All Forum Posts by: Zach Davis

I like to run the numbers as if I will be renting all of the units out since that's my ultimate goal. If it makes sense from a purely investment standpoint, then I'd just accept whatever savings on living expenses I get. Similarly, if it doesn't make sense as an investment property then it doesn't matter to me what I'll be saving on rent or a mortgage. Investments shouldn't have to be subsidized. 

I also run my numbers based on a cash on cash return. All of the percentage rules and per unit rules are fine but ultimately the specific math for that property will be different than any other and won't always fit the rules. If I can invest $10k of my own money and make $100 per month I'm making a 12% annual cash on cash return, that's fine by me, but that same $100 per month with $50k down is about 2% and I make more than that on my checking account. 

I only buy local properties because I know how most property management companies work and I don't trust them. Take a listen to show 100 of the BP podcast and you can hear Josh Dorkin railing against the idea that a new investor can buy low cost properties in another area and actually make money in the long run. He's been bit by it and I've been in the same boat. I bet if you look around you can find a market within 2 hours of yourself that you can make a better return on. I invest around Portland, OR which has mediocre returns at best but, within a couple of hours of the Portland Metro Area there are better deals. You may have to drive occasionally but that still beats a plane ride.

FYI, both of my properties were purchased from out of state investors that were looking for better returns. The first one had dealt with 3 management companies in 4 years, the last of which rented one unit to a sex offender who was molesting a 14 year old girl in the apartment. He got caught again and the unit was a crime scene for 2 months and thus collecting no rent. When the owners contacted us to see if we would buy it they had fired the management company, again, and were flying up from California to show the unit to prospective renters after the police released it. The other one I purchased for $40k under what he had paid for it because he didn't know the area when he bought and his management company ran it into the ground. I also just put an offer in on another one with a similar Out Of Area story...

There are obviously many people who make money at long distance investing but its almost always the seasoned investors with an established network that they can rely on and its rarely their only property. Not a husband wife buying class a C property in Texas or Ohio when they live in New York. Obviously I'm generalizing but I think the statistics would back me up. Again, listen to the Podcast, almost every episode the person being interviewed talks about the most difficult part of investing being finding a manager, contractor, handy man, agent, etc. that they can count on.

Yikes, must be in demand! My properties are B class and we charge a $250 "additional deposit" not specifically a pet deposit, we can no longer charge non refundable pet fees. Its worded that way because a pet deposit can only be used for damage specifically done by a pet, whereas an additional deposit can be used for back rents or a hole in the wall. Its all just legal bureaucratese but better to be safe than sorry... Our pet rent is $25 a month flat fee, not per animal or anything like that. We also limit people to 2 animals that are over a year old, under 50lbs and house broken, no breed restrictions or any of that BS.

Forgive me if I repeat anything already said in the previous posts, I just scanned the responses... Where you buy is really going to depend on what you're ultimately looking for and what kind of area's you are comfortable looking in. Close in Portland is going to have a "hip" feel to it with lots of brew pubs, coffee shops and an eclectic mix of people. Then there are the cheaper area's around Rockwood, Brooklyn, or Lents that aren't super desirable to live in but will offer a lower purchase price, and there's everything in between.

Vancouver is typically going to have better numbers from an investment standpoint and has about the same range of high to low end but doesn't really have the same culture Portland has. Which is good or bad depending on your stance. 

Ultimately Vancouver is the better option if you are looking at it strictly as an investment, lower FMVs, similar rents, lower property taxes, etc. Inner Portland is probably a "cooler" place to live for most.

I'd label that recurring maintenance, I only charge the tenant if its abnormal. A kicked in door or obvious water leak that they didn't tell me about is on them. Reasonable wear and tear or recurring maintenance is mine. 

Minimize the use of carpet. I use click lock vinyl plank flooring everywhere except the bedrooms. Its fairly inexpensive, tough, looks nice, its easy to install, replace and repair and its waterproof. We used to use tile but it ends up costing about the same plus its much more labor intensive to install and repair, plus its a huge PITA to bust it all up if you decide to replace it. 

One time saver I always do is replace the front door knob with a passage knob, that way the tenants have to have their key with them in order to lock the deadbolt. No more tenants locking themselves out and calling me at all hours of the night... Its not a maintenance thing but it saves me time and energy.

Let me preface this by saying; this is what I do in Oregon, I have no idea if it would transfer to Virginia... 

If its not spelled out in the lease who, what, and how much then I would want an invoice to point to if it made it to court. If you have it in your lease what costs are if the tenant is at fault then you should be fine. Also keep in mind that if you legally let them out of the lease and found the damage after you took back possession of the property then you have no way of proving that their negligence caused the damage and not your own. For instance, you let him out of the lease on Feb 28 and find the propane tank empty and leaking pipes on March 5, that leaves a question as to whether it was him or you that caused the problem. My attorney likes to say that landlord/tenant law has less to do with the "law" and more to do with what a judge feels is reasonable.

If you don't have those things in writing in the lease, then add an addendum for next time stating that you will charge a minimum of X per hour + materials for whatever damages the tenants are at fault for. Again, this has to be justifiable, you can't charge $100 per hour for your work when a contractor is charging $40. I charge a minimum of $30 per hour for my labor or the invoiced amount for a contractor, plumber, electrician, etc. My addendum spells out charges for the most common tenant caused damage (doors, drywall, water damage, broken windows, wrecked blinds, etc) and then state that it will be a minimum of X per hour + materials up to market rate for anything not listed. This is one of MANY ways that a really good professional lease agreement will save you time, money, and frustration in the long run.

Check with a VA real estate attorney before doing ANY of this, landlord/tenant law can vary wildly from state to state.

A while back I was listening an episode of the BP podcast and was struck by a story that @Brandon Turner told about simply talking to a couple in his church resulting in him buying his main apartment complex. This was somewhat of a new concept to me because I have always been the type to keep what I am doing to myself, mostly just because I assume most people really don't care...

Well, I decided to follow Brandon's model and somehow ended up in a conversation with one of my tenants (with my head stuffed under a sink) about wanting to buy poorly managed buildings in the area and begin to turn the neighborhood around (its a C cluster in a B area). This tenant is a stay at home mom and is a bit of a social butterfly... Somehow she ended up talking to the two separate owners of the properties on either side of mine, both of which showed interest in selling but hadn't actually thought about it. This tenant took it on herself to talk with them on my behalf, and ended up calling me with their numbers out of the blue.

After a couple of conversations and a little negotiation, one of the properties wasn't quite the deal I wanted so I passed on to another investor that I've worked with before and he will be closing on it at the end of the month. The other, I close on this week, 20K under market, and owner contract with very little down because he's retiring and wants mail box money. Two properties purchased and more money made because I decided to change one little thing and talk to people about my interests. It may not be as dramatic as an entire complex but none of it would have happened if it wasn't for one 3 minute conversation that would have never been if I hadn't heard that episode of the Bigger Pockets Podcast. Thanks for everything you do, BP crew!

The vacancy rate since the current owner bought it in 2003 has been under 3%. I know a vacancy rate is a vacancy rate whether the population is 2,000 or 2,000,000 but it does make me a little uneasy. I guess the reality is that I only need 1/1000 of the population to rent to fill that plex...

Problem solved, I didn't really want to buy the thing myself because it wasn't a good deal but some slum lord buying it wouldn't do me any good either. I turned it over to a partner at the large complex next door. He's going to buy it just to have more control of the neighborhood so I should have most of the benefits but not have to pick up a bad deal.