All Forum Posts by: Frank Adams

This might just be my "inner cop" talking, but THEY might be "the other landlord". Let's face it if you were going to squat somewhere what better way to evade charges/shift the blame/etc than to cry out; "HEY, I'm the one getting scammed here!" Not saying that's the case, just saying it could be.

Hmmmm, is there a way to link this thread to the other current one about; "how far away should your rentals be to self-manage?"

Also another reason to NOT use a management company. How often do they drive by?

Frank

Yes you must take depreciation.

As John said; "good rentals don't produce losses". I could not agree more. Heck if I wanted "write offs" I'd give more to charity.

Frank

Back when I was doing rentals I wouldn't even look at anything more than about 45 minutes away. Even when I was doing multi-year leases (leads to better tenants and even longer stays) I didn't modify it.

This was back before cell phones so before heading home after a showing I'd have to go to a nearby phone booth and check my messages.

On the lawn maintenance I'd probably go with an outside service (unless you're going to do that yourself) for the simple reason is that having one tenant doing something while the other doesn't just sounds like a great way to have problems between them; "John pays less than I do", "Yeah but he does the yard", "yeah but I'd do it better and cheaper", or "he doesn't do a good enough job".

No thanks, build in a proportional amount and eliminate that problem.

Just my two cents.

Frank

IMO it's a slam dunk flip, not close as a rental depending on your insurance and tax rates. I'd have already put it under contract myself.

Frank

I've only done one that was less than 700 sq ft, but about 15 of them between 740-920. I thnk my longest days on market was about 3! I buy them for cash and then resell them on my typical; Owner will finance with $2,000 down" deal.

I was out of the rental business when I moved to an area with a fair amount of stuff in that range and thought they might make profitable rentals, but I was only interested in flips by then. If I could find some where I live now that would turn like those I'd be doing several a year.

Lots of folks looking for that size/price range in many markets. Even better if you could CHEAPLY subdivide and get another one or two in there.

Frank

Well Chris, there are good and bad sides to everything. We originally did it because, long term, we did not want to stay in Houston. Driving from out of town to handle turnovers didn't appeal to us. By selling we got a better class of "tenants".

One of the downsides to it is that you forgo any future appreciation, unless you get the ppty back. Since we were in TX appreciation didn't figure much into our plans. Also we had sold ALL of them for well ABOVE FMV.

Another point in our favor is that TX is a "Trust Deed" state and you can do a Trustee's sale in less than 2 months, as long as you're prompt on all paper work. The last two that an attorney handled for me cost about $1,000 each to handle, not bad.

In several cases we've had people deed the ppty back to us when we convinced them that their legal and debt exposure would be less that way. In every case where we got one back we resold for a higher number. About 1 1/2 years ago we got one back that we had bought in '03 for $52K, put $2K or so in and sold for $75K, got back 2 years later, put $4K in and resold for $90, got back in '09 and resold for $100K.

But that's about the only way that your income will go up in the future.

We do ours on 30 year amortization, 10 year balloon loans. We're in our 60s so we don't really want any long term loans sitting around.

Good luck

Frank

I've done some 12s, but mostly 8-9. My key is that my SALES PRICE bears no relationship to "real" FMV. Of course I'm only getting about $2000 as a downstroke.

When you offer owner financing (particularly like mine) the buyer DOES NOT CARE ABOUT THE PRICE. He's like a typical new car buyer. His only questions are; "what's the downstroke?" (read-do I have enough cash from this month's pay?) and "what's the monthly total?" (read-after my beer, cable and new truck payment do I have enough to swing this deal?).

In my typical deal sometime during the signing of the contract the buyer, or more typically his wife, will look at the papers and say, "Oh, $95,000 is the price, we kind of wondered how much it was". This is AFTER they've signed!

Too high and they'll refinance on you, although I have a five year prepayment clause. By pricing it above FMV they won't be tempted to refi because the place won't have appreciated up to market quickly enough. I had one that had a prepayment penalty of six month's interest who refinanced from my 12% because rates had dropped enough.

Heck I would have dropped him to 9 or so had I known before he paid the fees to the new lender. I hated losing that income stream. I really hated LOSING THE OPPORTUNITY FOR FORCLOSURE when his wife left him a year later and they let it go. The bank sold it for $8K MORE than I had charged them when I first sold it. I would have sold it for another $12-$15K. OUCH.

Frank

Back in the '90s a lot of states toughened up their rules on CFDs, mainly a knee-jerk reaction to Bill Clinton having been an investor in Whiteater and all of these RE "future development-get in on the ground floor" deals were CFDs. Simply because they knew that a LOT of them would "default" and that would be quicker and easier than going forclosure/trustee's sale.

I lived in TX (deed of trust state) and my attorney at the time advised me to quit doing CFDs (compliance issues) and just sell on a Deed of Trust and Warranty Deed. He gave me a file with all documents on it and I uploaded it in my computer. Since then I've sold about 40 or 50 of them using it. I don't offer title insurance although I always check the Clerk's office. When I sell I charge $300 or so for "document preparation/legals" just like title companies do.

I've gotten about 5 of them back (another one soon, see my thread titled "taking one back in TX" over in "deal analysis"), including a couple where the delingquent "sold" it back, and never had anyone handling the trustee's sale question anything.

Check your state laws regarding CFDs. A lot of states have tough hoops to jump through.

Frank

Over the years I've contracted out more and more, heck I just paid to have wood floors put in my own living room. But, in a lot of cases I still like to do it myself. BTW John, $3.5 sounds like a good rate. Here's why I generally do it myself.

1. I have a pretty exacting eye and I'm anal retentive!
2. Ceramic tile is easy to correct a problem when you discover it. I always stand up and take a critical look around fairly often.
3. I always plan out the work and think it through from the day I make the offer. By the time I'm buying the tile I've figured out where my "hitches" might be.

I'm generally doing lower priced flips and ceramic tile can really dress a place up. Fairly plain looking tile is inexpensive and back when I had rentals I would pick up small "remainders" and use them for redoing entry ways or second baths. I hate doing linoleum and I've found that ceramic once installed NEVER NEEDS DOING AGAIN.

I'm fairly fast at installing it, even at 61 years. Planning, careful cutting and remember that the easy part is the FIELD work, the hard part is around the edges. True of roofing, painting and most other jobs too.

Frank

Ralph S. wrote; "Instead of figuring out how you're going to argue damages versus wear and tear, why not ask the landlord to pre-inspect and then take care of what you can. Learn what they are looking for and minimize your costs?"

Absolutely, that's why it's a good idea when selling a house to get your own inspection done, EARLY, instead of waiting for the buyer's inspection, which will likely give the buyer extra negotiating points, and may have you under a time deadline.

BTW Ralph, I love the picture of the 2002! Having owned a number of them myself I appreciate the picture of a true classic.

frank