All Forum Posts by: Gary L Wallman

Quote from @Dominic Castleberry:

Seller verbally agrees to sell their property at a agreed upon price but changes their mind, no docs signed to confirm verbal agreement, can I legally record a notice of interest on this property to protect my interest. I have taken the steps to secure financing although I don't have a signed purchase agreement, I do have the agreement recorded.

 Dominic,

The law specifically states that verbal agreements are invalid for real estate transactions. Without a signed contract for sale with an earnest money deposit for consideration, you have no legally binding agreement. 

I'm not a lawyer and this is not legal advice, so please take my opinion as only that of a fellow REI.

Respectfully, Gary

Quote from @Jay Hinrichs:

Quote from @Gary L Wallman:

Quote from @Joe Splitrock:

@Rudy Ferrara you are twisting this into something it is not. There is no conspiracy against wholesalers and they represent such a small percentage of transactions that they are not even competition for realtors. And nobody is going to ban together to "save the wholesalers", haha.

Real estate licensing is controlled by the state for the protection of its citizens. We wouldn't need any licensing or laws if we could trust people to do the right thing. We can't. Real estate licensing requires you take classroom training which includes legal and ethical components. This is to protect the consumer from predatory action of uneducated and unlicensed individuals. There is also a consequence if you don't follow the law, your license can be revoked. 

Following your logic, we shouldn't need a license to drive a car or practice medicine. I am sorry, but having talked to hundreds of wholesalers on BP over the years, I have found a high percentage know nothing about the law and worse they don't care! Many have no money or experience.  Some don't want to "trouble themselves" with taking a $500 real estate class and having to pass a test. It is not a few bad apples, it is a profession that attracts bad apples. This is directly due to the low barrier of entry. All it takes to be a wholesaler is to declare "I am a wholesaler". Download a contract off a website and knock on a door. That is literally it. That is where the risk is.

There are plenty of legit wholesalers who have their license. There are others who do actual buy and selling of real estate by taking title. It doesn't even take cash, just finding a partner willing to finance you. If you can't convince someone to finance your operation, you probably have financial or credibility issues. 

 Joe,

Not defending wholesalers, but.  . . I completely disagree with you regarding licensing laws. Sure, doctors, lawyers and engineers/architects and the like should be licensed because their expertise is technical and a laymen is typically not in a position to judge their efficacy. For most other licenses, they are simply there to reduce competition to those already entrenched.

With all due respect, I believe it's naïve to believe our government gives a darn about protecting us. Politicians care about the money from big donors and lobbyists. Hence licenses for everything to eliminate or discourage new competitors.

40 years ago, when I was in my 20's, virtually 80 percent of occupations required no licensure. Now, 1000's of hours of education to cut hair. Used car salesmen's license (in addition to the actual dealers). Pawn shop license, license to buy gold, license to sell cigarettes, license to  sell beer. Restaurant license, license to run a gym, licenses ad infinitum ad nauseum. I sent some guys to buy 5 small lilac plants for my yard and I was asked for my nurseryman's license. HELP?

Throw on continuing education requirements for real estate agents and barbers and the like and you really have to start asking yourself two questions. Are we really a free people and are we really a capitalistic society?  My answer: Not like we used to be. Can't even let your kid run a lemonade stand without wondering if they are going to get busted for no license/permit.

Respectfully,

Gary

I used to be able to do HML in Oregon with no license.. you still can in all but 12 states.. but for us in those 12 states we need NMLS registration and state license and yearly CE. of course your conventional mortgage lenders need license in every state.. I guess we either do the licenses thing or we go to full blown Caveat Emptor.

 Jay,

My vote: Full blown caveat emptor. The potential to lose a few bucks to scammers is, IMO, far outweighed by the costs added to EVERYTHING by these licenses and regulations.

The vast majority of people in business want to stay in business, so they deliver a fair product at a fair price. The few that don't get rooted out PDQ.

Imagine how much your costs would go down and how much savings you could pass on to your customer without all the ridiculous fees and permits in the Pacific Northwest.

I just watched "Million Dollar Listing Los Angeles" episode where a guy bought a lot on a bluff overlooking the ocean (far above the sea) to build a house for his kids to grow up in. 15 years later he was selling it never having moved in. It seems it took over 10 years and hundreds of thousands of dollars just to get the required permits. 4 or 5 more years to complete. Selling it because his kids are already grown.

These types of situations are flat out untenable. What a shame to completely undermine our capatalist system with all this nonsense. It's no wonder we, as a nation, can never get anything accomplished in a reasonable time and cost.

Gary

Quote from @Joe Splitrock:

@Rudy Ferrara you are twisting this into something it is not. There is no conspiracy against wholesalers and they represent such a small percentage of transactions that they are not even competition for realtors. And nobody is going to ban together to "save the wholesalers", haha.

Real estate licensing is controlled by the state for the protection of its citizens. We wouldn't need any licensing or laws if we could trust people to do the right thing. We can't. Real estate licensing requires you take classroom training which includes legal and ethical components. This is to protect the consumer from predatory action of uneducated and unlicensed individuals. There is also a consequence if you don't follow the law, your license can be revoked. 

Following your logic, we shouldn't need a license to drive a car or practice medicine. I am sorry, but having talked to hundreds of wholesalers on BP over the years, I have found a high percentage know nothing about the law and worse they don't care! Many have no money or experience.  Some don't want to "trouble themselves" with taking a $500 real estate class and having to pass a test. It is not a few bad apples, it is a profession that attracts bad apples. This is directly due to the low barrier of entry. All it takes to be a wholesaler is to declare "I am a wholesaler". Download a contract off a website and knock on a door. That is literally it. That is where the risk is.

There are plenty of legit wholesalers who have their license. There are others who do actual buy and selling of real estate by taking title. It doesn't even take cash, just finding a partner willing to finance you. If you can't convince someone to finance your operation, you probably have financial or credibility issues. 

 Joe,

Not defending wholesalers, but.  . . I completely disagree with you regarding licensing laws. Sure, doctors, lawyers and engineers/architects and the like should be licensed because their expertise is technical and a laymen is typically not in a position to judge their efficacy. For most other licenses, they are simply there to reduce competition to those already entrenched.

With all due respect, I believe it's naïve to believe our government gives a darn about protecting us. Politicians care about the money from big donors and lobbyists. Hence licenses for everything to eliminate or discourage new competitors.

40 years ago, when I was in my 20's, virtually 80 percent of occupations required no licensure. Now, 1000's of hours of education to cut hair. Used car salesmen's license (in addition to the actual dealers). Pawn shop license, license to buy gold, license to sell cigarettes, license to  sell beer. Restaurant license, license to run a gym, licenses ad infinitum ad nauseum. I sent some guys to buy 5 small lilac plants for my yard and I was asked for my nurseryman's license. HELP?

Throw on continuing education requirements for real estate agents and barbers and the like and you really have to start asking yourself two questions. Are we really a free people and are we really a capitalistic society?  My answer: Not like we used to be. Can't even let your kid run a lemonade stand without wondering if they are going to get busted for no license/permit.

Respectfully,

Gary

Quote from @David Dachtera:

Just wondering if anyone has ever heard the phrase "living paycheck to paycheck". Throw a $300+ "monkey wrench" into that machine and stand back - make sure you're wearing your PPE (Personal Protective Equipment) when you do.

As Marina Loos posted, ...

"What she did with that benefit ... " SURVIVE!

"The two don't have to unite and be okay with each other" ... but, there's no law against it, either.

For "... enable this behavior", read: provide affordable housing.

We all "plan for (the) future". Fortune is often less than accommodating, to say the least. "Life" happens on its own schedule, no one else's.

It may be unwise to assume that because a person is in a specific occupation that they are at the top of the pay scale for that occupation. Certainly, the pandemic has been most revealing in that regard.

That said, I do agree that it's time for a parting of the ways. The new owner's business model is inconsistent with that of the previous owner. So, yes - change needs to be made. In the process, it might be wise to not inflict or aggravate the black eye the landlord persuasion has in the eyes of our customers (current and potential tenants), not to mention their government representatives at all levels.

My $0.02 ...

Dave,

With all due respect, your response seems like a quote from a socialist manifesto. You don't know that John's tenant is barely surviving financially. She obviously can afford to blow big bucks on her cigarette habit. Maybe she has a million other vices and has been simply using her below market rent and the kindness of John's father to take advantage of them. Conversely maybe she gives her excess cash to a church or worthy charity. In either case it is totally immaterial.

John should simply charge the market rent for his investment. How, why or if the tenant spends her money if barely eking by or living it up on vices is NOT his concern. Getting a fair and equitable return on his investment is.

Respectfully, Gary

Quote from @Bud Gaffney:

@John Gach do you have a mortgage? If not leave her rent alone.

 Huh? No disrespect meant, but that may be the most inane response ever. What's the difference if John has a mortgage? Carrying costs? Would you let your neighbors kid borrow your car simply because it's paid off.

FYI, if John doesn't have a mortgage he has capital tied up he expects a return on. REI isn't charity and some chain smoking tenant who can't afford $750 bucks a month isn't one most landlords would want or accept. As a matter of course, we don't allow smokers in any of our 140+ rentals.

She should be thankful she has had thirty years of below market rent. If she's not get her out and renovate.

Respectfully, Gary

@David Li

Trying to think a little out of the box here. If your zoning R4 allows for 4 units, are you physically able to combine the 7 down to 4? Probably would hurt the rental income a tad, but the combined units should bring significantly higher rents then when they were smaller.

A far better outcome then being forced to sue the city or tear down your investment.

Quote from @Jim K.:

@Axel Meierhoefer

If you buy a property, and your chief source of revenue through the property is the rent your tenants pay, and the only way you can significantly increase your revenue is by significantly increasing the amount you make them pay, then your chief business strategy and goal is, simply, TO SUCK AS MUCH MONEY AS YOU CAN FROM YOUR TENANTS. If you can point to your annual profit and accurately say that the dollars in that annual profit figure most accurately represents the life essence of your tenants extracted FROM them and passed TO you...well, you just might be a vampire.

If you're doing these things, you're not making money off real estate. Your tenants are not paying the holding costs of your real estate for you as it appreciates in value. You're investing in milking machines for your tenants, a leeching system with four walls and a roof. Were the same silly arguments to be put forth in the dairy industry, cow farmers should be called milking parlor investors. They're not, they're cow farmers. They make their money off the cows, not off the equipment. Just like cash-flow investors make their money off their tenants, not their buildings.

Abraham Maslow's theories of human needs have very little to do with any aspect of the argument I'm putting forward. Nor am I interested in debating the finer points of why liberal democratic governments (or any large entity, private or public) have immense trouble providing stable affordable housing to the poor. Nor how many angels can dance on the head of a pin.

I am talking about the pure and simple mechanics of so-call cash-flow real estate investing. But I certainly understand the difficulty of making that clear here.

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” -- Upton Sinclair

 Huh?

Let me get this straight, Jim. I buy a home for $150,000 cash, using my hard earned and saved capital to provide housing to a tenant who has invested a $1300 security deposit and first months rent to live there and I am a vampire? I think not and I'm rather insulted by your statement. Appreciation is wonderful and it has happened for me mightily over the past few years but I never plan to sell or finance any of my 140+ doors so it's a moot point to me. To think I'm a vampire because appreciation is a secondary consideration is utter nonsense. I use my cash flow to acquire more homes to provide quality housing for people who need it and to maintain the homes in my portfolio in tip top condition. Quoting Upton Sinclair is a bit pompous. Perhaps "making it clear" is difficult because it is insulting and you are dead wrong, IMO. 

Respectfully, Gary

Originally posted by @Jeff Fountain:

@Will, I would not. But, that is my opinion. I own six properties on Saint Simons Island, GA and a property up in Alexandria, VA. I only mention my number of properties to convey my limited experience. While we all want to make more money, the solid dependable tenant is golden and is worth more to me than a bit of extra money. If you raise the rent on your current, you run the risk of the tenant looking elsewhere. Consider raising the rent after a tenant moves out. My goal for all my properties is to maintain solid long-term renters. Gives me more time for the beach. I recommend finding that balance between great monthly cash flow and keeping great tenants. Just my $.02.

 Jeff,

I respectfully disagree. I have 140+ doors and I expect all my tenants to be well paying and respectful to my property. They do not get discounts for being what is expected by me and outlined in our lease together.

This is why proper screening is so important. Background, credit and income checks and a requirement to get a favorable recommendation from their previous landlord at a minimum. 

I used to think much like you but I found myself behind the eight ball when I passed on raising my tenants rents for several years in a row. As my costs continually increased I ate them. Then, five years later or so, I'd raise the rent half of what I should have to catch up and they'd be upset and sometimes move.

So now it's the frog in warm water going to boiling water concept. A rent increase every year, but small enough to not be noticed and still slightly under market.

Here is some math. Say my average rents should go up 3 percent a year to compensate for inflation and expense creep. If my average rent is $1100 a month then my average increase should be $33 per month. If I wait 5 years on average to raise my rent I'd lose approximately a quarter million dollars over that 5 year period, ignoring any compounding effect. 140 doors x $33 increase x12 months x 5 years = 277,200.00.

I am not in this business to give up $55k a year so my average tenant can save 33 bucks a month. Bet your not either.

Respectfully,

Gary

J,

If a purchase I'm involved with, for an older home, came back with these few defects I'd be thrilled. In my mind these are minor issues.

My first investment property purchase was a 100 year old two-story duplex where the foundation and support beams had weakened and the floors were 9 inches off level. Got it for a great price and had it repaired. Have had it rented continually since 2008 and it's worth 3 times what I paid for it.

Sure, I prefer 1000 square foot SFR's on slabs built post 1950. So does every other investor and consequently you have to pay up. Sometimes the minor issues in these older homes gets you the deals because the competition shies away.

Congrats on your first deal.

Gary

Jason,

We use GE Gallery series for our rentals. They are available from Lowe's at a reasonable cost. I do provide built in Microwaves when I can fit them in to the kitchen design.

I find it best not to provide washers and dryers. They break far too often, usually do to bad electronics and are expensive to repair. Also, in our neck of the woods, not expected in SFR's. Most tenants own their own as well.

Gary