All Forum Posts by: Jay DeCima

Ian

With 250 rentals in Northern Ca (at my high point), I have run into this many times.

Cash their check, Serve a 3 day notice to pay or quit (do not include late fee). DO NOT ACCEPT ANY PARTIAL RENT AFTER this.  Send a memo explaining the situation to them.  Memo is way less emotional than talking.  To keep my sanity years ago, I developed my way to manage my tenants.  I manage them by mail.

I cut this (below) from one of my memos.  After you tell them exactly what they need to do, add this verbiage:

"You will be billed $950 for the eviction services of the eviction lawyer, (lawyer name if available).

After the Sheriff’s lock out, if money is still owed, we have to do a Sheriff’s Wage and Asset Attachment. Most employers, including us, do not like to do this because of all the paperwork involved. This Wage and Asset Attachment is in effect for 10 years and will follow you to different jobs. It also gets very expensive for you, because the Sheriff charges you for all attempts to collect money owed from one or more of your employers.

I would really be better if you could borrow some money from your family, employer or friends to get caught up on your rent so you won’t be evicted. You could then pay them back later.

I hope this will help you try to get current so we do not have to evict next week."

__________

Believe me, the tenant will understand. They do not want the Sheriff near their place of employment.

Good luck.  Let me know if I can help.

Fixer Jay DeCima

Mike

Having done tons of Calif. evictions over my 50 years of investing with 250 rental houses, I have seen it all.  Here is my advice to you:

Hire the real estate eviction lawyer that does most of the evictions in your jurisdiction.  Ask around, there are usually 2-3 lawyers in a county that specialize in evictions.

In Modesto, you will pay probably less than $1000 for the eviction and Sheriff lock out.  My philosophy is:  "if you can turn a big problem into an expense, you no longer have that big problem".

For your local eviction attorney, this is a pretty simple case.  They work with lying tenants being evicted every day.

Don't loose sleep on this, But..............DO THS EVICTION IMMEDIATELY, AND DO NOT COMMUNICATE WITH THE TENANT......the attorney will. 

Good luck.

Let me know if I can help.

Fixer Jay DeCima

Phillip

People usually reject things they do not know about.

Here is what I did, starting 50 years ago.  I used to do flippers but found they were too much work.

When I started, I needed cash flow as soon as possible.  I did not have the luxury of buying regular single family homes with little profit for many years and waiting for them to be paid off.

So I came up with a better way.  This was all in Northern Calif.  I bought groups of older run down houses ON A SINGLE PARCEL.  It takes some effort to learn this but it was hugely profitable.

Because these were lower income houses in old parts of town (NOT SLUMS), I rented to Section 8 tenants a lot.  I screen the tenant like any tenant and choose if I want to rent to them.  Mainly Section 8 is going to inspect for "habitability".  No big deal.  

I actually have more creditability over Section 8 tenants than my non Section 8.  Why?  Where are they going to go if I kick them out?

Also easy to determine rents that section 8 will pay. This varies in every county in the country. Some pay more than others. On the HUD site it will show you the max. rent amount they will pay for 1, 2, 3,4, 5 bedroom homes for every single county in the United States. Google "Hud, fair market rents, 2017".

Good luck.

Let me know if I can help.  Generally speaking, for my affordable rentals, I prefer tenants with a Section 8 voucher.

Fixer Jay DeCima

Jeffery

Rich people may make 30-40 times more money than you.  But I can guarantee you that they are not 30-40 times smarter than you.

They just figured out how "to do it".  Real estate education is the key.  Pick a kind of real estate you think might work for you, find the expert in that kind of real estate (check them thoroughly....for example, How many Google pages do they have?.........2 or 20).

Learn from that person.  Stay focused.  As an old time pitchman, Zig Ziglar, used to say:  "If you don't specialize in something, you will become a "wandering generality".

I did that 50+ years ago.  I did all kinds of real estate, but focused, at the beginning, on buying groups of older house on a single parcel.  These almost 250 houses in Northern Calif provided the best cash flow and almost 85% of the time had seller financing.

Good luck.

Fixer Jay DeCima

MarieChele

After over 50 years investing in Norther California, I can tell you something for 100% sure:

Everyone has a bad real estate example from a neighbor that had an uncle whose son lived next to a lady that knew a guy that had a friend that had this terrible xyz real estate disaster.

Catch my idea? Not very credible.

It took me some time to come up with my own way of investing but at my high mark I had over 250 California rental houses.  

Did I make some mistakes?....Sure.  I also made plenty of mistakes on my previous W-2 job.  I can tell you that real estate held over the years can be very forgiving.....and profitable if buy the right kind of cash flow properties like I do.

Good luck.  Let me know if I can help.

Fixer Jay DeCima

Jarrett

I have been doing all kinds of investing for 50 years in Northern California, mainly SFHs and duplexes.  I ended up with 250 houses in Northern Calif, but did not have a lot of cash to start.

You almost always need a down payment, BUT IT DOES NOT HAVE TO BE YOUR MONEY.

Here is a simple one I did.

For sale.  Duplex, $75,000.  Adult child inherited from deceased mom (very important to find details behind the sale.  If agent does not know, ask if he/she can find out).  The adult child wanted nothing to do with tenants and it was important to sell the property quickly (she needed cash).

My offer (one day after it came on the market):

$80,000 ($5000 over asking). That $5000 to be credited to me at close of escrow.

$40,000 hard money loan.  I knew the hard money folks and could get the loan within  a week because the loan was only about 50% of the price.

I asked her to carry back the balance, $40,000 for 10 years, at 7%.  She agreed.

In the offer I said the $5000 I would get back at escrow would be used to fix up her run down duplex and make the collateral for her $40000 loan nicer and worth more.

Deal closed as above.

Very important to know that YOU CAN DO DOWN DEALS, BUT MOST OF THE TIME THEY HAVE NEGATIVE CASH FLOW because of large mortgages.

I knew this would work, because the 2 bedroom unit upstairs was $125 less than market value and the 3 bedroom down stairs was $200 below market rent.

Why did the lady say yes?  She got a bunch of cash and I owed her $40,000.

BTW, 2 years after the sale, after making monthly payments, I sent her a note, "I inherited some money from an uncle and would like to pay off that $40000 loan by giving you $20,000."  She left a voicemail saying that I was taking advantage of her and would only take $28000 to pay off the $40000 loan.  Fine with me.  She gave me a 30% discoun a what I OWED TO HER.  Where did the $28k come from?  I was in middle of a refi, it was going to close in a week.  I came up with the $28k from every source I could to pay her before the refi. close.

2 weeks after I paid her, I called her to see if all was well with her and she thanked me for the chunk of cash.  She was able to take her grandkids on vacation.  She could not do that the the small monthly checks she got from me on the $40K loan.

Good luck.  Let me know if I can help you.

Fixer Jay DeCima

Anita

As a buy and hold investor of over 50 years, I am not a fan of buying out of state (my opinion) and "MAYBE" making a little cash flow after mortgage, repairs, taxes, insurance, property management.  

A "little bit" of cash flow and hoping for appreciation is not really going to make you feel like a real estate investor.

At my high point I had 250+ rental homes in Northern California, because I live in California.

Buying one at a time would have taken me too much time.  Plus, there will always be tons of competition for single family houses.

So I came up with a different way of buying.  I buy groups of houses 5+) on a single parcel.  Before you tell me you cannot do that in California, I can tell you I have many students doing it.

My way:

-5+ units (houses, duplex, non-conforming, even a mobile) on single parcel.

-Run down and poorly managed are a plus.

-Banks WILL NOT finance 5+ units in run down shape.  They will run from you if you try to apply.  Sellers of these properties know this and know they will probably have to carry the financing. THIS IS A TREMENDOUS BENEFIT TO YOU at time of purchase and later.  You create the terms with the seller.

-Because they are run down, the gross rent multiplier (GRM) you pay will be lower than if it was fixed up. Let say you buy at a 8 GRM and fixed and looking good it would sell for 10 GRM. Hold this thought and I will come back to it.

-Since it is run down, inevitably the rents are below market rents for a fixed house.

-My goal for myself or my students is to fix up the houses, raise the rents 50% over the next 24 months (remember they started off low). Fixing will also raise the GRM by about 2 (see above). This means an investor (if I sold) would pay more than when it was ugly. Raising the rents 50% and the GRM will just about double the value of the property. Run the numbers a few time to get a grasp on this very, very profitable technique.

I would try to spend time understanding this before you buy a Southwest ticket and fly away.

You have way more control of you investments when you control them.

Le me know if I can help.

Fixer Jay DeCima

PS: These properties will always be in older parts of town, not suburbs and not near ocean or Oakland.  Explore areas that are 50 miles away, they maybe 75 miles.

Gautam

Wow, you should be the teacher here.

You are correct in your statement on owning the note and not the property.

I would just say, let's go with your way of looking at it for now.

I probably got a little advanced in my comment about basis. If I offered a seller carry back note and then died and my heir took over the note.............then the person paying the note defaults and I foreclose, there are some complicated calculations regarding principal, interest and taxes. Let's not go there for now.

Thanks for your insight and follow up. It sounds like you know a little bit about this real estate stuff.

Let me know if I can help you in the future.

Fixer Jay DeCima

Ben

If you are young, why not buy a duplex or triplex.  Live in one and rent the others.  

This is not always easy if you have a family but well worth it you can.

You get rental income, depreciation, appreciation (maybe) and other tax advantages.

Your own house is an EXPENSE. Yes it may go up but when.

Become and investor and then homeowner.

That is my 2 cents from a 50 year investing senior.

Best of luck.

Fixer Jay DeCima

Jake,

Yes I can.

It is called "pajama money".

Let me explain.

At my "high mark" I had 250+ rental houses in Northern Ca.  I did not buy them one at a time.

I developed "my way of investing".  I buy groups of houses (usually 5+) on a single parcel, needing work.  The seller knows that over 5 units and needing work, that I will NOT be able to get bank loan.

So I have the seller take back the financing.

I do lots of things in between you increase value and rents............but when I sell, I want "pajama money".  I will only sell with my seller financing.  Each month I can collect mortgage checks, made out to me, from my mail box......in my pajamas.  I am in control.

Also, I DO NOT WANT TO TAKE BACK THE PROPERTY FOR THE BUYERS.  I want them to be successful.  I will sell with a low down, and structure payments to no be more than 50% of monthly rents.  Yes, doing that may have me charging a lower than market rent..........but in exchange, can I raise the price?

You bet I can.  Most newer investors on BP would jump at the opportunity to buy a group of house with good cash flow and a higher price.

You mentioned taxes.  Even though I raised the price to offer good terms, I only pay taxes on the principal part of the payments.  Remember, at the end of my career, I no longer need a big chunk of cash.  I can collect monthly mortgages for 10 or 20 years and not realize the entire capital gain.

If i get called to the "final closing" (that's death) my heirs take over the property at the value it is worth today and their basis is pegged to today's value.

Advice to you. Figure out how to do this and forget about teaching boomers about leaving real estate.  What are you going to tell them.....buy stock.  Don't waste your time.  Choose what has worked for a long, long time..... Buy and hold (and add some new twists to the philosophy.

That's the 'ole timer in me offering the advice.

Good luck.

Let me know if I can help.

Fixer Jay DeCima