these cities that we are looking in. There's no doubt you can buy a house in Detroit for $100, but for the reasons I mentioned above you don't want that house. If you stick to the right locations that have solid neighborhoods, have well kept homes and you manage the properties right, there is a huge opportunity out there...

Welcome to Bigger Pockets Steve. There are lots of folks from Michigan on here. Let me know if I can help you in any way!