All Forum Posts by: Brendan M.

I've got two vacancies coming up in the next two months and as of right now I don't have any formal written tenant screening criteria. My price range tends to attract a decent number of tenants with bad histories (crime, eviction, credit). However, I'm an optimist and I have found that some people may have made mistakes at some point (even in the recent past for some), but that doesn't meant they're bad people or can't pay their rent. For example, in one of my units I have two tenants with criminal records straight out of the halfway house who are without a doubt my best tenants. 

I'd like to develop written criteria that allows me to both reject, at my discretion, tenants with red flags, and accept on a case-by-case basis others who might have similar red flags but  after interviewing/checking with references might appear to be genuinely attempting to get their life back on track. What would be the best way to do this? Does anyone have any written selection criteria that allows this flexibility they'd be willing to share? Alternatively, has anyone gotten burned trying to do this kind of thing?

What's your end goal? If you're looking to cash flow on a 100% levered deal, you're probably best going for the 30 year mortgage. The reason many investors choose 30 year mortgages is because of the cash flow advantage associated with it. Adding a 15 year mortgage into the mix only increases your risk by decreasing your monthly cash flow. Sure, a lot of that difference will go towards your equity, but you're reducing the liquidity of your cash until you decide to sell or refi your home. What you're talking about doing is starting out fully levered, then rapidly unlevering yourself by paying so much down in equity at the expense of your cash flow.

Think of it this way, if you do a 30 year vs a 15, you'll have that much more monthly cash flow to use as a contingency for if you have a bad few months. Alternatively, you could take that cash flow and use it as a down payment on a second property after a few months to a year and never have to worry about the refi. 

Man, this is a complex situation. With service dogs, I'm not so sure. If you legally have to modify the lease to allow her a service dog (which you honestly might), it still appears you're allowed to request documentation from the tenant such as proof of disability from a doctor (to include stating that animal is recommended/required) and certifications that the animal is indeed a service animal. If she's truly disabled, she shouldn't have a problem providing these documents. If she doesn't want to or cannot provide them, then I wouldn't think you're legally obligated to allow it. Unless you just want to give in and let her have a dog (might not be worth your headache to fight this), I would consult a lawyer prior to making any moves.

@Frank Perea - I didn't circumnavigate it, I'm living in the property now. I just calculated my numbers as if I wasn't, because where I live is immaterial to the viability of the property as a long term buy and hold. By pure good fortune, I will be deploying soon so I actually will likely be able to get out of my occupancy requirement early and start renting it out fully in a few months.

@Chad Bowman - I looked at loopnet, but I was too cheap to buy their premium listings and most of their properties wouldn't work for VA (needs to be 4 units or less). Because I was out of state when looking, I wasn't really able to effectively network in the area, which I would recommend if you're able. Honestly, you might find good deals here or there on CL, but I wouldn't count on it as a replacement for many of the other more reliable deal finding techniques. For my next purchase, my goal is to use a combination of networking and direct marketing to locate an even better deal.

@Bryan O. - I keep hearing conflicting info on how reusing the VA loan works - I guess I'll find out for sure when I apply for my next one! Also sorry to hear about your house, I just found a leak in my roof a few days ago actually, which has done a decent (albeit manageable) bit of damage to one of the unit's ceilings with the recent rain... Crossing our fingers that insurance covers both of us!

@Casey Murray - I asked him about his other offers and decided to put in a fair offer at right around what the other ones were, but since he mentioned he wasn't under contract I figured I'd have teh upper hand if I got mine in first. I didn't try to low ball because his asking price worked perfectly fine for me in terms of cash flow, and my offer I put on paper was actually a little higher than my verbal offer to him (to account for bringing an agent into the mix). I was more interested in closing on something good enough than waiting months to find the perfect deal.

@Mary lou L. - Yes, I just asked them to pay a set amount of closing costs in the contract, then worked with my brokers to get costs down as low as possible. The remaining balance was used to pay off my debt. Also I wouldn't wait for the "perfect deal" - find one that's good enough (but make sure you're not at risk of losing money), and take the plunge! With a VA loan it's no skin off your back, if you want to reclaim your benefit you can always refinance out down the line, so I would argue it's best to just find something decent and try to make it work. It's really low risk if you buy smart and know you can cover your mortgage during the absolute worst case scenario.

@Bryan O. - Wow! I would be extremely interested in hearing more details about this once-in-a-lifetime reclamation you mentioned. Do you know the specific eligibility requirements or have any good resources you'd recommend for learning more about this?

@Aaron Rigterink- The next step is analyzing deals! Believe me, finding a deal that works is totally doable with only 1-2 hrs of extra work every night. Research is the first step, but it's followed quickly after by action! A good place to start is by contacting an agent if you haven't already, then just start analyzing everything he sends your way.

@Albert Yamoah - VA loans are (unfortunately for civilians) for service members only. As far as I know, you cannot receive debt paydown like I did from FHA or conventional loans, but I'm honestly not sure, maybe someone else can weigh in on this. I am not sure if I'd be eligible for an FHA loan now that I used my VA benefits.

@David Dewey - Congrats, getting 10k in concessions is quite a deal! Great to know that the rules changed, I'll be sure to look into them and the implications on my future strategy.

@Sebastian Villa - It's my understanding that you can continue to use your VA loan benefits on as many purchases as you like up to your benefit limit for your locale. You can also free up VA your benefit through a conventional refi if necessary. As for finding the deal, I spent a few months looking at everything that came on the MLS in my area and was getting really frustrated with the apparent lack of any real deals. So I decided to take a look at Craigslist, without much expectations and searched for things like 4plex, multifamily, 3plex, etc. Found the deal my first day searching on CL actually, it had been listed at the current price for 3 days. Seller claimed he had two other verbal offers so I put a contract in front of him within 24 hours of finding it with a net slightly below what he said his other verbal offers were for. He asked me to bump his net about two thousand, which didn't really impact my numbers so I obliged and came back with a counteroffer and he signed it right away.

@Terry Brown, I think the above also answers your question. I knew it was a good deal because I defined my cash flow and cap rate goals, which were in some part dictated by running numbers on every single multifamily that came on the MLS in my area. I actually built my own excel calculator that mimicked the BiggerPockets calculator and added some of my own functionality (e.g. incorporated VA funding fees based on down payment percentages, among other things), primarily so I fully understood how all of the numbers that make a "great deal" worked together. After analyzing months of deals, I had a great idea of what crappy deals in my area looked like so when I found this one on craigslist I knew I had to jump immediately. Also I think it's worth noting this is really just an "above-average" deal, so I didn't wait for singing angels and sunbeams to take the plunge. I just found one that fit my goals and took the dive.

@Matthew A Rodriguez - Absolutely agree, our personal expenses make up a significant portion of our cash flow. "Financial Defense" - excellently put, I'm gonna have to start using that term.

@Nicole Jones - I know exactly what you mean with the hotspot. It was actually cheaper for me for a long time to just up my data cap and not use internet, so I went without for almost a year. Unfortunately (or fortunately?) now I called to decrease my data cap to save money only to find out rates went up and I'd lose 2/3 of my monthly data just to save $5 or $10. I have yet to play hardball with them to really work that rate down, but thanks for the reminder to see if I can swing something. 

@Ryan Billingsley -  Never ending battle is right - come to think of it, you just gave me an idea! I'm going to set up a system of recurring reminders on something like a semiannual basis to audit all of my negotiable expenses. Maybe I could spread them out so I do 1 different one each month - that'll keep me constantly thinking about expense mitigation!

@Steve Vaughan - Absolutely, and thanks for reminding me I need to order a new coffee press... ;)

@Account Closed - Great idea, I wouldn't have thought of using it for home alarm companies. I guess any subscription-based company that offers an intangible product is probably a good target to negotiate your bill.

@Ed L. Great list of negotiable services. I have yet to try to contact my utilities like water, electric, etc. but that's good to know they're options to consider. 

Other places I found that are receptive to negotiation are home improvement stores, like Home Depot or Lowes. On bulk. clearance, or items with defects, asking an associate to give an additional discount has worked out well for me so far.