All Forum Posts by: Kimberly Kesterke

Well- despite all of the advice against it, I hired one of my tenants to do some basic property management work. He wanted work and I needed some help - pure and simple. You know how hindsight is 20/20? Well, I'm going to share some things in this post that make me cringe- and yes, I agree with you on the front end.... I was an idiot. But I would like advice on how to get my credibility back after the classic mistake of commingling business with a tenant. 

Long story short, I have a tenant in one of my properties who I trusted. He and his wife paid rent on-time, he seemed like an honest guy and I really needed a new team member to help be my "boots on the ground". Being an out of town landlord, I needed someone to help keep contractors straight, help pick up supplies and keep the jobs running. Basically I needed a project manager, and since he claimed to have helped real estate investors in the past, I felt like this could be a successful partnership. 

Cringe-worthy mistake #1: I sent over a business credit card for him to use for supplies 

(yes, I'm an idiot). I justified it by: 

1. I trust the guy 

2. It will help save me time 

3. He rents from me, I like this guy as a person- why would he do anything shady?? 

well- after about 3 weeks that one bit me in the behind- charges from Family Dollar and Lowes popped up that were not authorized. I immediately cancelled the card and had him return what he bought- which after pressing him for the receipts it was clear they were not job related charges. 

Had he been a contractor, I could have fired him, but since he is one of my tenants, I felt I needed to tread lightly. I wasn't willing to press charges or make a huge deal about it-  and decided this was my own stupid tax for even thinking a credit card was a good idea in the first place. ( I have to take some responsibility there on my end). 

Cringe-worthy mistake #2: By hiring him, he clearly saw that I needed additional help, which damaged my credibility as a landlord.

As landlords, we have to keep a distance. As soon as tenants feel too comfortable, they start to take advantage... which leads to... 

Cringe-worthy mistake #3: I gave him an exception in paying rent on-time this past month.. 

(insert throw pens, remote controls, your computer mouse at this forum post) 

If I haven't lost you from my absolute lack of common sense and lack of following my OWN Processes, read on as to why this was the nail in my coffin with this tenant.....

A little back story- he called me up at the beginning of the month with "the story". We all get them- heck, I get one from each new tenant at least once within the first 3 months they start renting from me. And I'm good at being firm. 

However, since he had helped me out with these renovation projects, I felt I owed him a favor. I told him I wasn't happy that he was going to be late, and that I would make an exception this once. I asked him when he could have rent paid and he said 01/17. 

Well- you guessed it- its 01/17- end of day, no rent. I reached out earlier today and you know what his response was? " I will get it to you later". He acted like I was the one bothering him!! (Landlord credibility completely annihilated). 

The lesson I learned here was to never ever ever ever hire a tenant to do any sort of work. And secondly, never ever ever waiver on rent collection processes. And never give a tenant/ project manager a credit card ( I pretty much added that in for myself- anyone reading this with any common sense already knows that) 

So the purpose of this post is two fold- One- I would love some advice on how I can get my credibility back with this tenant and avoid this every single month until his lease expires in June. And Second- if in the future it seems like a good idea to hire a tenant to do some work- please think twice. 

@Ahmed Youssef- Think of it slightly differently- The Turnkey Companies have done all of the heavy lifting on that property - They found the property, they renovated it, they placed a tenant that will allow you to cash flow at the 1% rule or higher.. there is incredible convenience in that scenario. They even pre-screened the tenant and are collecting legit rents. Also, there are different types of appraisals out there- the income approach and the comparative market analysis approach (CMA). Most appraisal companies use the CMA approach, where as turn-key companies are going to market the property based on the Income approach- again, both legit ways to value a property. Sometimes appraisers, when using the CMA approach will pick homes that are not necessarily like-kind properties. The turn key property is renovated- fixed up- where as the appraiser my compare it to a dump down the street.

I guess my point is that appraisals are subjective based on the appraiser- they don't always provide the most accurate price. So it makes sense to me Turn key companies would build that clause in a contract to protect the renovated value of the property. 

@Andrew Webster Hello Andrew- there are a few ways you can check to see rent-ability in your area- 1. Go onto Zillow and type in your address, click on the rent filter- and then slowly expand out- you should be able to see other rentals around you. This will give you an idea what a property will rent for. 

2. You mentioned this is near a lake- Have you ever considered Air bnb? You can manage the Air bnb remotely with an electronic key pad lockbox, or hire a property manager who can do it for you. You would have to leave the property furnished, but could be a good income stream for you. 

3. Consider renting out the rooms individually- Here, you don't need to furnish the place- however target youth groups, churches and the local college- Figure out the utilities and roll them into the per room charge. I personally haven't done this strategy myself, but will be testing it out on a larger property I have once the lease is up. I've heard people experiencing greater cash on cash returns in these scenarios.  With a house the size of yours, this could really add up quickly for you. 

Wholesalers

Wholesalers are excellent resources. They are business owners whose sole purpose is to find and sell investment properties. They can dig up incredible deals that are then passed on to you. The way they make money is through their negotiation power. They negotiate a deal that provides a spread between what the seller is willing to accept and what the investor is willing to pay. This spread is the money they make and is usually referred to as the “assignment fee”. The better negotiators they are, the more money they make, while still passing on an awesome deal to you.

Keep in mind that their assignment fee covers a variety of costs they incur on the front end before ever closing a deal. It covers costs to mail out postcards or letters, it covers their costs to acquire a list, and their time dedicated to taking calls, negotiating the deal and building their buyer’s list. Using wholesalers allows you as an investor to save time, effort and money in exchange for a small assignment fee. Using the right wholesaler can be a win-win- You get a good deal, and they make a profit.

Networking with wholesalers can be a good way to find your next rental property because wholesalers do the heavy lifting for you. From driving for dollars, to sending out postcards, to networking with their local community- the right ones have their finger on the pulse of off-market properties.

So how can you find these magical service providers who do all the heavy lifting for you???

Facebook Groups

There are hundreds of thousands of real estate investing groups on Facebook. All you would have to do is join a few in your market of interest and post you are looking for someone. You can even search the group archives with the keyword, “wholesaler” and get a pretty good list of people you can contact.

Google Search

The more professional and experienced wholesalers will have websites that are tagged and archived on Google. Just search “ property wholesaler, (insert territory here)” and sift through the results. Many websites have the option to add your e-mail address to their list. It may not hurt to give them a call directly and let them know what you are looking for.

Local REIA- (Real estate investing association)

Every State has a variety of REIAs- pick one and start going regularly. Find the meetings that specifically discuss deals and opportunities. My local REIA calls it the "Dealmakers" meeting and they even have a google group that sends out email notifications. Most of the time, the notifications are coming from wholesalers.

As you can imagine, Wholesalers are not all created equal. You are going to have some excellent ones who are true professionals- they treat their services as a business. You will also find ones who are just trying to make a quick buck.

Either one can be fine to work with if the deal is structured properly, however, you have a better economical exchange using the professional. The following is criteria on how to find the better ones:

• Do they have a website?
• Do they have testimonials on that website?
• Are they responsive when you call them?
• Did they come recommended from a happy investor?

In wrapping up- wholesalers can be a great resource for you in finding off-market properties. They do the heavy lifting for you, are networked within your investing territory and will have a lot of insights to which areas are the best to invest.

What are some other ways you have found or networked with wholesalers? Any tips on how to properly vet out a wholesaler to ensure they are a good one?

@Paul S.

I have to agree again with “stick to the policies no matter what”

I invest in Augusta, GA and EVERY new tenant I place throws me a sob story at least once. I used to fall for them and lose money- now I don’t and make money.

I think Paul you nailed it on the head and I understand where you are coming from. These past 2 years I’ve had to toughen up and be very very clear on rules and regulations:

1. I am not their friend

2. Do not waiver on your policies (every time I have, Ive regretted it)

3. Have plenty of Pay or Quit, Notice or rent default templates on hand- those letters alone are enough to send the message you are messing around.

4. In every sob story situation I ask myself- what would my mortgage company do in this situation?

That helps me see the situation clearly.

@Paul S. @Mallory

I agree with Paul. So many landlords have good hearts and tenants take advantage of it every chance they get. Hand back the tenant her sob story and stick to your policies. Sounds harsh but turn the tables- will your mortgage company give you a pass if the mortgage doesn’t get paid? No. They will hand you a pretty pre-foreclosure letter. My point here is that yes you can feel bad for a tenant who has fallen on hard times- but it’s important to filter the situation to a non-emotional, stark reality. We have to pay our mortgages on-time and tenants have to pay their rent on-time or there are consequences.

@Adam Harris @Asia Jones

Adam has great advice here. Legally all he needs is a 60 day notice to vacate. I wouldn’t want to pay him a penny out of principle. If that doesn’t work then take other measures- the next having the property management company rectify their mistake.

Good luck

@Alex Johnson- Hey Alex- I'm not a financial adviser, and take this with a grain of salt:

Here is a rule of thumb I make when it comes to investing:   Will this investment's cashflow outweigh the cashflow of the other option? 

So- you mentioned the loan is -250/ month. 

I would look for investments that would cashflow MORE than 250/ month. Say you got a SFH, or a duplex that cashflowed $400 after expenses, etc- Your initial principle payment would more than cover your student loan. As you get more established you can throw even more money towards the student loan- almost like the famous Dave Ramsey snowball effect. Or, you can choose to househack- rent out rooms or rent another side of a duplex. The extra money you get from the rents could pay for mortgage and some living expenses- which means you could throw all of the money you would be paying for those things to your debt.

Again, I'm not a financial adviser, but positive cash flow is the way to build wealth overtime and you can use that same money to pay off your loan faster, while having a cash flowing asset. 

@Peter Philando- Its not a very easy task, however you can find them by calling the law office that represented the foreclosure auction. Usually the lawyer will be listed on the public notifications- I am not too aware if Auction.com offers the lawyer information or not.  Since lawyers represent multiple foreclosure listings at a time, if you start building a good rapport with the offices in your area, you can start making it a monthly check-in call. As you probably know, not all properties that are up for foreclosure go to auction, or get sold. 

Wholesalers

Wholesalers are excellent resources. They are business owners whose sole purpose is to find and sell investment properties. They can dig up incredible deals that are then passed on to you. The way they make money is through their negotiation power. They negotiate a deal that provides a spread between what the seller is willing to accept and what the investor is willing to pay. This spread is the money they make and is usually referred to as the “assignment fee”. The better negotiators they are, the more money they make, while still passing on an awesome deal to you.

Keep in mind that their assignment fee covers a variety of costs they incur on the front end before ever closing a deal. It covers costs to mail out postcards or letters, it covers their costs to acquire a list, and their time dedicated to taking calls, negotiating the deal and building their buyer’s list. Using wholesalers allows you as an investor to save time, effort and money in exchange for a small assignment fee. Using the right wholesaler can be a win-win- You get a good deal, and they make a profit.

Networking with wholesalers can be a good way to find your next rental property because wholesalers do the heavy lifting for you. From driving for dollars, to sending out postcards, to networking with their local community- the right ones have their finger on the pulse of off-market properties.

So how can you find these magical service providers who do all the heavy lifting for you???

Facebook Groups

There are hundreds of thousands of real estate investing groups on Facebook. All you would have to do is join a few in your market of interest and post you are looking for someone. You can even search the group archives with the keyword, “wholesaler” and get a pretty good list of people you can contact.

Google Search

The more professional and experienced wholesalers will have websites that are tagged and archived on Google. Just search “ property wholesaler, (insert territory here)” and sift through the results. Many websites have the option to add your e-mail address to their list. It may not hurt to give them a call directly and let them know what you are looking for.

Local REIA- (Real estate investing association)

Every State has a variety of REIAs- pick one and start going regularly. Find the meetings that specifically discuss deals and opportunities. My local REIA calls it the "Dealmakers" meeting and they even have a google group that sends out email notifications. Most of the time, the notifications are coming from wholesalers.

As you can imagine, Wholesalers are not all created equal. You are going to have some excellent ones who are true professionals- they treat their services as a business. You will also find ones who are just trying to make a quick buck.

Either one can be fine to hire if the deal is structured properly, however, you may have a better economical exchange using the professional. The following is criteria on how to find the better ones:

• Do they have a website?
• Do they have testimonials on that website?
• Are they responsive when you call them?
• Did they come recommended from a happy investor?

In wrapping up- wholesalers can be a great resource for you in finding off-market properties. They do the heavy lifting for you, are networked within your investing territory and will have a lot of insights to which areas are the best to invest.

What are some other ways you have found or networked with Wholesalers? Any tips on how to properly vet out a wholesaler to ensure they are a good one?