All Forum Posts by: David S.

I don't really have a dog in this fight, but have 15 years of experience in being a landlord.  Here is some general advice concerning this thread:

1.  Class C and D properties will usually have high turnover due to non-pays, kicking people out for illegal activities, a great tenant moving in the new partner (i.e. girlfriend/boyfriend) who is a dead beat who doesn't work and causes problems with the neighbors, kicking people out who tear up, etc. When there is turnover, there is a potential of large repair bills. Oh and the new dead beat boyfriend, he is just visiting....that is what they will tell the judge when you evict due to a lease violation of moving them in there without your permission.

2.  Class C and D properties will get robbed more often. I know of areas where landlords must go run to the property to remove all appliances from the unit when it goes vacant because they grow legs and walk off.  I know of landlords who bolt down or cage in their AC units because it will get stolen for $20 worth of copper that some crackhead will then use to go buy a crack rock, leaving thousands of dollars worth a damage to the owner for that hit of crack.

3.  People who succeed in these properties are SPECIALISTS. They themselves are the boots on the ground or they have a dedicated employee or family member in that capacity.

4.  If you are not a SPECIALIST in this type of property, then DO NOT INVEST IN CLASS C or D PROPERTIES!!!!! Get a higher asset class, class A or B, buy bonds, or just put your money in a S & P 500 index mutual fund. With the bonds, CD's or S & P mutual fund, you set it and forget it.

5.  Your 20% pro forma and 12 cap rate calculations for C and D class properties are pure BS unless you have #3.  If that is the case, you are working your a$$ off to get those returns.

6.  90 % of property management companies in my area do not take on Class C and D properties and about 95% who manage in Class C and D aren't worth a sh$t!  This may or may not be true in your area.  Managing these properties are a lot more work and I don't think you can please owners with a $4000 repair bill every time someone moves out.  All applicants in Class D areas will have bad credit. I have seen some folks with good credit in Class C, but they are not in the majority.

7.  The further you go down in asset class, the harder you (or your rep) will work.  For example, Class C- is more work than C+. Class D----you may as well just show up in the area every day. These areas need full time babysitters and law enforcement.

Again, I will say. 

IF ARE NOT A SPECIALIST IN CLASS C OR D, INVEST YOUR MONEY ELSEWHERE!!!!!!!!!!!

@Steve Rozenberg

Steve, I think you know the answer to this! Conversation starter?

Well, I'll bite. @Russ M. said it perfectly.  Let everyone know your screening process BEFORE they apply. 

"Mr. Tenant, I run a full background check, credit, eviction, and criminal.  (Depending on class of property for this next response).  While a little ding on your credit won't hurt you, I do want to make sure you pay your utility bills and rent on time. I also check your income and you need 3x rent."

Also, to attract a "great tenant," you need to have a "great place."  If your property is dumpy (unless you are in ultra competitive markets like NYC), then you are going to attract a dumpy tenant.

That would depend on your state and local laws. Some states REQUIRE that the security deposits not be commingled with other funds.  Further, some of them require you to pass along the interest.

These examples are extremes.  Extremes on the negative side. There are good contractors, landlords, tenants, etc.  Not everyone cuts corners.  I find that cutting corners damages your reputation and will cost more in the long run because rework would be necessary.  You will find many folks who want to do the right thing.

Take a break from investing and come back to it when you are ready.  Everyone gets burned out.  I can tell you that many investors spin our wheels for months and even for years with little or no progress.  However, by persevering, there is a time when you can build some momentum.  For example, I have had some long dry spells on deal flow only to find myself with way too many that I can handle come through at one time.  And as you grow your network, it exposes you to better deals, contractors, mentors (unpaid), etc.

I think that one bank account per property is a little extreme unless you have each property in a different LLC. Different checkbooks, accounts, debit cards is just a bit much.

You can separate expenses for each property by using QuickBooks or Excel spreadsheets, or whatever method you prefer.  Assign each expense according to the IRS categories on the Schedule E, i.e. Property 1 Cleaning & Maintenance, Repairs, Utilities, etc.

I think a triage system is best.

For example, if something critical occurs, like plumbing leak, you want to respond same day to mitigate damages.  Loss of heat when it is 10F outside or loss of AC when it is 95F outside, same thing, you should repair same day.  It may be difficult to get someone same day, so for a plumbing leak, you may have to walk them through turning off the water source until you can get someone out ASAP.

Minor things, like a gate not latching right or loose fence boards, etc., I see that you can schedule once or twice a month for maintenance days to take care of these issues and other backlogged issues.

I put together an "investor profile."  It had the following sections:

1.  Background

2.  Objective

3.  Summary of Results

4. Deal Breakdowns which include address, purchase price, improvements, rents, sales price, ROI, etc.

5.  Number of Rental Units owned by year

Pictures of actual properties would be nice if you can round them up. 

I wouldn't care if it were legal or not, the right thing to do is NOT to charge them.  They work for peanuts to protect our country and have no choice but to go when they have their orders.

Maybe it would be best to explain to them when they move in that if they have a change in orders to notify you ASAP, then you will be advertising and showing the unit so that you can lease up very quickly.

This practice may even get you the reputation as "military friendly" and you can fill vacancies quickly by being on their advertisement board or get in tight with some of the base higher ups so that you can get some referrals.  After all, they will most likely have a replacement who will need housing.

I am a little divided on this issue.

If your co-workers or boss are likely to be jealous and cause you problems, then it might not be such a good idea.

However, if not, then as everyone says here, it would be a great opportunity to network to find potential deals, tenants, or even partners.

If there is gas heating present (or gas HWH, etc.), then I completely understand why CO detectors are needed.  You won't know it is producing CO until an AC company catches it or if someone is sick or dead. 

Seems like a small price to pay for peace of mind...I install CO detectors in all properties with gas regardless if someone asks me to do it or not.  I get the sealed battery 10 year life detector.  This prevents tampering by removal of a battery, which while doing surveys of equipment, I found this common among tenants and smoke and CO detectors.  These are about $35 to $40 each.

This is a small cost of doing business in residential rental real estate.....