All Forum Posts by: James Taylor

I live in San Diego, it is expensive to invest in real estate here.  

I have friends that have cash, and would love to do what I do but don't want to do it themselves.  (I have rentals in my hometown and surrounding area in WI)  I have been approached by people that have money and would want me to invest in properties in that same area for them. 

I know there is an opportunity here but I'm not seeing it.

I don't want to move back, so I won't be able to gain from the management of their property.  I would be able to check on the properties from time to time and have the houses checked on by others, and maybe even get some easy maintenance done for all of them at a discount as I have those connections.

I was thinking that I could take a percentage of the close, and a percentage of the management fee.  I would have to work that out with my property manager/realtor.  I would also have to work out with my property manager if she would want to do more properties.

I was thinking that maybe a friend could open a management business, and start doing that together.  I would just get a percentage, but I'm not sure how many properties he would be managing so that could be a full time job for him.

So I'm at a loss.  I have friends that want to get into real estate with cash sitting idle and I am sitting idle not knowing what I could do for them and for myself.

If anyone has any other ideas I'm open to suggestions!

I like a graduated late payment plan if it is legal in your state.  If they pay a pretty large late payment, they might start to pay more attention.  This comes up from time to time as it is a common problem.  You have to figure out what you want.  Is the stress worth the extra money, having tenants that take care of the property, etc.?  Everyone has their own value system.  Many will say to toss them to the curb without a second thought as they don't mind getting new tenants in there.  If they are late you are legally able to serve notices etc. when they do that.

If I know that they are taking care of the property, and I know they are going to pay, including the late fee, I don't mind.  I would make the graduation of the late fee pretty aggressive to drive the point, if they are still ok with that you are getting a nice bonus to your rent.

I have a frequent late payer, they add almost 1000 a year to my profits a year.  I just smile and count the cash.  They take excellent care of the property so it is worth it for me.  They have been there for years.  The extra cash after a few years adds up.

The biggest thing is the property manager, do you have one that you know is good?

I live in San Diego and all mine are out of state, I'm flying out this week to go work on a house I just bought actually.  I can't imagine buying a house without seeing it though, the property I just purchased I was going to offer more based on the pictures (not seeing it) but really came in low due to the pictures not representing it correctly (I flew to go see it).

If you feel it is worth it then follow through.  Do your research on service providers.  Iron out the details with your property manager on responsibilities covered.

IE: if the tenant pops a circuit breaker and can't figure out how to fix it, will your property manager go or do you have to get an electrician?  

You can do an out of state sale, it is fine.  People are just stating that your money could maybe go further in another state that is more landlord friendly and closer.  

I wish I had done that when I was 20! Congrats!

 I also look at that and with the analysis, bargaining, inspecting, arranging of contractors, supervising,and that seems like way more than a part time job.

I also wonder about the BRRR strategy as it kicks the can down the road, yeah, in 30 years you are rich, and yeah, you are now playing with none of your money, but I want opex. I don't want to bank on appreciation or the day that it pays off 30 years from now. How do you find that many "deals" in that time frame also? That is a lot of mailers sending out if you are doing them, and that takes time also in the sending and the calls you may get. Following up leads, etc.

I am buying properties by saving up cash, putting 20% down, carrying smaller mortgages and earning profit by either saving up for a downpayment or rolling all extra into one mortgage to pay it off as quick as possible.  I know many can't do this but the brrr strategy seems like it is really hard to pull off, and I can imagine feeling like what is going on when you look at your account but never really see it grow and you own properties.

I guess if you want to expand as big and as fast as possible brrrr works, you are really leveraged, and you have a bunch of properties, and if everything goes well, you could do what I do and roll all the profit to pay down one and still pay it down quickly and soon it would become a steam roller of fully owned properties.

I just can't imagine being able to find all these "deals" and expand my empire that quickly that I would be able to get the returns I feel comfortable with. 

I'm sure there are going to be a number of opinions on this.  I have a tenant that pays late but pays the late fee.  They are late quite often.  

They keep the place spotless, and have been there for years.  There is something to be said for that. Yes, you could evict a person based on hard timelines and you could screen people and be back at it a year later or every year after that since they only stay for a year or two and leave.

Or.. you know this person likes the place, and probably won't move.  They will also remember that you worked with them when times were low (it wasn't charity, it literally is only a few days).  The tenant will remember that and would most likely want to stay even longer.  They get a job, pay regularly, and you get regular payments again and your property is still well taken care of.

I would talk to them about it to see when they think they will get a job. If prospects aren't looking up, then I would talk about parting ways as it looks like the place is too expensive for them.

dang, was hoping to scroll down and see that he got it

BP podcasts are great to listen to while sitting in traffic :) 

@Jessenia 

@Jessenia Munoz if you are unsure of your calculations, you can post them on the site, and people will look at them and point things out if you are missing something, I have a wife that is a an accountant/financial analyst so it made things easier for me.  I don't know your situation yet but if you are nervous it could help you feel better about things.

@Jessenia Munoz 

I actually bought my parent's house.  They were leaving the state and I wanted a rental property.  I know all the in's and outs of that house so I felt comfortable buying it.  It might be frowned upon on here by people, but my parents took offers, and we took off 15% off their highest offer.  That is how we determined market price.  

We then took that number and calculated what we thought would could get for rent (rentometer.com/craigslist ads in the same area) .

We then calculated what we would pay for taxes (you can get that on zillow) added buffers for what it may cost to do some fixing up, added 5% of maintenance, 5% for capital expenditures, 8% for property management (we already had an agreement). 5% for vacancy into the expenses.  (There is a really great calculator in the tools -> rental property calculator portion of this site)

Based on what we saw for insurance, what utilities I have to pay, (one furnace so I have to pay heat approx. 6 months a year, which we got a fixed rate thermostat so they can raise it past 72) .  Once we looked at all the calculations we got a loan and had to put I think 25% down due to already owning our home.  That was that.  My Property manager is great, she does a lot of vetting for people, it has been relatively hassle free *knock on wood*