All Forum Posts by: Heather C.

James Vermillion Thank you. I posted my experience because in talking with some newbies, they weren't taking the reserves seriously. They were thinking in terms of only having vacancy for a month or two OR only having to come fix the AC. The fact of the matter is reserves are our safety net and completely vital to running any business.

Luis A. Yes the insurance has taken care of everything. I will say that everything went rather smoothly with the insurance, it was just a long process while they were investigating it. I expect the property rehab will be completed by early Dec and it won't be rented until Feb/March due to the rental season. This will mean 10-11 months with no rent (x2 because its a duplex).

I know a lot of people come on here seeking advice about rental deals they have and many of them don't hold up to the 50% rule. I will admit I guilty of justifying the deal in my head even when it didn't make true sense on paper. Luckily I had (and still have) a great mentor that snapped me out of that. There were times I felt like she was being unfair to the deal because the property was beautiful or in a good location, etc.
This past April one of my rentals, a duplex, caught fire. Thankfully no one was hurt. The tenant's dryer had a faulty part which ignited lint in the dryer. Combine that with the fact that the duplex was wood frame from 1920s and pesto chango you have one hell of fire starter.
I have been out of 2 rentals incomes on this property. First waiting for the insurance money (in FL they have 120 days and of course they took every last day) and now waiting on the renovations. Yes I received some of the lost income in the insurance payment; BUT I still had to float several months before that came through.
Reserves are so very important. If I hadn't used the 50% rule and funded my reserves, this could have been catastrophic for me financially. Luckily its not and while I do cringe every time I check on it, I'm not losing my butt on this deal.
I urge everyone looking into deals to buy with the head and not the heart. Its easy to get caught up in the excitement of buying something; but the money is made in being smart financially...not because the unit looked pretty.

No problem Chris. She seems to be motivated so let that work in your favor. Also don't forget to get creative- seller financing that may leave you more liquidity, better terms, etc. The options are endless. Good luck!!!

Chris,

I have to agree with Uwe. I have rentals at all price points in the market. You make your money when you buy. One of the first mistakes I made was assuming that the property appraiser's office would lower my assessed value when I disputed it. Well it didn't happen and I was stuck with the tax bill. Combine that with paying too much in the first place and I barely cash-flowed. One break in the AC unit and I was out my profit.
The deal MIGHT work; but all in all if you can't count on appreciation if you are holding long term. I try to make all the money I can on cashflow and let the appreciation be the icing on the cake.
Whatever you decide good luck!!

HT

2012 for me has been great. I am 100% occupied with good quality tenants and have increased rents. I think it is a bit hard to predict the next few years given how the political landscape may or may not change. I do know that there is an significant increase in foreclosures held by banks but not the market. I think they are trying not to flood the market; but like Ralph S. said...they can't hold onto them forever. I am just going to continue buy and hold strategy. Its tried to true!

Michael Sherwood That is correct. The lease agreement is your protection as a landlord....couple that with tenant screening and due diligence and you eliminate a lot of your problems. I am not in NY but I don't see where you would have recourse against them. We have all learned these lessons along the way at the school of hard knocks. I would focus your attention on advertising the unit for rent (put the sign in the yard now!!!) and getting it tenant ready ASAP to reduce your time vacant.

Dale Osborn you bring up a very legitimate and scary point. My fiance will have almost 10 years in the Navy when his next contract is up. The scuttlebutt is very active with talk of taking away the pension in a move to a 403b and restructuring the insurance they receive. I starting to take that more seriously than before due to a lot of lifers being told thanks for but not thanks when they try to re-up for another 6years. We are both learning very quickly that the only thing you rely on for your future is YOU....not a promised pension, not a 401k plan someone else controls and not even that job with a paycheck.
Thanks for post!

Hi Mike,

When you state that you did not have a contract, do you mean you did not have a lease agreement with the tenants?

Michael Lauther I guess I'm having a hard time coming to terms with being disposal in some areas of this business; :)
Scott W. I am 31 y/o so young; but not that young. In 2007, I had an amazing boss at my day job that is buy and hold investor as well as a hard money lender. She took me under her wing and taught me what she knew and the mistakes she made along the way. I am a very fortunate person to have had that opportunity. I still maintain a full time job and reinvest all the rents into the business...building reserves and paying down mortgages. For me REI isn't about quitting my day job tomorrow (though I wouldn't mind that eventually), but to retire early with sufficient revenue streams to support an active lifestyle.

Steve Babiak You may right. I get information from a property preservation company that has access to properties before they hit the market. While there are realtors assigned to them (to do routine inspections) they aren't actively marketing them. This isn't just HUD foreclosures but also banks. I think from the bank perspective, its about accounting for maximum losses (ie reaching the max write off then holding the rest for the next year) and curious if they will flood the market after the first of the year.