All Forum Posts by: Greg Scott

My W2 friends would ask "What is the corporate policy?"  Since you control the corporate policy, that is a decision you can make.  There really is no wrong answer as long as there is a reasonable justification should the IRS question it.

I know that part of Indy very well.  In the map you provided, these are my thoughts:

 - North of I-74, particularly near I-465, I would generally stay away from.

- That corner of Indianapolis is really on the fringe of the city. The East border is mostly rural.  The South border they are building a lot of big-box warehouses and there are not many neighborhoods.

- South Emerson and South Franklin are fine.

 - It seems somewhat arbitrary to select that corner.  You might want to look at North Johnson County instead.  That is not technically part of the City of Indy, but is in the metro.  It has less crime and more growth and is more business friendly.

- Most of what you outlined is in Franklin Township.  The Judge there is fairly landlord friendly but the court docket is packed so it takes about 45 days to get a court date.  Beware of Lawrence Township in the NE corner.  That judge has been so horribly anti-landlord that nobody takes an eviction to her court any more. Almost everybody takes their evictions to Superior court.  It has gotten so bad that the City is, humorously, losing money in that Township because there are no court fees coming in.  They have a proposal for the other courts to subsidize the courtroom of that judge now, since it is basically insolvent.

That sucks.  Hopefully these thoughts help.

Do you believe it is truly bankrupt? I ask because if there is no money in the LLC, there is no money for you to recover. I would verify the bankruptcy is legit. This should be publicly available information.

I suppose you could sue the syndicator, but you probably do not have a case unless they committed fraud of some sort and you can prove they did.  You shouldn't need an SEC attorney to sue.  On the other hand, the odds are probably not be in your favor.  Why throw good money after bad?

The tenants have sensed that you are allowing them to have more power, and they are taking it. 

Your lease probably (or should) state that with 24 hour notice, you can enter the property, and you do not need to give a reason.  If you allowed them to cancel, that was your decision. They can ask for whatever they want, and you can always say "no" to anything that violates provisions of the lease and is compliant with the law.

Given where you are, I would allow them to stay to the end of their lease, but non-renew them and then sell the property after they move out.

I'm connected with one wholesaler.  He specializes in older stuff in working class neighborhoods.  DM me and I'll send you his email.  I've never bought from him, but he seems to have good deal flow.  Some sell very quickly, and some get re-priced.

On the other hand, have you trolled the MLS? There are plenty of good deals in Indy right on the MLS.

It is worth seeing how this boring deal impacts the rest of your portfolio.

Remember, looks like 100% bonus depreciation will be reinstated this year. This property might not have an effective BRRR strategy, but if you get a massive depreciation write-off, you might be able to eliminate a ton of taxes that you would have to pay next year. From an after-tax perspective, this boring deal could become a home run.

I never buy condos because of the large HOA fees. Even if they tell you the monthly payment is a number you can live with, they can always hit you with a special assessment. The main problem with condos as a rental, is that a huge portion of your operating costs is completely outside your control.

This is not a stupid question.  It gets to the core of underwriting. 

Underwriting a property is part art and part science.  Math is easy.  What is harder is answering questions like the one you are posing.  Often, there is no scientific way to get to the answer.

We own two properties in a B-class market.  In this market there are two newer properties with much higher rent.  All the other properties of similar age and have much lower rent than ours.  If you are just doing math, you would conclude there is no possible way our properties can get the rent we are getting.  And yet, we do.

From an operational perspective, we simply keep trying to make our properties better and better over time.  If we find that our occupancy is pushing close to 100%, we start raising rents.  We raise them until we start having trouble leasing and then stop.  Sometimes  occupancy drops below where we want it.  Then we may lower rents.  Other times we identify ways to make our property even more desirable.  Sometimes that is improving the unit interiors, sometimes improving curb appeal, sometimes adding amenities, or numerous other actions.

So, with the property you are analyzing, what can you do to improve rent?  That is the art of it.  It sounds like one solution is to furnish the units.  Look at the condition of that property.  Does it look like junk?  If you made it look better, do you think you could increase rents?  Is there a key amenity missing that other properties have?  How could you differentiate your property from the others to provide a unique market proposition? 

There is probably not a mathematical answer to your question.

If this is your first rent property, you are going to have a lot to learn.  If you are making renovations, that first year is going to go fast.

I wouldn't worry about the 2nd property now.  Get this one rehabbed and operating well. Once you are nearing the finish line, your next move will be much clearer.

My immediate reaction was that the credit report is fake.

Don't deviate from your processes.  A good tenant would not care about the $47 if it gets them into a property they like.

On a related note, if you do not follow your standard process for EVERYONE, you can be accused of, and charged massive fines for violating fair housing laws.