All Forum Posts by: Aaron Wyssmann

Luke Moses I've wondered much the same about my own market. I think there definitely is value in looking at other markets but also at home. If you haven't yet I would listen to the podcasts with Michael Quarles. I think it was like show 77 & 79 or something like that. In the second one he goes into how you can start to market to you local areas and if you buy cash I think would be a great way for you to find some deals. I'm just getting ready to launch some campaigns in my market.

@Westin Hudnall I'm thinking you're right.  I keep coming back to it and thinking about it but in my "gut" I just have some questions.  To me that's saying move on.  

Thanks man.

@Westin Hudnall I have run them through the analyzers but the thing that has me a bit worried is the age of the homes. I put in 3% for CapEx but I'm not thinking that is enough.

I've run across a couple properties and would love some input, thoughts, etc on how to possibly structure a deal.  I've got my own thoughts but would love some others.  The seller is a father of a friend of mine who is 83 and just doesn't have the health to deal with them any longer.  He is willing to do some seller financing.

They were both built around 1890 so they are quite old. The neighborhood is what I would call lower class B (I think?).  The area is safe (two blocks from the main police station and county courthouse) but attracts some of the not-so-great crowd.  I've driven past the homes and they are in decent repair and believe that he has taken good care of the homes.  

The renters he has in there currently are all from a local charitable organization.  The organization pays the first 6 months of rent and then after that the tenants have full responsibility.  Obviously he has lots of turnover because then they pay very late or don't pay at all.  I could definitely find better tenants.

The homes are both separately metered for electric and gas but not for water/sewer.

HOUSE #1 (Duplex) -  Asking $50,000

2bed - Rents for $400

1bed - Rents for $350

Insurance would be roughly $60, taxes are $48, trash $20, and water/sewer $90 (all monthly costs)

HOUSE #2 (Triplex) - Asking $50,000

2bed - $400

1bed - $350

1bed Efficiency - Lets his maintenance man of 5 years stay rent free.  I'd say I could at least get $150-200.  Owner wants him to continue to stay for free but I don't I can let that happen nor do I need that, have my own crews.

Insurance would be roughly $65, taxes are $42, trash $20, and water/sewer $135 (all monthly costs)

This one has a newer roof and I believe some siding.

QUESTIONS:

What kind of a percentage is running the numbers should I use for Capital Expenses?

What issues can I expect with homes that are of this age?

What am I missing?

Ok, so enlighten me with your wisdom. I would love to know what you all think of this @Nathan Brooks and @Brandon Turner . 

@Ursula B.  completely agree with you that having possible tenants see a property before it is ready is a waste of time. Most of the time they can't look past the issues. 

Here's a link to the laws in Kansas

http://www.thelpa.com/lpa/landlord-tenant-law/kansas-landlord-tenant-law.html

@Westin Hudnall  Some of this is going to depend upon your state laws so it is always good to read those and know your rights as well as the tenant's rights.  Missouri's Attorney General has put out a little booklet that we hand to each and every tenant at lease signing.  Also, if you haven't you should start the practice of taken very detailed pre-pics of a property before move in and then also upon move out.  Keep these somewhere that they will never be deleted it is one of the best ways to win court...document, document and document again.

So in MO we have to provide the tenant a walk through that is scheduled where the tenant can be there if they want to be.  That is where you have to be tough.  I walk through with my cell phone on a note app like Evernote and write down everything that I seen that I'm pretty sure was not pre-existing (side note: I always walk around everything twice before discussing anything with the tenant, you'll be surprised how much more you see the second time around).  After this is finished I then discuss with the tenant all the issues I found.  I thank them for renting with us and that my goal is for them to get as much back of their deposit.  (INSERT IF NEEDED: But in walking around I think you can agree this is not what this home looked like when you moved in.) Many times they will say, "That was there when I moved in."  To that I simply respond that I have detailed pictures of the whole place and if it was there then rest assured you will not be billed for that.

I do not discuss any type of amounts with them because quite honestly I don't know right then exactly how much it will be.  In MO we have 30 days to send them a detailed list of repairs and the cost with those repairs.  That is then when I either send them a check or let them know what they owe us.

In your case I'm assuming you don't have pictures of what it looked like before he moved in...maybe a bad assumption :)  On the appliance issue, I hope you have receipts from when you installed them and that would be something you can stand on.  Now whether you have to replace them or they will just need a deep cleaning that is up to you, we always try to be as fair to the tenant as possible but in this case they were new.

On the carpets, if it is not cleanable and they weren't new you will probably have to pro-rate them out if you are going to have to replace them.  Again this is to your discretion but we never go below 50%.  So if the carpets cost $1000 then the minimum I would charge is $500.

In terms of touching/cleaning the property you really can't.  The tenant may be fine with you doing that but don't.  If you do you lose the chance to do the walk through and document literally everything that is wrong with a property.  We as owners want to get someone in as soon as possible but you have to legitimately get them moved out first.

Hope that helps and if something here doesn't make sense just let me know or if you have other questions.  I'd be happy to send you an example of a walk through that I've done if that would help. 

The key to being a good property manager is to know the laws in your state and document everything.

Based upon your question, I'm assuming your looking for buy and hold deals?

If so then the first thing you should do is determine your target markets as to where you'd like to be buying properties.  Don't just take the shotgun approach...unless you have a very small market of course.  Once you have defined your investing objectives, then the first place I'd start is on Craigslist.  If you go to the rental section you'll find a map of all the available rentals in your target area.  Study them, study them and study them some more.  Look at the different properties and compare what is the same or different about each one and what rents they are charging.

Until you do this and really know what a property will rent for you can't begin to work the math of the equations.  For example, when you are confident that a home will rent for $500 then you can work backwards to determine if say the 2% rule will work.  Based on that you would want to try and buy at $25,000.  Again, though the 2% and the 50% rule are just that, rules-of-thumb.  Make sure you look a whole lot deeper into the numbers to make sure the deal will work.

Then you can start to look at what is available on the MLS or elsewhere to determine if properties will really work.

Hope that gives you a place to start.  Have fun the process.

Now that is a problem, isn't it?  I'm assuming you are talking about doing this after you close on the property or have it under your possession otherwise you've got lots of legal issues there.

In my experience I wouldn't hire someone off Craigslist for that.  For all you know they could keep a copy of the key and do any number of things to the property.  I'd definitely send a locksmith company over to do that...if they will.  They may want proof that you can actually be changing the locks out.  The other option is to see if there is someone out here on BP that is in the are of the home and see if you could pay them to help you out. 

Good luck, hope you find someone.

@Jonathan G. Well that is awesome that the meeting went so well.  A 60/40 split is a great deal on a first property.  When I first read about RE deals one strategy is to have Finder and a Funder.  In this one you gotten to play a bit of both but now sounds more like the Funder.  

You partner sounds as though he is very good at his craft so I think I'd probably let him do his thing.  When I've had Funders it was fun to just sit down and talk about how the project was going but I love talking about those kind of things :)  I bet he would be more than willing to share if you simply approach him with the attitude of wanting to learn.  Most people are move than willing to teach/help/coach...at least that's my experience.  

I'm excited to see how it turns out.  Keep me posted.

Jonathan Gregori If he is a business guy, which he is, he will get that you just want to understand the deal. Then I would simply write down some of the concerns that you have and talk with him face-to-face about them. I would start by saying that you hope this to be the beginning of a long relationship of working together on deals. Questions I would ask: How much will it cost to build an average home and will you guarantee that price? I know that costs on projects are the part that is most difficult to manage and just want to know your comfort level on this very important issue. Will you be taking a contractors fee for building the home or will you be paid from the profit on the home? Are you good with a 50/50 split on the profit? How shall we go about putting all this in a written form? (I so wish deals like this could be handshake deals but this day image you just can't do it that way) That's all I can think of right now but I'll add to it if I think of others.