All Forum Posts by: Account Closed

@Jon S. 

If you are going to allow dogs, then know that any breed can be aggressive and any breed can bite.  The dog that mauled the Frenchwoman who was the recipient of the world's first face transplant was a Labrador retriever.  In fact, Cocker Spaniels are relatively more aggressive to people than are pit bulls.  

Dogs are like people, and every dog has its own personality.  While some breeds may have a genetic predisposition to certain kinds of aggression (towards other dogs, or in defense of their owners, for example), how the dog owner manages their dog and the individual temperament of the dog matter more than the breed.  That said, some homeowners' insurance companies have banned certain breeds, so be aware of your own policy when you rent to people with dogs, and/or make sure your insurance company doesn't practice breed discrimination.  I have State Farm and they don't discriminate based on breed.  

It's my personal opinion that children cause more damage than dogs.  SO, if you are going to rent to people with dogs, then you may as well simply charge an amount for rent that you feel comfortable with for people with dogs, rather than tacking on extra fees and pet rent for a pet.  You can advertise your rental as pets OK on a case by case basis.  Then you make sure that you like the individual pet, that it is well mannered, spayed/neutered, clean, flea-treated, up to date on its vaccines, and has good references from previous landlords.  I also require tenants to buy renter's insurance, as I'm more concerned about liability than damage.  

If people in your market tend to have pets, then you will do better with this strategy than by charging all sorts of extra fees and rents.  You may even have people interested in renting your unit for the price you advertised, and they don't even have pets.  But non-refundable pet fees are a real turnoff to most pet owners, and rightly so.  Why should someone with a dog and no children have to pay more than someone with children and no dog, in the event that their dog could cause some damage?  An extra refundable security deposit is much more fair, because it doesn't penalize pet owners simply for being pet owners, AND your tenants will be incentivized to keep your unit in excellent shape so they can get their full deposit back.  

Furthermore, at least in Oregon, a savvy tenant would have a legal claim for a full security deposit refund if the only damage was from pets, and you charged a separate "pet deposit" or "pet fee" that didn't cover the entire cost of actual damages sustained.  At least, that's according to a landlord association here in town.  Instead, just charge a higher total "security deposit," and any damage sustained by pets can be covered by the security deposit.  

And while charging extra pet rent is legal and widespread, it just screams "exploitation" from a tenant's point of view.  If you want to have a mutually respectful relationship with your tenants, one in which your tenant wants to stay for a long time because they feel trusted and in turn think you are trustworthy, don't come up with all these extra fees for people with pets.  If you roll it into the overall rent, they won't know the difference and they'll feel grateful to live in a place where the landlord isn't apparently nickel and diming them to death.  

You'll have the same cashflow as though charging pet rent, but your tenant relationship won't be built on a foundation of distrust.  (And this is where other landlords on BP will feel compelled to reply with defensive comments about their pet rent, but that's OK.  What's good for them is good for them, but I stand by this statement.)

Responsible pet owners are the best tenants because they are grateful to have found a landlord who will accept them, and they'll not only work extra hard to make sure your rent is paid on time and the place is well taken care of, but they will also stay a while if they feel they aren't being taken advantage of.  

Just pet-proof your property and screen well.  Or don't accept pets--because that's less competition for the best tenants for me.  

I'm no labor/employment/market expert, but from what I hear, Portland taxes are pretty high compared to Beaverton, Hillsboro, and Vancouver.  I'd be curious to hear what the experts think about future trends in telecommuting and increasing numbers of people working as contractors rather than employees.  

@Account Closed thanks for the info on Guardian, but I went to their site and noticed you're the NW Regional Account Executive.  

Who are some of your competitors and can you give info about submetering in general, rather than specific to the company you sell for?

@Claudia Fernandez it's been a while since I looked into the HomeStyle loan, but I'm pretty sure it's for first time owner-occupants?  There are lots of reasons why a conforming loan (much less an owner-occupant loan) wouldn't work for flippers.

I don't see how a lender who charges 12% interest, takes half your profit, and THEN owns the property 100% after all the work is completed by their lendee (who by the way still has to put up 10% of the project) would be considered "too good to be true."  

It's a different business model--one that some might call "disruptive"--but they're not giving anything away for free. You're essentially their bird dog, agent, and contractor all rolled into one, and you just paid THEM for the privilege. But for people in expensive markets who don't have the 25% LTC DP that HMLs want to see (which keep in mind is less than the 25% LTV that most conventional banks want), it could be a way for more beginner flippers to build capital.

Personally, I'd be a little concerned about giving up all control over the property.  I'm pretty opinionated about design decisions and know my neighborhoods well.  In addition to dictating the choices you make as the rehabber/remodeler, a company that owns the property could simply decide to hold the property and give you whatever they say it's worth.  Not saying this company would do that, but they could.  Also with this model, you ONLY have the one exit strategy.  If the market shifts by the time you're done with the rehab, you can't hold the property--you'd have to take a loss.  That's a lot of time invested to relinquish all control yet still take on significant risk.  

All that said, if I were a flipper starting out, and despite all these considerations, it's still one funding strategy I'd look into, in addition to others, if I didn't have private money or personal capital.    

Thanks @Amanda Coleman!  I'm clearly not that informed about the MJ industry. But you all have given me lots of munchies for thought.

The mortgage broker I've worked with for a while has told me no way can I do 5% down on owner-occupied conventional for a duplex. He said 15% down minimum plus 5% PMI. Which banks loan on 5% @Craig Garrow and @Steven Silva?  Did you have a second loan Craig?

In other news, it seems like I'm doing a lot of my mortgage broker's research lately. A couple months ago, I had to give him a reference for a lender that would count only that portion of a HELOC that has been tapped--not the whole amount approved--against DTI for a new loan. Until I sent him the reference, he thought such a loan was non-conforming, but in reality what he thought was Fannie Mae's rule was actually just a lender overlay.

The reason I stick with him though is because he's put in a lot of time for me and hasn't seen a dime so far as a result.  But man--why aren't [some?] brokers keeping up with the lending guidelines?  

@Mike Nuss yes, if I were to sell it as a SFR, then that would be the current grandfathered use. House is only 1000SF. I'm not well-versed in that business (maybe I should call my cousin, who is . . ) but that doesn't seem like a lot of grow space to me?

Contract ends 5/31. I do think it's a pretty good deal and obviously want to get the highest IRR, but am also open to possibilities I hadn't considered before.

@Lauren N. I'm no expert in commercial office/retail, BUT if I were a newbie and/or didn't know much about REI, those asset classes would scare me. We've all seen the empty office buildings and vacant storefronts during economic downturns. But everyone needs a place to live, so there's always a market for residential (unless you buy in a bad location).

Another thing I wonder about is increased telecommuting and outsourcing and how that will affect the demand for office space in the future.  

Bend is relatively expensive as well.  If your mom isn't planning on managing the property, then why is she fixated on Oregon?  Most cash flow experts would tell you that generally speaking, your best markets are in the Midwest and Mid South.  I personally invest locally, but that's because I'm managing my [only] 3 units right now, and I'm also in it for the very long term in an appreciating market.  If I only cared about cash flow and didn't want to play an active role in property management and/or were 20 years older, I'd hire a property manager and/or buy a turnkey property in the Midwest.  

Property managers exist for a reason, and it's because they provide a valuable service that investors of all property types (including SFRs) don't want to do. While management at a 100 unit building may cost you 6%, for a SFR it might cost 8% (at least, that's the going rate in Portland). That's not a huge difference, and generally a good property manager knows how to increase income at least as much as they will cost in commissions.

If you haven't already, I suggest listening to the BP podcast (including old episodes) and reading some books and checking out this free guide.  Educating yourselves will give you and your mother a better sense of your risk tolerance, long and short term goals, and how to get there.  That way, you can refine your strategy to fit those parameters.  Without a basic education and some clear goals, it will be difficult for you to integrate the advice people give you on BP, as it will also be difficult for BP to provide you the best advice for your specific goals.

Wow, @Charlie Fitzgerald, what well-thought-out and incredibly helpful point of view!  

If your mom really really wants to invest in RE, @Lauren N., she could put aside a small percentage of her cash into a small (1-4 unit) property to get a feel for what REI is like and whether she wants to dive deeper--but still keep the majority in a vehicle like the one Charlie described. (And if cash flow is what your mom is after, then Portland probably isn't your best market.)