All Forum Posts by: Thomas Garza

My wife and I are hoping to purchase a property ASAP, and 1-2 more in the next year. We are hoping to work with a quality wholesaler who finds deals with actual meat on the bones, and who is working in our area. Any suggestions would be greatly appreciated. 

First, if you haven't already, you should read the BP Ultimate Guide on Tenant Screening which can be found at: https://www.biggerpockets.com/blog/2013-01-27-tenant-screening. 

We have personally listed our properties on Zillow, Cozy, and Craigslist. So far, all of our tenants have found the house on Zillow, but I have heard that many people find success with Craigslist too. We have used Zillow's application and background check in the past, and it has worked decently, but we personally plan to write some software to handle applications going forward, and we will probably use a different service (to be determined in the future) for the background check as well. 

With regard to the contract, I'm not 100% sure where the best place to get one is. Of course you can contact a real estate attorney and they should be able to provide you with a strong lease agreement, but I imagine there are many other source options. I personally got mine from a friend, but we will probably purchase one from an attorney in the near future just to make sure we are truly protected. 

Best of luck with your first rental. Don't get discouraged and always remember that rental properties produce long term wealth.

@Moises Ulloa, are there any issues with the property? Assuming no major issues, using the 50% rule I would think this property would cash flow (assuming the rental numbers are correct). 

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $70,000
Cash invested: $6,000

We purchased this property as our primary residence. When we moved out of this property, we held onto it and decided to rent it out. When we first started renting the property out in 2016, we made roughly $50 in cash flow (after accounting for 10% vacancy , 10% realtor fee, 10% maintenance, 10% capital exp, and 10% property management (paid to ourselves)). Now, 3 years later taxes and insurance increases have eaten up all the cash flow since the market has not allowed me to increase the rent.

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

When we first bought the property, we didn't plan to ever use it as a rental. After my brother told me about BP, we decided to give it a try.

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

Since we purchased this house initially to live in, we found it using a realtor. We negotiated down the price a few percent and came to a deal.

How did you finance this deal?

FHA loan

How did you add value to the deal?

While living in the house, we made a few updates: we removed old paneling, we added a safe, and we repainted the house. We plan to remodel the bathrooms after our current tenant moves out to make the property more attractive to tenants.

Lessons learned? Challenges?

Taxes and insurance will increase, so I have to increase my rents or else I will loose all of my cash flow. Also, I have learned that most tenants really care about bathrooms and kitchens.

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

No, we would never use our agent again.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $70,000
Cash invested: $6,000

We purchased this property as our primary residence. When we moved out of this property, we held onto it and decided to rent it out. When we first started renting the property out in 2016, we made roughly $50 in cash flow (after accounting for 10% vacancy , 10% realtor fee, 10% maintenance, 10% capital expenditures, and 10% property management (paid to ourselves)). Now, 3 years later taxes and insurance increases have eaten up all the cash flow since the market has not allowed me to increase the rent. We are planning to update the bathrooms after our current tenant moves out, which should make the house much more attractive.

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

When we first bought the property, we didn't plan to ever use it as a rental. After my brother told me about BP, we decided to give it a try.

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

Since we purchased this house initially to live in, we found it using a realtor. We negotiated down the price a few percent and came to a deal.

How did you finance this deal?

FHA loan

How did you add value to the deal?

While living in the house, we made a few updates: we removed old paneling, we added a safe, and we repainted the house. We plan to remodel the bathrooms after our current tenant moves out to make the property more attractive to tenants.

Lessons learned? Challenges?

Taxes and insurance will increase, so I have to increase my rents or else I will loose all of my cash flow. Also, I have learned that most tenants really care about bathrooms and kitchens.

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

No, we would never use our agent again.

Hey @John Ala, congratulations on your first flip! I think many people wish that they walked away from their first flip with any profit, so it sounds like you are doing good so far. 

What are a few of the bigger things that you learned? 

@Ashley Wynn, I just learned yesterday that Wells Fargo offers a HELOC on investment properties. It still might not work for you since they only go up to 60% LTV, but for us it is enough to use for down payments and/or rehab costs.

Maybe you could find a portfolio loan that packages many or all of them together. You will probably get a better interest rate financing them as conventional mortgages, but you will probably have a hard time finding a lender who will give you 15 mortgages (I heard the max is around 10). 

Hey @Ashley Wynn, welcome to BP. 

We have 2 rental properties, but we are looking to buy 2-3 more in the next 18 months. We have decided to leverage the equity in one of our rental properties by using a HELOC to fund our next few deals. The rates are considerably better than hard money (6% instead of 12% or more) and we can hold the debt longer if needed than a traditional hard money loan. Do you have any equity in your primary residence that you could leverage?

In regards to analyzing the cash flow, I would focus primarily on the period where you have long term financing on it. That period will be considerably more expensive since you are paying principal and interest instead of just interest. 

Does that answer your question at all? 

Hey @Natalie H., sorry to hear you are having a bad experience with one of your rental properties. 

We just had a property that took almost 8 weeks to rent, and it was stressful. I realized towards the end that it was much cheaper for me to drop my price, than it was to miss another month's rent. By dropping the price by $50 per month (from $1250 to $1200), I reduced my yearly income by $600, but I was able to generate more interest and rent the property much quicker. Of course, I don't know how much longer the house would have sat vacant if I didn't lower the rent, but every 15 days the property sat vacant was costing me $600 (in lost revenue), so 2 additional weeks would have been my break even point. 

You might also consider signing a 7 or 8 month lease with your next tenant so that you can time your vacancies around the beginning of summer instead of fall or winter. 

Keep your spirits up and best of luck with your property.