All Forum Posts by: Adam Johnson

I'm not sure how much space you have to work with, so I am going to throw out a couple more ideas to consider.

For my properties that have garage spaces or sheds, I will "rent" that space for a monthly fee, say $ 50 or so (I know that's low, but follow with me). This space ONLY gets rented to the tenant that takes me up on my offer to cut the grass and shovel the snow. Not coincidentally, I "pay" them $ 50/month to do so. I simply credit it on the books if they do what they say they will do. I write up separate agreements so that if they default on the grass cutting and I have to do it, I can enforce the agreement separate from the living unit, which is subject to different laws. The reason I keep the fee low is that if they decide they would rather have cash than the garage space, then I am not stuck paying out a lot. This hasn't ever happened (yet), but I like to cover my bases.

Another idea that has worked really well for me is coin-op laundry rooms. I put one in a 5-unit (all 1 BR and a studio) that has ok. I recently put one in a 4-unit (three 2 BR's and a 3 BR) and it has done extremely well! One washer, one dryer is plenty. Set the price at about the same price as the local laundromat, convenience will win, who wants to haul their laundry to the laundromat when they can just walk to the laundry room? These are run off of the house utility meters. The 4-unit didn't have a house water meter. Instead, it had 4 meters, 1 for each apt. I simply included the water in the rent for one of the apartments (marking the price up accordingly) and tapped that one for the washer.

For the laundry rooms, I took it one step further. I learned that some larger apartment complexes let an outside company set their machines up in the laundry room of the complex. The complex gets 1/2, the outside company gets 1/2 of the take. The complex pays the utilities, the company maintains the machines. Instead, my kids bought the machines. We are teaching them to save/invest and they had just enough saved up from holidays, birthdays, and allowance to buy the machines. So they are "the company". Works great for all and the tenants love the convenience.

The laundry rooms need very little space. Big enough for 2 machines (they make stackable coin machines too if space is a problem) and to open/close the door. They can sort/fold in their apartment. Keeping it small discourages loitering and makes it easier to keep clean too.

I am not in your area, but suggest you look up a nearby/local REIA (Real Estate Investors Association) and attend some meetings. These are excellent places to network and learn. If you go to http://www.nationalreia.com/ you can search for local chapters.

Keep browsing through BP too. I have been a member of my local REIA for a while, consider myself a semi-experienced investor, and recently started browsing through BP. This, too, is a great place to network and quickly get different viewpoints on challenges/questions you are faced with.

Good luck!

In line with the other advice, I would take it a step further. I would write in the counter offer that you will ONLY accept the units vacant! Trying to overcome your reluctance to fill vacancies by forcing a lower price on the seller will backfire, if you even get it accepted at all. If you force them to place tenants, you will have a problem, guaranteed. The current landlord also has no incentive to carefully select tenants because a bad choice will soon be your problem, not theirs.

You MIGHT want to write in the units are in ready to rent condition at closing. You might also want to write in that you have access prior to closing to "pre-rent" the units, but don't sign leases that start prior to closing and include a "subject to closing" clause in your lease in the event that the deal doesn't close so you are liable for damages with the tenant.

Yes, this does change the dynamics of the deal slightly, but it doesn't ruin it, in my opinion. Look at it this way, you will have selected 1/3 of your tenants in this property. I don't have a lot of experience in SFH rentals, but I would think that MFH tends to have a higher turnover than singles. I operate all multi-units and use a 10% factor for vacancy when number crunching. You may find that you have a unit occupied for 2 years or more, but you may also find that by the time you get it ready to rent and find a suitable tenant, it is several months, so that number seems to fit. This will also help pick up your bad rents that never get collected.

Welcome to real estate. Nothing ever goes quite the way you planned it. (At least it hasn't for me yet!) All you can do is make the best of the situation and keep moving forward.

Indeed it can get you down. If you break even, then you can call it "free" education. Don't look too hard at the numbers if you want to call if free, though! I have paid a LOT for my education over the years and continue to learn (and pay) every day. Some lessons cost more than others. Keep moving forward and don't repeat the same mistakes.

Lazy seems a little harsh. Cautious seems more appropriate. I, too, have experienced the frustration of a lower than expected appraisal. In my opinion, the banking industry is still over-compensating for being "spanked" after the whole debacle that occurred a few years ago. Appraisers were also spanked, so many are being overly cautious now as a result, in order to protect their licenses and livelihood.

I operate in an area with few comps, so the appraisals I need to have done I have to pay extra for (almost double what it costs for nearby cities with more comps). This is due directly to recent changes in what is considered acceptable and another example of too much government intervention in our daily lives.

@Holly Baldwin - lesson number 1 in real estate is that you make your money when you BUY the property. You originally bought this house to live in, so you likely spent too much then. You will never recover from that and turn this into a good investment.

Lesson number 2 is the house you live in is an EXPENSE, not an investment. You likely bought this property on emotion, not on strictly dollars/cents.

With this in mind, I spent too much on my house to ever turn it into a profitable investment. BUT, I like it and I reduced my monthly personal living expenses over $ 500 by moving here from my last home. That minimizes the "damage" from owning it.

To your original post - sell now and look for a property to buy that makes sense as an investment. If you aren't desperate over the money you lose every month, run through the current lease. Maybe talk to the current tenant to see if they want to buy it, but have them get their own financing and take you out of the picture completely.

Honestly, you can't really look at this property as an investment because it wasn't originally purchased as one. You can spend a TON of time, effort and money and MAYBE get it to break even, but why? Put the same effort into buying a good investment.

Learn from this and consider it a "cost of education". If you can sell it and break even or put a few bucks in your pocket, the lessons learned will be what makes it worth your past effort/stress!

I can't answer that question directly. I like to follow the path of least resistance. Please see my earlier post. I would exhaust that option first if I found myself in your shoes.

This isn't perfect, but helps a little. I give all of my tenants my business card, which has has my office and cell phone (and the address to send rent to - one less excuse!). I tell tenants to call me at the office first. On my office voice mail, the recording says to leave a message or call my cell phone with a TRUE emergency and I give the cell phone number there too.

When I get calls, I screen them to determine what is truly an emergency. No heat late Friday night when it is 10 degrees outside qualifies, my shower faucet handle just broke but I got the water shut off does not qualify. I then call the appropriate contractor to handle it. If it is what I consider more of a nuisance issue or a routine service call, then I schedule it as soon as I can get to it without paying overtime or after-hours fees.

It is rare that I go to after hours service calls personally, with the exception of fire or major police calls (break-in, alarm sounding at a commercial property, etc.). It is also rare that I answer the phone late at night, unless I see it is the alarm company or I recognize the number as belonging to a tenant that would NOT call me unless it was an emergency. I do, however, listen to the message right after it is left to qualify it as urgent/emergency or not.

That is the long way of saying that I make myself available, but not TOO available, if that makes sense.

@Ned Carey - I appreciate the chuckle. This is exactly the kind of story that my wife and I joke about putting in our memoirs when we "retire". To anybody that isn't in this business, this won't get fully appreciated. As somebody that is in this business, all I can do is shake my head, smile, and say "you just can't make this $*it up!"

Hope you got it closed ok!

Ouch. I realize I am telling you something you now know, but you should ALWAYS secure financing with the property and make sure it is on record at the County.

I would go back to who handled the sale as well as the County to find out if a lien was ever recorded. If it was, you may possibly be in luck as you might still be able to go after the current owner and/or title insurance company.

Unless you signed a subordination agreement, if your financing was secured by the real estate and recorded, your lien should now be superior since it would have been on record before any current financing in place. This would mean you are now first position lien holder and a foreclosure by you could wipe out inferior liens.

I am not an attorney (nor trying to be one). I recommend highly that you speak with one right away if you haven't already. I would start trying to find out if the lien ever went on public record.

One final takeaway - I ALWAYS get a title insurance policy as a BUYER (and recommend highly doing the same if I am the lender). This is a perfect example of what could happen. If there is, in fact, a recorded lien that was missed when the person you sold to turned around and sold it, then it is possible for that sale to get reversed and/or other damages be incurred for the current owner to clear the "cloud" on title. With title insurance, the title insurance company pays the cost. Without title insurance, the current owner pays the cost. It sounds like the current owner is in the dark on the situation. This could prove to be unfortunate for them.