All Forum Posts by: Dustin Heiner

Hi @Alan Johnson!

Thanks for the mention! 

One side note as a investor/buyer I'd like to mention. 

Personally, I LOVE working with wholesalers. They do the hard work while investors like myself get the benefit of having a long term rental. I've bought many properties from wholesalers and will continue to do so. Also, I absolutely do not mind paying the wholesaler fee. They did all the hard work so they should make money on it.

As a wholesaler, a non-refundable deposit sounds like a reasonable thing to charge. I get it. They want to make sure they are not wasting their time or lose the property. Plenty of buyers would probably pay it.

As an investor though, I never pay the non-refundable deposit. Maybe other investors do pay the deposit, but I don't.

Even thought I don't pay it, wholesalers still sell properties to me. Why? Because I am a buyer. If the property is good, they know I will go through with the purchase. If, after my inspections are done, and the property is not what it appeared to be I will need to adjust my price.

Let's say that after the inspection, there is $10,000 worth or work done that was not considered at the time of the contract. I don't want to be stuck with the $10,000 bill, so I lower my offer by $10,000 so the seller pays for it. If the seller does not accept, then I give them the option to not take my counter offer.

If I paid the "non-refundable" deposit and the seller walks, then I am out the money. I'm not in the business of losing money so I don't buy it.

For me, there are too many properties out there and I just move on when a wholesaler will not negotiate away the "non-refundable" deposit.

Thanks again Alan!

Dustin

Wow, that is expensive! I thought mine was at $750. There is a lot more working setting up your taxes but once they are in his system, it is quick for him.

I have 28 properties and my CPA charges $750 for my entire return. He is in CA too. Super awesome that he also worked for the IRS before so he knows what to watch out for so you have a better chance of not being audited.

If you want his info, I can give it to you. DM me if you would like.

Hi @Lane Pate!

In my opinion, the hard part with investing is finding and acquiring a home that will make you money. If you decide to flip a property or rent it out, you need to get the property first before you can do anything.

Since you have the property already, and you know it will cash flow, it would be a great idea to rent it out and make passive income each month from it.  Also, the tenants are paying off the mortgage and you will hopefully get some appreciation after many years of profitable rents.

I plan to move from my residence in a year or two and will rent it out. I could sell it and cash in on the appreciation but then I would lose the cash flow.  With renting it, you can also refinance the property after a few years, take money out to buy an investment, and have your tenants pay off that mortgage.  

Best thing about refinancing is that money you pull out is TAX FREE!  When you sell your home, you pay taxes on the sale.  When you refi, the IRS sees it as a loan that you pay back so no taxation there.  Good thing for you your tenants are paying off the loan!

There are many other great things about rentals. Send me a PM if you would like to chat about it.

Hope it goes well for you!
Dustin

Hi Debbie! Welcome to BP!

Send me a PM and I'll see if I can get you started in the right direction.

Dustin

Hi @Melissa Kirchhoff!

So, I was in your shoes many years ago with having too much debt to my income. I tried to purchase a new home to live in but was having a horrible time with financing.  My loan agent did everything she could to get around the problem of the debt to income.

It seems as though banks will allow lending if you are able to show more income from somewhere else.  Think of any other place you can show more income from. Maybe having your joint tenant sign a lease with you for her portion and see if the lender will be fine with that. Basically that you are leasing out a portion of your property.

Ultimately for my situation, to purchase my new primary residence, I needed the debt to income to be lower.  The only way I was able to do that was to have someone sign onto the loan with me and guarantee the loan for me. 

I was blessed to have my father who was willing to co-sign with me which improved my debt to income enough to purchase the home.

After a couple years, I refinanced (because my debt to income had changed) and got my father off the loan and had it solely in my name.

I hope you figure something out!
Take care,

Dustin

Great question @Jason Utley!

If you are close enough to your properties where you can manage them yourself (and can tolerate managing it yourself), you will save plenty of money not paying a PM.

Usually PM's will charge first months rent for a leasing fee as well as 8%-12% typically for a monthly fee for managing the property.  There will be other costs from the PM if there are maintenance calls and other expenses for the property.

Here is what I look for in a PM:

Communication
The PM should be able to return your call/text/email within the same day, or at the latest, within 24 hours. This is a non-negotiable. Only with good communication can your real estate business run well and keep you and your tenants happy.

When I am screening out PM’s before I invest in a new area I expect the PM to be on their “A” game and be in constant conversation with me because he wants to get my business. If the PM has horrible communication timelines and abilities while he is trying to get my business, I can only imagine how much worse it would be when I actually hire him to do the job. I have passed on many PM’s because of their lack of communication in the hiring period because it will more than likely get worse, not better.

Trustworthiness
You must be able to trust your PM. Remember, they are your employee, and they are working for you. One property manager I had was not trustworthy, and I had to fire her. There were missing receipts, unexplained expenses, upset tenants, etc. Don’t put up with a bad property manager. Get rid of them quickly. Like an employee, hire slow, fire fast.

Accountability
Everything the PM does should be ran through you, and you should be able to verify what they do. I give my PM’s the authority to spend under $100 per property per month without my approval. I don’t want to be bothered with a $5 toilet leak, but I do want to be bothered about a $300 water heater or a $2,000 furnace replacement.

I review every statement and every expense/income that I receive. If there are any issues or questions, I ask them right away. If the PM is unable to adequately answer my questions, I start to get suspicious of them doing their job well and how much I can trust them. Once the seed of doubt is planted, it takes a lot of time for the PM to build that trust back up in me so I am able to fully trust them.
Quality of work

Commission percentage
The amount that I pay my PM is based on what I contract with them for their services. Some areas 8% of rents is the going rate and in others 10% is. If it is hard to find a good PM in a specific area, you may pay an awesome PM 12% because you are getting awesome service for your money. I have an area where I am paying 12% for my PM, but he is worth every penny.

Other Fees
On top of the commission for the monthly rents, it is wise to watch out for other fees that they may charge you. These fees add up quickly and eat into your cash flow each month. 

Some things I look out for are:
Minimum monthly fee if the property is not rented.
Up charges for contractor repairs.
Finders fees.
Marketing fees.
Charge to visit the property for any reason.

So, whatever you decide, your property needs a good manager. If it is you or someone else, take care of the property and the tenant and you will make great passive income for years to come.

Hope it goes well!
Dustin

@Ricardo Meza

Great questions and a lot to go over. Send me a PM.

Hi @Marissa Mallamo, send me a PM when you can.

Hi @Ricardo Meza!

This really depends on your risk tolerance.  

I personally invest in an area where homes cost $15k and rent for $500.  There are many issues but the cash flow is very high for the $ invested.  The problems are all just the cost of doing business.

Some things you will need to consider when investing in lower end homes.

1. Turnover - Because of the lower quality homes, the tenant turnover is high. Figure about $1500 in costs like carrying costs, eviction, clean up, leasing etc.  There are ways to lower this turnover though.
2. Repairs - Because the home is less in quality, there will be a lot of differed maintenance and normal things break since it is an older home.
3. Screening Tenants - You can keep turnover low if you screen tenants right and run background checks.
4. Property Manager - Your PM is your best friend here unless you are managing it yourself. It is hard to find a good PM for these types of homes. Once you find one, keep em.
5. Crime - Lower class areas have crime. Many times thieves break in to steal copper plumbing/wiring etc. when the property is vacant.

There are many other things to consider.

Send me a PM if you would like to chat more.

Hope it goes well!

Dustin

Hi @Jeremiah H.!

You are on the right track.  I only refinance if the property, or the next property, will cover the payments AND I still make money.

For instance, I refinanced my residence and pulled out $50k from the equity.  The note payment increased by $300 each month but that is covered by a property I recently purchased for $9,000 total cash.  This property is already rented for $450 a month and after PM fees, Taxes, Insurance, etc, the balance will cover the increase in my mortgage payment.

Now I have $41k to invest in more properties.  

I recently used that $41k, plus other money, to purchase a home cash for $151k. The property is worth $240k and I am renting it out for $2100 a month.  After all expenses, I will have a passive income of $1650 or so.  

I am in the middle of doing a delayed financing on the property and will pull out 100% of my money from the property and the note payment will be $850 each month.  That means I will earn almost $800 in passive income with NO CASH in the deal because I pulled out all my money.

So yes, I always consider the cash flow on every deal and plan 2 to 3 moves ahead so I will always have a positive cash flow.

Hope it goes well for you!
Dustin