My biggest lesson is you constantly got to keep reminding yourself that they are paying your mortgage. If your tenants are good with paying rent on time then you got to cut them some slack and put up with some of their shenanigans.
My one tip for new LL..... the "I'll be protected if I put the unit under an LLC"...... unless you are following all the criteria for truly being an LLC.... corporate books, corporate minutes, agenda and all the other paperwork and documentation that you need to have to actually prove your are operating an LLC..... any half decent lawyer will pierce that LLC in a nano-second..... dont be fooled...carry a lot of liability insurance
The day I bought my first investment property was the second-best day in my early investment career. My first property was a C-class 4-plex in Houston. On paper, it was a cash cow. I believe the return was in the 10% range. The first month or two were great. The rent came in without major problems. I felt really good. And then the problems started.
It was the first of the month. I was going door to door collecting rent. I collected rent from three units, but when I knocked on the fourth, no one answered. Another tenant told me that they were in there. I knocked again, but still no answer. I did not know what to do.
I returned every evening for the next few days, and still no answer, even though I heard people inside and the lights were on. I called the person I bought the property from and asked for advice. He laughed and said, “Now you know why I sold the property; good luck.” He hung up.
I contacted a lawyer. I discovered that evictions take time and lawyers are expensive. However, I had no choice, so I paid the retainer and got on with it.
It was another first of the month. I was at the property collecting rent. The door to the fourth unit was not only open, the door and door frame were gone. Torn off, leaving a ragged hole. I stood looking at the opening in shock. I went inside. The appliances were gone, walls were damaged, all windows were broken, all doors had holes kicked in them, and excrement was smeared on the walls and floor. I bought plywood and covered the windows and the door. I was in shock.
I called the attorney and explained what had happened. He said, “You got off easy. Remember that just because they left does not mean you have the right to enter. We have to complete the eviction.” So I could not repair the property; it sat vacant.
The next month, another tenant refused to pay. A week later, they skipped, and I had two vacant units. I spent thousands to get both units rentable. Before I got either unit rented, squatters moved in. So, I started the eviction process on these units too.
I could continue, but there is no need. The day I sold my first investment property was the best day in my early investment career.
A few years later, I bought two 4-plexes in Atlanta that were B+ or A- Class properties. I had the properties managed by a property manager. Income came on schedule, and repairs were minor. I made good money, and life was easy.
Lessons learned:
After location, the most important success factor is the tenant pool. Every property attracts only a narrow segment. If the property attracts the wrong segment, you have a big problem.
You buy properties based on the tenant pool segment the property attracts; do not buy the property first and hope things will turn out OK.
Never believe paper returns. Actual returns can be drastically different than paper returns. It all depends on the tenant segment the property attracts.
You cannot afford to self-manage. No matter how much you think you can save by self-managing, one bad tenant will cost you far more. Work with a good property manager if you want to make money and have a life.
You cannot afford to self-manage. No matter how much you think you can save by self-managing, one bad tenant will cost you far more. Work with a good property manager if you want to make money and have a life.
This is my advice to everyone I meet wanting to own rentals. That 10-12% is worth every penny.
I should have followed this rule on my first deal. I've since got a google number and use a virtual office with a phone answering service. Also, now I conduct all my rental business through a third-party website built for landlords and tenants can make request through there.
FERNWOOD Team, KW VIP Realty520 Reviews