All Forum Posts by: Greg Scott

Actually, a vacancy is not the worst thing.  Much worse is having someone living in your unit who is not paying.  They are costing you wear & tear and utilities and you have no revenue coming in.

You have been very lenient, and now you have set the expectations that you do not follow your own lease.  I would say that you should let this tenant go, mostly so you can start over and set appropriate boundaries.

Want to see the end-game?

I spoke to a guy recently who was trying to figure out how to make it to retirement. He had a quad in California about 1 block from the beach. The property is worth a mint. He had owned it for 30 years and should have been making bank on cashflow.  He wasn't.

He had one sister (disabled) who was living in one unit for about 25% of typical rent.  He had another sister living there at about 50% typical rent, and one cousin that was also paying about 50% typical rent.  The fourth resident was unrelated, but a long-time resident not paying market rates. The rent increases over the year hadn't kept up with inflation so he was roughly zero cashflow after taxes, insurance, and maintenance.

He didn't feel he could sell, because family was living there and did not want to raise his rent either.  Emotionally and financially, he was stuck.

Assuming your lease clearly states it, yes. You can also charge her court costs for filing the eviction and late fees.

Whether or not it is worth your time, is a different topic.

I would look to cash-on-cash returns and equity capture as your two primary metrics.  Nobody can gauge appreciation with any precision so just ignore that.

Cap Rate is effectively meaningless on a 4-unit property.  Comparative Market Analysis or comps are used to value quads.  Commercial properties, including 5+ unit multifamily are valued using the income approach.  Cap Rate is a critical component of the income approach to valuation of commercial properties.  Cap Rate has no use for single family, duplexes, triplexes or quads.

I haven't but know people that have.

The reason they bought the LLC instead of the property is because they thought that buying the LLC would not trigger a change in the property tax assessment. However, they were wrong and the taxes went up anyway.

My attorneys have always advised against buying someone else's LLC because that LLC carries all the past baggage including any liability, and the LLC operating agreement may not have been set up the way you would want. Also, if they did not maintain the corporate formalities properly, the LLC can be thrown out in a lawsuit.

The SEC is cracking down on the sort of behavior you describe.  People who's primary function is to raise money and do not have a true role in the GP are breaking the law unless they are licensed to raise money.

Do you want to give money to someone who then just hands the money to someone else, without any real control over the deal? 

I'm glad the market is shaking out most of these money-raisers.  They were a sign of excess in the space and the industry won't fully recover until most of them are out of business.

Performance will vary based on the local housing authority executing the Section 8 program.

Right now the Indianapolis Housing Authority is severely broken. Landlords aren't getting paid and residents are getting evicted.  

Some of them operate much better.  

It will continue.  I still get calls for properties I sold over a decade ago.  I also get calls from people reading off a single-family script and the address they give is one of my large apartment complexes

I recommend you get a separate phone number for managing the operations of your business.  Then it is easier to ignore the spam.

Here is a fun trick for text spam from people wanting to buy your property.  I like to text back that I no longer use that phone number.  I am interested in selling that property but could they please text me at my normal number.  Then I give them the phone number of a different person that was hitting me with text spam.  I also make sure I then block both their numbers.

You have some valid points, but I would like to present a counter-argument.

I agree that people that only buy properties that have the highest pro-forma cashflow, often are buying in rough parts of town.  They are management-intensive to operate and rarely does the predicted cashflow match the actual cashflow.  Trying to get to the bare minimum cashflow number to leave your job is extremely risky.  On this we are aligned.

On the other extreme, investing for pure equity growth can be equally disastrous.  As you know, real estate goes through cycles.  If you are relying on doing a re-finance every couple of years and you hit a dip in the cycle, you could be in trouble.  You may be forced to sell in a down cycle and you may never be able to recover.  This is happening to people in commercial real estate right now.

I like being somewhere in between.  I want consistent cashflow to handle my day-to-day living expenses.  I never want to be forced to sell in a down market.  In an up market I can harvest gains and re-invest in further growth opportunities.