All Forum Posts by: Bryce Wong

I'm assuming you're asking if you should be using cap rates as a metric for evaluating a property. The short answer to that is no. Every market is different and there are too many variables involved. The only way to find out is the run the numbers yourself. The only busy work you have is putting all the pieces of the puzzle together and determining if the numbers would help you achieve your financial goals. Only you have the answer. Good luck!

I can't help but wonder if you contacted their past landlords that they provided as reference. Do they pay the rent directly in your name? If so, they would use that to their advantage knowing that they are dealing with the landlord directly. According to my experience, it's always better to set up a legal entity to which they pay rent to so they would think twice before suing as they know that they're not coming after your personal assets. Consult an attorney immediately to have a mold addendum drawn up that would protect your rights as a landlord. You might also want to consider doing a month to month lease with the tenants. It is situations such as this that makes me happy that I decided on a month to month lease. Not happy with mold? Clean up and get the hell out of my home. I can only have so much patience with tenants like these.

Congratulations. Keep us posted on your journey! Don't forget the people who contributed to your success. 

Out of curiosity, how did you do your screening? How did you advertise your listing and where did they find you? Were you satisfied with their credit score? Did you verify employment? Make sure you evict them so it appears on their record and other landlords would not suffer the same fate.

What are the numbers on this property? Congratulations! Keep us posted.

I smell a troll here. Sure go ahead and file a lawsuit. While you're at it, don't forget to hide your cigarettes in your car before going in to the courtroom. It may work against your favor. 

This is a very broad question but here goes: The title company usually handles the search for liens and back taxes. Title insurance is usually included with the closing costs. The other due diligence would be getting quotes from contractors to make sure that you're not overpaying for the rehab. Look up similar comps around the area to see what they are selling for. Also, educating yourself with rehab would be very beneficial and can help save you a lot of money if done correctly. 

Every real estate deal presents its own unique set of risks and they have to be treated on a case-by-case basis. A foolish investor who uses leverage to purchase rental property might face the wrath of a depreciating asset or less than ideal cash flow because he miscalculated and thought he got a good deal. A smart investor who uses leverage to his or her advantage would reap the benefits of an appreciating asset, but he or she is also susceptible to the market swings.

Let me give you a quick example of how leverage can go bad:

Adam thought he had a good deal when he bought a property at market value for $150,000. He paid $10,000 for it and took out a loan for $140,000 at a fixed 30 year payback. He makes a decent gross income of $1200 a month in rents. After deducting his monthly mortgage payment of $590.25, and all other expenses (e.g. CapEx, vacancy, taxes, maintenance), he is left with about $200 to spare. He thought to himself, "Hmm, if I continue this trend, I will be making a lot of money." 3 years down the road, using the money he saved, he bought 3 other properties in the same neighborhood with the same amount of money, this time taking out a loan of $420,000 ($140,000 * 3). He smiles to himself, satisfied that he is making progress in his investments. Just when he thought he was on his path to riches, the property market collapsed, the economy goes into recession, and his properties are all worth $80,000 a piece. He now owes the bank over $500,000, but his properties are only worth $320,000. His renters leave because rent prices were falling in the area and they want to live somewhere cheaper. He now has negative cash flow on his properties and cannot sell them, because his properties are worth less than what he paid for. On top of that, his company had major layoffs and he just received a letter of termination just when things couldn't go any worse. Adam is now forced to foreclose on all of his properties and admit that he made a bad investment decision.

Of course, this is just an extreme example, but no investment is safe from risks. Decide carefully from day 1 what your financials goals are and keep a healthy reserve of cash to protect you from any downturns. 

Maybe you can expedite the process by getting bids of your own and sending him quotes for them instead of having him to your homework for you. The easiest way in my opinion is to make the sale for the seller as easy as possible so he's inclined to sell it to you. Now that he's getting his own quotes, I doubt he'd get back to you. He might use that as an excuse to wait on other offers.

The numbers are looking great. Don't forget to get a detailed inspection on it, you'd be surprised at how much more "repairs" that might come up once a certified inspector goes through it. Congrats on closing. Renting in the winter is not a problem at all if you price and advertise it right. Good luck.