All Forum Posts by: Frank Jevitzky

Hi Daniel,

In your position, you would have quite a few options. You could sell and use that income as an investment on multiple rental properties. You could also use a lease option with a large non-refundable down payment to put down on a rental property and make rental income at the same time. You could also pull a HELOC and put down on more properties while renting out. I'm not familiar with the Colorado market, $100k is a good amount in a lot of markets. Using a lease-to-buy option with a 3-7% non-refundable down payment is extra buying power. In addition, you could increase the monthly rent for your property due to the lease-to-buy option. I would do a 4% non-refundable down payment with a monthly rent of $2,400 and 50% of that goes towards equity after 12 months if they choose to buy the property. 50% accounts for the above-average 50% expenses on rental properties. This practically secures 24 months of rent plus the non-refundable payment for you to place on another property to generate income. In the event that they choose to buy the property off of you, you yield that non-refundable payment plus 50% of the rental income minus expenses in addition to the remaining purchase price of the property to pay off the HELOC. I'm a bit rusty as I haven't used my investor brain for a while so I hope that others will chime in and point out any discrepancies. I'm sure there's a lot that you could put into the contract to negate expenses such as "renter agrees to purchase as-is." Hope it helps, feel free to reach out if you have any other questions!

I haven't done any deals yet, but I've been told that it is important for you to walk the house and assess repairs needed. Bring your paperwork to the property that way it can be signed if you can negotiate the right deal there on the spot. I'm told that if an agent is involved, they will almost always require you to sign their purchase & sale agreement, so make sure it doesn't prohibit assigning the contract. Like @Curt Davis says, the more information you can provide to your buyers, the easier it is for them to make a decision, so take lots of pictures and try to get as much information from the seller as possible.

Cash buyers will almost always inspect the property and run their own numbers, but you want to run your own numbers so you know what's fair to wholesale the property for. It's a good idea to network with contractors so you can get an idea of what big ticket items generally cost so your numbers aren't way off. I heard a podcast that suggested building a buyers list while marketing for deals that way you have buyers to reach out to as soon as you have a property under contract. Don't give the seller your deposit, that goes to the title company after you've opened escrow. The steps I've been educated to take are:

1. Market

2. Evaluate deals

3. Determine funding needed and put property under contract (just deposit or transactional lender for double-close)

4. Reach out to your cash buyer list

5. Assign or double-close

I've also been told to run your paperwork by a contract attorney to make sure your i's are dotted and t's are crossed. I have also had a lot of buyers tell me that creative financing sweetens the deal so you should look into that as well. Hope this helps!

@Chris Scott thanks for inviting me to this event, I look forward to meeting everyone on the 14th!

I'm a new investor myself and I have not completed any deals yet. I have spent the last 6 months investing in my education, listening to podcasts, attending webinars, etc. I just started reaching out to leads this month and other investors/real estate professionals and it's been a great experience so far.

I think it's important to establish a system that you can track, budget, and improve. I believe you can purchase some of the documents you're looking for from BP, but I've been advised to always run them by a contract attorney to make sure that they comply for your specific area. If you're talking to an agent lead, they will often have you sign their purchase and sale agreement, just make sure it's assignable.

You'll have to gauge what works best based on the time you have available. For me, I work a full time job M-F 9am-6pm so I prepare my day the night before. Doing things that work for you while you're at work (like Craigslist ads, direct mail, networking with agents, and web presence) are great! Just make sure that your money is going to the best use possible.

The owner's equity is important because that often determines the minimum amount you can offer them (because they need to pay off the loan). For example, if they have 30% equity for a $100k listing, your minimum offer will typically be $70k because that's what they need to pay the remainder of their loan. With wholesaling, you're looking at the after repair value and the ROI for the investor buyer.

In the simplest of examples, say that $100k property would be worth $200k after $40k in repairs, you put it under contract for $80k (the seller gets $10k profit) and assign the contract for $15k, that leaves a good profit margin for the investor buyer. But there's title insurance, commissions if the property is listed, hazard insurance, and plenty of other things to keep in mind so education is definitely the best first step.

I'd say an important to consider weighing out the differences in costs if it's currently a dry-22 unit. Since R22 is being phased out by 2020, R-410A units are the replacement units, but from what I've been told this requires that you change the air handler as well. Some people are still putting in Dry-22 condensers to cut their costs down and using M-O99 if R22 isn't available to them.

I've heard mixed reviews about using M-O99 as a replacement for R22 because it needs to run at a higher pressure than R22. So all things considered, if this is your situation then I'd recommend seeing what fits your budget.

I've had good experiences with Goodman units.

It's important to know what is defined in your lease agreement. Resident negligence should be factored in. This is a type of situation that should be backed up with service requests and proof of completion within a reasonable timeframe. You may not be able to charge them if the toilet handle "broke" due to "normal wear and tear", but at least having the proof that it was serviced and you educating them (in writing) on what to do should a toilet overflow again in the future (shut-off valve) could protect you from liability later on. This should also convey the repercussions of them not performing the actions necessary on their part to prevent damage to your property.

At an apartment community I worked at, a tenant smoked inside their apartment for over 5 years. The walls were stained yellow along with the blinds. When we charged them for the paint and blinds, they took us to court and the judge came back in the tenant's favor which actually required the community be responsible for all of their move-out charges. The worst part was that the judge miscalculated the charges and the community ended up having to pay more than what was initially charged.

Ozone machines do a great job like @Nathan Gesner said so it's worth a try. You may have to eat the expense of new carpet/padding, but at least it mitigates the potential issue of the future residents saying the rental wasn't ready when they moved in and a judge taking their side on it. You could also view it as an opportunity to put another type of flooring in if it's valued in your market.

Another thing to try (if you have central air) would be to put a deodorizing spray on the air filter and run that for a while, but that may just mask the scent.

Zillow and Craigslist seem to be the best free/cost/time-efficient sources of advertisement. Like @Logan Allec said, Facebook is actually a great advertising source as well. I have had friends share their friends' rental advertisements. Though I don't know the success rate, it's still free. I'd just suggest that any friends sharing your post don't promise "security" or a "quiet area" as that can get you in trouble. I also like @Jon Freeman's idea. Not many apartment communities offer month-to-month lease agreements so you may be able to charge a premium rental rate for doing so. Just be sure to know your market and competitors so you can overcome objections to the higher rate. Another idea would be, if you had any friends/contacts working for companies with high turnovers in the areas (such as consultants, contractors, interns), ask if they could recommend your property to their new hires. Maybe you can pay them a referral fee in return if budget permits.

@Account Closed said, speak to them and get as much information as possible. If you can work out a solution for them after consulting an attorney (even if just a short-term rental after putting them through your application process and them qualifying), you could save yourself some headaches and hassle. Just make sure they go through your application process, sign your lease agreement, and agree to your terms. This could at least give them a bit more time to get back on their feet.

Depending on what your local/state laws are, it's very risky to accept that much rent up front. In California, if you accept that much rent from a resident, you typically cannot evict them because you have already accepted their rent through a period of time. I only say this because a tenant could be problematic, such as cause several complaints from neighbors that cause you to get fined by the city, disturbing other tenants if it's a duplex or MF, performing illegal operations, use the premises for something it's not permitted for, etc. If you accept that much rent from a tenant and they cause issues, you may be stuck with keeping them for the full duration of the period they paid rent through. Not to mention, there are also possibilities of cashflow through lease termination fees if they had to move out for an emergency if your state/local laws permit. Ultimately, fair housing laws require that you treat all applicants/tenants the same, therefore what you decide should be a standard practice going forward. I am sure Texas laws are different from California laws so it might be best to talk to an attorney.