Rental Property Investor · Boone, IA · Member since 2019 · 55 posts · 94 votes
Everything has gone wrong all at once. I have 13 doors- which you would think would be able to handle about any issues that popped up, but the issues have happened too fast. I had insurance require roofs to be done- siding changed out - one thing after another after another. I still have two major things I need to do (a roof and some steps need repaired) and I have already spent all the savings and maxed out a couple cards. It’s been a terrible 4 months. Anyone have experience with this, and any advice? I’m feeling pretty anxious right now.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
Landlording is difficult and getting things off the ground can be extremely tough especially when your buying distressed properties and have a lousy tenant base to pick from .Don’t ask me how I know ( I felt the same as you many times) . I’d first Consolidate those high interest cards into a line of credit or bank/credit union loan with a fixed reasonable rate . Focus only on things that must be done to be habitable and take no tenant requests for upgrades or frivolous stuff waste no money in your personal life that’s not necessary . Get your ducks In a row and persist and push on do as much work as you can without paying people to do it , that means 80+ he work weeks if that’s what it takes . It’s a struggle at times and a fight to be victorious but you must have laser sharp focus and keep plugging away . Never ever ever never give up I don’t care how bleak it looks . There’s a reason 97% of population is not a real estate investor and of those that are in the 3% that are , most all of them have only one rental . We are a rare breed and it can be overwhelming but if you push through you can make it .i will leave you with a quote from Calvin Coolidge -
Nothing in this world can take the place of persistence. Talent will not: nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not: the world is full of educated derelicts. Persistence and determination alone are omnipotent.
@Pavel Ushakov. The taxes of me taking money out of 401K is ridiculous. I don’t like that strategy.
You can usually take a loan out instead. But dipping into your retirement funds could prohibit you from participating in broad market gains ahead. However, S&P is almost at all time highs currently, and any blowback from a failed China deal (or any other event) could take it back down (quite) a bit.
Real Estate Broker · Lexington, KY · Member since 2017 · 131 posts · 129 votes
7y
@Ryan Rush thanks for the honesty and for this post. I purchased 8 units last year and all the repairs just kept hitting me every single month. I was able to get a $45,000 subordinate loan on my primary residence that my local bank offered. Just a 3 year note at 5% interest. My income is good and we live below our means so the additional payment I can handle.
Thanks to this thread, I’m changing my strategy and I’m going to take it slower until I can build up some reserves for these properties before purchasing more.
I’m curious what benchmark others use for reserves?
Rental Property Investor · Boone, IA · Member since 2019 · 55 posts · 94 votes
7y
@Timothy VanWingerden. Glad it helped others. I love learning and I am also not afraid to tell people when I fail because if you’re not failing with something you’re not trying very hard.
I have a plan in place after all of the discussion here. I’m going to get a heloc on a house- use it to pay some debt and do the roof on my free and clear. Then I’ll sell it as a turnkey (if anyone is interested) and use that to pay the rest of the bad debt as well as putting the money back into the emergency fund. I will then start building up cash to invest again after I get that back on track. And off I go.
Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
7y
Bottom line is you need $$ to cover all these expenses...... you either borrow it at the lowest interest rate possible or you raise it by selling something or getting a partner with capital....... simplistic summary but its the basic situation
This would be how I look at it....ok so I borrow some $$ and it gets me out of the immediate crisis.....but I have to pay that back and it does NOTHING for my reserves for the next issue...... and there will be more issues....when and how much is unknown. So borrowing solves my immediate crisis but doesn't help me much in the long run unless its sunny skies and smooth water for a LONG time...
Selling something......obviously a door or 2 is the choice...... gets me out of the current crisis or at least real close....my debit isn't higher.....and I have fewer potential needs for reserves I don't have yet.
Selling a door or 2 isn't quitting....... its being smart. You have over grown too quickly without the reserves to weather the storm. Adding more debt just to hold onto these units isn't the smart play in my book. Dump some units, fix the issues in front of you now...... build up reserves and regroup.
Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes
7y
This is why when I buy I gut it starting with Mechanical then go to kitchen,baths floors etc...So I deal with painting and hopefully minor issues yes it makes buying houses slow but seems to put money in my pocket .
Rental Property Investor · Tampa, FL · Member since 2014 · 55 posts · 12 votes
7y
@Ryan Rush After reading many of the replies to your original post, I stopped because I realized I don’t know exactly what you are asking. There’s an intermediate step that needs to be done...
How much cash needs to be freed up in order to get back to stability?
Maybe get a roommate, Airbnb your home/ spare room, or sell some stuff from the attic/garage that you aren’t using anymore.
How long until you can pay it back? Sell your car and buy a civic or Corolla. Cut your cable, pack your lunch, no takeout, no dining out.
Creative ideas: Patch the roof, tarp the roof, finance the repair through the repairman.
The problem is framed as a cash and/or cash-flow problem. How much? Or how much per month?
Also, if you are going to sell, please take property conditions into consideration. If you just did a remodel, roof, HVAC/heat it may be better to sell at ten years than now.
Real Estate Broker · Tampa, FL · Member since 2017 · 9 posts · 26 votes
7y
@Ryan Rush
It sounds like you bought too much too fast. You may want to sell a few properties that you have equity in and get caught up on your bills and other repairs. I’m not sure what you own but focusing on keeping your best cash flowing units and unloading a few of the units with less cash flow could be a good start. Don’t get caught up with the stories of people growing huge quick. You don’t know all the background details of those people. Slow and steady wins the race. Build a solid foundation.
I keep three months' gross rent minimum. On a new property, much of the additional cash flow goes into those reserves. Once I get that, I add 2.5% of gross rents every month. Obviously, the more properties you have, the less capitalized (per property) you will have to be since you can mitigate the risk of one property by using reserves of the others. I wouldn't get too cute with that, though. If I found the deal of the century and I wanted to use...*gulp!*...the cash reserves of my other properties to purchase it, I ABSOLUTELY would not draw down past 3 months' rent.
Also, lenders will want to see at least that much in reserves in order to qualify for a new loan without your existing properties hurting your DSCR or debt/income.
Specialist · Wesley Hills, NY · Member since 2018 · 20 posts · 10 votes
7y
Being a landlord has its struggles, it's always important to have a mentor that has been through it all and is where you want to be at. I would say right now to get a fair line of credit which will help you now and insurance that can cover you if this happens again.
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The most important thing right now is to fix your current situation. The last thing I'd recommend is if you can barter with a contractor and maybe he'll go for it, and example network with some of your Real Estate Peers and bring him some business in exchange for making the repairs you need.
Investor · Fort Lauderdale, FL · Member since 2012 · 1k+ posts · 465 votes
7y
It's important to have enough in reserve to deal with the worst case scenerio.
At the end of the day, the tasks have to be prioritized, DIY or hired out. You may be able to defer some tasks.
In 2017 when hurricane Irma hit, I felt the same. I had extensive damages in six properties. All at the same time. All had to be dealt with at the same time, all urgent. Roofs, fences, trees, landscape, a huge mess everywhere. I had to remove over twelve trees, some of those are 50' tall trees that were uprooted and slammed down across the driveways. Just cutting down the trees cost $12000. All my repairs and expenses came under the insurance deductable which was 5% of property value, and they don't cover the outside like sheds, fences, mail boxes that were tossed across the streets, landscape that were completely ruined by uprooted trees. I had no choice, went part time on my day job for a full month and went to work, and had to hired out some of the jobs. Very difficult to find people, tree companies would give you a quote, 50% higher than normal rates, because it's in high demand, and wanted payment in cash, you don't want to pay cash? I have 50 other messages from people who are waiting for my call back. What? "price gouging is illegal?" CLICK.
@Jay Hinrichs. That was definitely a thought I had but it’s also the property that has the highest level of cash flow so I have a hard time convincing myself to sell it.
Have you thought about refinancing this property and using the cash to help pay for the expenses on the other units? the other question is does it cash flow the most because of the money you have in it?