All Forum Posts by: Justin Hoggatt

Sara,

Good for you to thinking differently and trying to change a depreciating asset into an incoming generating asset.  The vehicle would not fall under any tax law (as far as I know) and certainly not as a capital gains.  Capital gains is where you buy something low and sell for high.  A vehicle, in most cases (maybe all?) would not qualify for that.  If you buy stocks, or a house, for say $10 and sell for $15, you pay the $5 capital gains.  For a car that was given to you by your parents, that would fall under a gift and if I'm not mistaken, they can gift you up to $13000 each?  Either way, when they handed over the title, they were "selling" it to you and you can put what you need on the title and turn that in - making it kind of a mute point. 

I hope that makes sense - but short answer to your question, is no.

Just like what @Levi T. said, I hope that you have a previous tenant application which includes all that information.  I know sometimes inheriting a tenant you may not have this pertinent information of DOB and SSN, and I've learned the hard way of not gathering this information ASAP after taking over properties.  I want to AT LEAST send it to collections and have it hit their record so that hopefully the next landlord that runs their information will see this and won't rent to them.  Unfortunately there isn't a lot of recourse in our system against tenants and it's not a great use of our time and energy to do small claims.  Hopefully you have at least some of their deposit and then you can submit to the collection agency of choice to hit their credit and reporting.  Trust me when I say, I know what you're going through!

It's hard to say how your rent is market wise because it's often a flurry of "interested" people.  I personally like to try and hit the sweet spot of higher rent and more applicants.  That way, when more people are interested, I can move towards a higher quality prospect and not just take the one person that will pay the highest rent.  Trust me, you'll regret it if you stretch it too far because the person that pays the highest rent is the most desperate and won't care for the property (most likely).

We have found that people on FB aren't usually interested, but more of just tagging it as an available property and they 'may' come back and request some information.  We have a standard response that we send to people and have a priority of who we actually talk to.  If the request comes into our system (we use Appfolio) then it's a higher prospect than something like FB.  If they spend the time to do our questionnaire that is automatically sent to them on interest then it's a higher prospect.  Lastly, anyone that calls us directly is usually very interested in the property and will warrant our quickest response.  

Also, with the higher amount of people that are interested, it's good to ask hard questions and tell them exactly what you're looking for in a tenant.  It will scare away the bad ones and the good ones will certainly appreciate what you're saying and almost feel more excited to rent from you.  As far as numbers, I think that's about right for interest level and you can always change the rent if you have a feeding frenzy - don't feel bad if you have to tell the prospects rent is actually $25/mo more than posted.  We've done that and it's still fair game.  They can still choose to go with you or not.

Also remember, sometimes you might not be getting highest rent, but getting highest care for the property is also super valuable and not directly seen in your pocket while it's rented - but certainly pays off in the end.  

I think there are a couple things to consider.  Would it be taking away from the rest of the basement to where it leaves the area cut up or otherwise awkward and un-usable?  I think the idea sounds pretty good and do believe there is value in having a 3/4 bath in the basement with a bedroom.  We have a basement "suite" for my extended family and guests and it's been one of the best things for comfort and usability.  Adding the drains for the shower and toiler was super easy and the concrete cutting is likely something that you could do.  We've even had someone use a sledge hammer for concrete getting to drains in our apartment buildings and it's something that ultimately works and doesn't take much time.  So, don't be afraid.  Just have a plumber come out and mark where the drain is and what you have to tap into.  You could do some of the heavy lifting and not be charged a crazy amount.  Then, have the plumber tap into it where the shower goes.  I would suggest getting a permit for it though, that way it's recorded on official paperwork because it will add value to your home and anyone buying it from you next might want to know it was done correctly.  

A quick note about the pump idea.  It works, however, I wouldn't go that route if you have the drain in the area.  The pump idea is generally when the drain of the house goes out the basement walls and you have to pump it up and out.  If the drain is under the house, it seems counter-productive to pump it up into a drain that is already flowing down.

Short answer is yes. You'll want to put your properties into an LLC and you can operate your property management business under another LLC. I'm not sure the advice you are referring to, but I don't believe business cards and other preparation you're talking about is necessary to get started. I assume that maybe by essential documents, you are referring to your personal financial statements, bank statements, tax returns, etc? Those will be needed for the loan to get the property but to me it sounds like you may want to find out your goals and criteria before really worrying about business cards and a company name. That can all come after you've really started.

We make it a policy to have prospects view the property before applying.  We do realize that sometimes this isn't possible for those that live out of state and simply can't or don't need to see it if our video's or pictures do it justice.  On our application, we have a disclaimer included that viewing the property is part of the application process.  Additionally, the application requires payment at time of application submission so we don't have to ask for payments later.  

Sometimes tenants will want to apply as quickly as possible to get "in line" for the property.  In my opinion, if you have that many people wanting to apply so quickly without even looking at it, then your rent rate is too low and you should raise it before allowing anyone to move in. Also, I do have an "Unseen Property Addendum" that I have added to my lease should someone not actually see it and still be 100% okay with signing a lease.  Again, this does happen and the addendum basically says that they agree the house is rented to them and they can't argue about getting out of it because it "wasn't what they thought".  That's of course after a valid attempt to make sure they have seen it, usually at least by way of FaceTime or similar.

The lender will be able to help you with your leverage ratio's and whether you have enough lending power/cushion. Yes, I used my HELOC for many different down payments and then just didn't keep the balance if I could help it - pay that off as quickly as possible. I got conventional loans through the same lender - not a banker. The lender will be able to turn them out faster and will know your situation for each property and help you move forward. The more lenders you have, the more confusing it gets, not to mention, the more paperwork you have to submit.

As far as "safe", I would argue that it's safer to have a 4-plex that a single family home as your first. It still falls under a residential property and if you can swing it, the cash flow from 1-2 units will pay for the property and the next 2 will be the cash flow. If you have a single family house open and vacant, you're not getting any cash flow. Plus, I'm assuming the returns and cash flow will be much better on the 4-plex and you'll pay that HELOC off (or add to savings) quicker too.

Good luck!

I understand the dilemma.  How many lenders are you talking to? - seems like a lot. :)

I think you do a mixture of using your $25k (assuming they won't require you to have reserves) and ALSO get a HELOC. We utilized our HELOC to quickly build a portfolio in which the lender can use your HELOC as equity. When we found a house, we used the HELOC to put as the down payment on the home, paid it off as quickly as possible - rinse, wash, repeat. Get as many traditional loans as you can.

Using all cash on a home in the amount of $125k doesn't make that much sense to me.  It would be much better used on a larger deal if that's your route of getting a refi.  Try and use that for a 4-plex or something (assuming you're in a lower priced market) where you're getting a return off of a larger property and you're cash flow will be better.  Worrying about a slight increase in your interest rate is pretty negligible at this point in my opinion.  Yes, it can be higher because it's a rental property, but for how long everything is right now, it should be fine.  Also, if you have the money pulled out and it's sitting there, you'll be that much more motivated to find something quickly and sitting there for only a couple/few months in the grand scheme of things isn't bad.

I'm looking forward to a great 9 months ahead.  I know it will be a busy 9 months filled with excitement and growth as I have a goal to close on 4 RV Parks.  Keep me in mind should you have any opportunities and know anyone looking to sell and RV Park (not MHP) let me know!