All Forum Posts by: Aaron Gordy

Jack

Totally up to you in how you spend your money but all one has to do is find a competent broker or an agent. They will help you find a deal, get it financed and tailor it to your skill set/workmanship.  Its really not necessary to buy into anyone's malarky..just saying. Their business is to get you to buy into their program and get money from you. A good agent/broker is all about trying to create a client for life and is looking to help that person throughout the process and get money for you instead of from you. The comparisons are totally different concepts. My two cents!

 The Freddie Mac article is a good one! Since Freddie Mac does alot of with the finance side of the multifamily business then its very important to know their thoughts. If they think that the market will tank then they will be less likely to buy multifamily loans which will mean less liquidity in the market which means lower prices. They are a behemoth in the secondary market.  Thanks for sharing Nate! 

Since I have operations in Austin I know it really well. The city is very diversified with high tech, entertainment, government, etc but it will be affected through less tax revenue coming to the Capitol city from places like Houston. Less tax revenue means tightening of the budget at the State level which means less employment at the state level. I imagine that it won't significantly change the economy. After all, I heard recently that there were 200 people a day moving to Austin metro. Those are insane numbers. 

Freddie Mac and Fannie Mae are important entities to pay attention with regards to multifamily, imo. My three cents with inflation factored in.

A landlord can make a tenant's life very difficult, in Texas. Texas is a landlord state where the laws favor the landlord. One can get an eviction for nonpayment of rent fairly easily. We will file by the 10th of the month unless we have a reasonable expectation that the rent will be paid. We can usually get a hearing in 2 weeks.

Once we get the eviction judgement then the process changes a bit. Sometimes the tenant will stay and basically say get me out or sometimes they will leave on their own. Its to their best advantage to leave on their own and I make sure that they understand. 

The next step of the process is a very ugly part and I explain to the tenants way in advance the process and the negative consequences to not only their credit but to their rental history as well and the likelihood of not being able to get quality housing for some time. Many landlords in Austin will not even rent to a person with an eviction on their background ever.

The ugly part is when the constable gets involved. There is a writ that is served with the constable. That usually takes place about 2-3 weeks after the eviction judgement. The constable will go out to the house and make sure that there is peace while we remove items from the house and put on the curb. It doesn't matter if the tenants are there or not. And there isn't any advance warning to the tenant. So, if the tenant is at work and there is no one home then their possessions will be on the curb for all the neighborhood buzzards to pick through. Its quite ugly.

So, I explain all this to the tenants way in advance. The ones that are smart leave. There have been very very few like less than 5 that have stuck around. I have been managing properties for over 15 years. Its called tough love. 

As a landlord, I take care of business. The tenants pay the bills and we must keep that in mind. Its good business to be friendly. But its bad business for the tenant not to pay the bills. The most important background check is the rental history and it has to be legit, imo. 

Aaron

Good morning, Vanessa

Buying and holding in Austin is a good pathway for building passive income. For a single family house its a bit harder to cash flow initially but over time you will have less headaches than a fourplex or a duplex. Single Family housing can also be sold in both an investors market and a owner occupied market. Duplexes, Fourplexes and other multifamily will have the best selling results in an investors market where the interest rates are favorable. It changes often. Austin house prices appreciated by 8% last year. Rents are also going up considerably. I think the city is at 97% occupied. Austin Metro unemployment rates are in the mid 3%. The city is doing very very well. 

As a broker, I can send you specific properties that might be conducive to your goal of long term passive income streams. 

Aaron

I agree. Getting a good CPA is probably one of the most important things that one can and should do for real estate business or any business for that matter. The CPA knows the rules and the grey areas. The CPA should be one of your best friends because you will spend a small amount, get huge savings and great advice. I consult with my CPA often and I suggest to real estate investors all the time to get a CPA.

Satish

Hi. Good question. One can manage a property on their own if they understand the laws and the economics of real estate. Do you understand how many folks can legally live in the property? What do you do if the tenants choose to lease the place out airbnb? What happens if the tenants don't pay? Do you understand the process of eviction? Do you know about contractual liens? Do you know how to properly do a background check? There are people that try to get over sometimes and will fudge on the application some things such as income. Credit and criminal is cut and dried. Do you know how to check rental history and ask the right questions? Do you have relationships built with handymen and/or can achieve economies of scale with regards to getting a handyman. Do you have an hoa that can make life tough in the event that the yard isn't maintained properly and was supposedly going to be maintained by the tenant?

I know quite a few folks that manage their own properties but they always know that they can call me if they are in a bind. Things happen. What do you do with a hoarder? Worse still, what do you do with a death or similar such things. Things happen. There are so many elements involved with property management. Some folks have the time and some folks don't. My advice would be to hire a company (like mine : )) and if you don't like them then fire them. In my contracts with owners I give them an option out so if they aren't happy then they can leave. And vice versa, if I don't like the way a particular person does business such as wanting to be a slumlord then I will choose to fire them. 

Hiring a property manager can save you headaches, provide expert advice and a ton of time. My two cents. A good property manager is a tough love type of person. The tenants pay the bills but I am most certainly not going to let them go nuts and ruin a property with keg parties or whatever. 

Aaron

Bob,

One property is in an stellar location and its really easy to rent. One only has to let folks know that its available and there are multiple applications on it. The other one is in the suburbs and the occupancy is a bit lower. 

Aaron

Good morning, David

I can help you as well. I run a property management company and deal primarily with investors. I know multifamily really well and am currently working on a couple of deals presently valued at around $900k with cap rates around mid 4%s and another one around $1.8k with a cap rate around 7%. I started off running an apartment locating company over a decade ago in Austin and so I know the rental business very very well. Over the years folks started reaching out to me to help them with purchases and property management. And so here I am. The more complicated the deal the more fun it is for me. Please let me know if I can be of assistance. Thank you!

Aaron

I would stick to the lease as that was the agreed upon terms between the both of you. It really depends upon the approach to the situation. If you have a gift for words and communication then you can make it easier for them to digest. 

If it was my situation then I would simply have a quick conversation about the yard and say that you can have a lawn service go by to take care of it at their expense. If the tenants are working all the time and paying the bills on time then that is a good thing. The last thing that they probably want to deal with when they get home from a long day at work is the lawn. Mowing the grass is physical and can be exhausting with the heat of summer. They would probably appreciate it too if you were to go out of your way to take care of the yard for them. Turn a negative into a positive.  If you can turn the negative into a positive for the tenants then they may renew the lease which is the goal anyways for good paying tenants, right? 

Texas is a landlord state. I would get an estimate for the damages and then sue the guy. So, when the guy goes to get another apartment or house then that landlord will turn him down. Eventually he or she will get tired of it and pay you. I know as I used to manage a bunch of slum type places that we were renovating. I think I sued in small claims at least 5 tenants or maybe more. I can't remember as its been several years. Think of April as Christmas. April 15th is tax refund day. Eventually the fella will take care of it and you will be paid. Be sure that you sue for interest as well. In Austin, if one has a broken lease on their credit or owes money to a landlord there is a slim chance of him or her finding decent housing where the landlord will accept them as tenants. 

I would craigslist to get an estimate then I would just get busy. Think of it as sweat equity. If you can't figure it out then youtube it. Many of the things around the house can be fixed fairly easily with a little bit of thought.  Carpet can be salvaged if you have a solid carpet cleaner. There are many ways to get a place cleaned up cheaply.

Hiring a solid property manager is a good choice unless you have the time to deal with it.  Consult with a broker there in SA and see if they can just help you with the process. You don't have to hire them but a little advice from folks that do the business every day is probably a good step.  

PM me if you have any questions. I have bailed out folks that have been in much much worse positions than yours, I believe. Once I helped out some friends that had one tenant pass away from alcohol, the son was a complete mess with drugs urinating and defecating on the floor and on top of all that they were hoarders. We had to get 2 40 yard trash haul off containers to get rid of it all. It happens but they are much better landlords now and screen diligently. When I ran an apartment building with over 250 units one of the tenants was a super nice lady that paid her rent on time and was solid in every respect except she was a total disaster and her place was insect and rat infested...gross!! So she got the heave ho. It happens.