All Forum Posts by: David S.

There was one that I was asked to participate in that went belly up and all investors lost their investment.  It was presented to me by a friend who had a relative who was purchasing an apartment complex in a small town with a military base.  The prospectus was top notch and I could see why some folks invested in it.  However, the reputation of the syndicator was questionable.  My friend bought a share and I did not.  The main syndicator used income from the investment to support his lifestyle, going as far as buying a Porsche with those funds.  My friend was giddy that he bought the Porsche.  I asked him why was he so proud of his relative using HIS funds to buy a Porsche.  When there was a downsizing at the base, there wasn't enough reserve funds to keep the property and it went to the bank, leaving every investor with a complete and total loss, including the relative of the syndicator. By the time it was foreclosed on, the syndicator had already moved on and started another business.

I am not sure about the legality, but ethically speaking you should have went through the agent.  I am not sure if your motivation was to just get information or get a better deal by not using the agent.  If the latter, the owner would still be contractually obligated to pay the commission even if he did a PA directly with you. 

@Chris Mason touched up on insurance. You should definitely have a large 7 figure umbrella policy to protect you from lawsuits. This is regardless of whatever entity you decide on i.e. LLC, Trusts, personal name etc.

Check with a professional on this, but I believe an LLC can have a loan with 2 years of income history. There is always the non-Fannie Mae route such as commercial or portfolio lenders. Many of these loans come from small, local banks. Typically, these loans will be a higher rate and may even be a balloon type note due in 5 or 7 years, or a 5 to 7 year ARM, but with a longer amortization period, like 20 or 25 years.

Yes, I have been in this situation.

Real estate is not just a number's business, it is a people business.

Your reputation is reflected in your actions.

Trying to collect rent from a dead tenant's daughter is just plain cold.

Just let it go.....and put your efforts into finding a new tenant.

If your reserves are adequate, this shouldn't run you out of business.

Baton Rouge is a great place to invest in rentals. A lot of flippers and wholesalers are doing great as well. We may not appreciate 30% a year in values, but I can tell you that my properties  (and rents) have appreciated quite nicely. The economy is constantly adding jobs and developers are always building subdivisions. I would recommend reading the online magazine, Baton Rouge Business Report to get a pulse on the local enonomy.

And that was pure media hype over potentially losing a home game for LSU. These guys will fight to keep revenue so stories like this is pure hyperbole.

Some things are state specific..so you may not be able to use all of them

-Payment Methods Accepted

-Late Fee Policy

-No maintenance performed by tenant without landlord's permission

-Procedure for notifying landlord for maintenance (too many say this has been broken for x amount of time so I need it fixed TODAY, but never notify the landlord)

-Consequence of moving people in and bypassing your qualification process

-Consequence and fine for sneaking a pet in without notifying landlord

-Rent pick-up fee--if they refuse to adhere to payment method in lease; rent pick up fee will apply for successful and unsuccessful trys at getting the rent. i.e. you knocked on the door nd no one answered or they ignored you

-Tenant damages-Tenant MUST PAY FOR TENANT DAMAGES.  That includes drain cleaning if grease and other stuff is flushed down the drain or cleaning of AC coils for failing to change the filter. Broken windows, etc.

-Tenant damages, unpaid utilities, pet fine etc must be paid for in 5 days or face eviction

-Landlord does not change light bulbs

-$75 fee for loss of key or if landlord must make key or let them in

-No subletting

-No illegal activities, no loud noise

-Cleanliness. If premises is found dirty, landlord has the right to hire maid service and bill the tenant.  Due in 5 days or eviction.  Landlord can pay for extra pest control if tenants are filthy and it needs more due to that.

-Waiver of Notice (LA specific)

-No commercial businesses

-Lawn and outside must be kept up or landlord can hire out and bill tenant

-Fine for refusing landlord access.  This occurs when you try to show the apartment for prospective tenant when they are moving out or even for appraisers, repair people, or even during your inspections.

-Landlord needs 30 day notice when lease is up

-Getting utilities cut off is grounds for eviction i.e. no electricity in place

-Who pays utilities

-When utilities gets transferred and consequences of not doing so

-Tenant must let repair people in; will be responsible for repair people who can't get in and charge a fee.  This one is crazy--you would not believe how many people want their stuff fixed but who won't let the repair man in.

@Carmelo Lopez

I don't think those two changes will have that great of an effect.  These are apples and oranges compared to pre-2008 when they gave out liar loans. There are some economic geniuses who predicted the stock bubble of 2000 (Schiller?) and the subprime crash (The Big Short).  As @Lesley Resnick stated, I think the big one coming may be commercial.  When hedge funds are driving cap rates into insane ranges, it is evident that there is a bubble.  However, it is all speculation which bubble will bust and when.  The best thing is to be prepared to spring into action a get some good deals when it reveals itself.  And also protect yourself if you should take that hit.  Like reshuffling your portfolio now if you think you need it or maximizing cash flow.

Actually, it was @MichelleBright who mentioned the commercial market crashing.

Congratulations Austin!  A lot of my purchases have come from semi-retired or nearly retired investors!  I have to remember to always ask if they have other properties.  Some sell off their high headache ones first, then wait for the others.

Great scaling over a short period!  Also, this is a great reminder of what can be achieved with persistent time investment.

I like to insure close to construction costs or for what I could rebuild it for.  The insurance company can provide you with the construction costs per square foot.

The question is: If you have a major incident and you have to rebuild from the ground up, are you prepared to come up with the difference, even if it is several hundred thousand dollars?  Or would you even rebuild it? Would you just take the insurance money and sell the empty lot?  The answers to these questions should point you in the right direction.

I am not to familiar with your area, but mine would be about $100 to $120 or more per square foot construction costs using a GC, putting the coverage amount to at least 650K.  You could sub it out yourself for much cheaper, assuming it is allowed in your area and you are qualified.

@David Washington

If it would be possible, you might consider actually purchasing the property first, then turn around to sell it.  It may be difficult to secure funding, but I would think that would be legal in your state (check with your local laws)? One local investor in my area uses this technique and does extremely well.  While it is contradictory to what typical wholesaling is i.e. little or no money out of pocket, you don't have to worry about someone doing an end run around your deal and signing up another PA with the owner. Or having to explain to a seller, I am buying your property, but not really.

Otherwise, I think paying the $199 a month is a no brainer to stay legal.