All Forum Posts by: Greg Scott

Kristian:

Indy is a great market.  I think your plan has merit.  My only concern is searching for the rent to value "1% rule".  This metric became popular post GFC, when properties with a 1% rent to value ratio were fairly easy to find.   Can you still find them in Indy?  Probably. But, they will be in challenging parts of town where realistically you do not want to own property and your long-run returns will under-perform.

I'd encourage you to find a balance of sub-market growth, nearby employment, strong income, and only then a good rent-to-value ratio.  If you are willing to do some work, you can force appreciation, capture some equity, which boosts rent-to-value.

In terms of areas to avoid, I would stay away from the East side, particularly anything along Post road between Pendleton Pike and I-74.  Also avoid Lawrence Township (NE Indy).  The judge there is "progressively" destroying rental property by allowing massive delays in evictions.  Most landlords in Lawrence township now take evictions through Superior court, although that has added costs and is a slower process.  

Hard lesson. 

Open ended contracts, particularly verbal ones, usually end badly. This is a lesson I have learned on a few occasions.  Always have a detailed scope of work and a price in a written contract.  

Path forward. 

Have a frank conversation with the property manager.  It is fair to express your disappointment that they exceeded the cost target you gave them.  On the other hand, don't assume they were screwing you. It could be the rehab they did was the right thing for the property and one that might get you more rent. It could be that the decision makers were not aware of the ceiling on your budget.

The hard part will be explaining you cannot pay the overage.  You will need to work out a mutually-agreeable solution.  Yelling won't help.  This is where keeping a cool head and using good negotiation skills will likely yield the best outcome.

Good luck.

Yes.

I had a rental where the applicant had a 7 figure salary.  He was a consultant that was in town frequently and hated hotels. 

He asked to pay a year at a time.  We said no.  He paid monthly for 14 months until he forgot a check, got hit with a late fee, then paid the remaining 10 months in one check.

He moved out at the end of his lease with no issues.

Of course, this is the exception, not the norm.

First of all, a multi-year lease should be a hard "no" even if it was a perfect tenant. That is not a benefit for you, nor any kind of evidence that they are worthy of becoming a resident.

That issue aside, I would not allow someone with a recent eviction on my property unless the "unfortunate circumstance" was unlikely to recur AND they otherwise have a strong historical track record of making payments AND they would put down a very large security deposit.

Easy decision.  Sell.

- Your return on equity with this house is terrible.  Take that equity and redeploy it.  Get that money working harder for you.

- If you rent it two more years you lose the homeowner capital gains exemption.  Why not take the profit without the tax hit?

- California is not a landlord friendly market.  There are others that are much better out there. 

You can ask for whatever you want for rent.  It is still a free market. 

If you are too high, market rate customers will ignore you.  Someone with a voucher may still want to lease your unit even if the rates are above market because they are not paying.  The agency, of course, is trying to maximize its resources, so would love to have you charge less rent.

If your focus was primarily on gaining excess rent, keep in mind that there is a reason many landlords will not take vouchers.

We have very different definitions of a Hard Money Loan. The longest I've ever had a HML was 3 months. Most people want out as fast as possible. To me this sounds more like personal loan to a business.

I 100% agree with @Nathan Gesner.  To improve your business going forward, it is important that you recognize how you created the problem.

There are a portion of residents that if you give them an inch, they will take mile.  You just cannot allow that.  You need to understand your lease fully and follow it 100%.  Any time you "are trying to be nice" or "give them a break", not only do you undermine the legal foundations of your lease, you embolden the unethical tenants to move the boundary further in their favor.

Based on my experience with Hard Money Lenders, this post does not make any sense to me.

Did you not file the loan documents with the county as a lien on the property? The loan attaches to the property, not the LLC. If the loan is not getting paid, you foreclose and sell the property to get your money back.

The only other way you could get yourself in trouble is by giving the borrower cash before the work is done.  My Hard Money Lenders held the money in escrow and would not release the funds until the work was done, inspected, and they knew it was properly done.  That way, they knew if they foreclosed, all the cash was already in the house.  All they had to do was finish the work, sell the property, and they would get all of their money back plus profit.