All Forum Posts by: David Krulac

@Rick Brink I'm not giving advise to you or anybody else, but can tell you what I did. I started with nothing and bought my first eleven properties all with nothing down in one way or another. My motto was to borrow as much as I could for as long as I could. I borrowed bank mortgages, FHA (owner occupant) mortgage, VA mortgage assumption, second mortgages on multiple properties, signature loan (no collateral), as well as private loans. I was aggressive in getting loans on every property, because I didn't have savings and had a low paying entry level job. But on the other hand I had no personal debt for credit cards, or regular life expenses. Many of the properties need some work, for which I got lots of help from friends and family. Bought a 3 unit where all units needed work. Ended up putting in new furnaces, new electric service and lots of new plumbing. Bought another house near the beach that required several work trip before we could even stay there, where we gutted the only bath to the studs and replumbed the whole house, just me and my bestie. We never did see either the beach or the ocean on those trip, much of the time was spent in the crawl space under the house. I paid all expenses, but my friend worked for free, in exchange for future free use of the place. Of the first 11, 4 were foreclosures, 2 were from relocation companies, 2 were private unlisted, 1 was probate, 1 was auction, and 1 other was MLS. I went where I thought I could get a deal on a good property. The first one I owned for 24 years, the second one for 37 years, the third one for 23 years, the fourth for 17 years, the fifth for 17 years, the sixth for 31 years, the seventh for 24 years, and eight for 36 years.

@Tyler Kafka The FHA lender for the new purchase will probably want a signed written lease from you to the new tenant moving into your apt. And to prove that you have moved into the new purchase, you would change your driver's license to your new address, pay income taxes at your new address and receive all your mail at your new address. You're allowed to have a second/vacation home, but make sure it doesn't smell like a fraud.

Been owning rentals a long time. About 10% of our properties have septic systems. Some also have wells. The cost of public water and public sewer bills have increased drastically. Some sewer bills are over $100 a month and water bills over $150 a month. At one 5 unit building with only 1 br units, usually occupied by 1 person, and in an area where sewer bills were flat rated; our sewer bill was the same as 5 single family houses, even ones with 5 bedrooms each. Obviously favor for SFH over apartments was built into the billing. At that location we were also charged 5 times the trash rate of a SFH. So sewer costs are not always less than septic costs.

We like rentals:

In non-rental neighborhoods, with low crime and good schools.

No power lines

No busy streets, no double yellow lines

No commercial, industrial, odorous uses nearby.

Off street parking, of our current tenants 100% have cars and need places to park them. All of the current rentals also allow on street parking.

We've owned 1, 2, 3, 4, and 5 br houses, our current portfolio is mostly 3 br and few 4 br.

Our rentals are mostly SFH with 1,200 to 2,500 sq ft, tough most are less than 2,000 sq ft.

Our current buy box includes only houses built since year 2000, previously we owned properties as old as 1840, 1872, 1890, 1902, 1910....An investor I know says "Old houses have new problems."

No steep driveways, no steep lots, no flood plains. Once owned a level lot where the 100 year flood level was 8 feet above ground at the building.  Until there was a flood with 13 feet of water and the second floor was flooded 5 feet up.  I've cleaned out my last flood property, no more.

No oddities like a house that contains the detention pond for the neighborhood.

No swimming pools, we've removed both above ground and in ground pools from properties.

All our units/ apartments and houses have central air, except 1 which will change this summer, so we will be 100% central air.

Our preferred heat sources are gas, then heat pump.  We have no oil, no propane, or no electric baseboard heated rental units.

All tenants except one pay their own electric and heat.  The one exception is a condo where heat and hot water is provided for the whole building, which obviously we have no control over.

Personally I don't like 3 story building (all owned are 1 or 2 stories).  I also don't like split level houses, bi-level houses, historic buildings, or mixed use zoning building.  I want residential buildings in residential zones.

"Landlording" by Leigh Robinson 500+ pages expert advice from long time LL

@Marcus Auerbach We occasionally do month to month, usually do 1 year initially and sometimes longer on renewals. Once a very good tenant asked initially for MTM, and I complied and drew up that lease.  It basically said either party could terminate with 1 month notice.  The tenant complained saying he didn't think MTM meant that the LL could terminate only the tenant could.

@Andy S.  There is a downside to 3 year leases, in the last 3-4 years rents have sharply escalated, locking yourself into a lease that becomes less than market affects the bottom line. It a balancing act between maximizing rent and maximizing tenant longevity.

I've used "Signature Loans" from Credit Unions which are essentially lines of credit with no collateral.  Your Signature is your collateral.

@Radovan Matusovich Very familiar with Westwood, I can remember when the big red brick factory opened as a Sealtest Ice Cream producer. I've owned property close by in Pittsburgh and there are good areas where you can rent out property profitably. For me starting out I would finance property, save cash and increase your yield as well as allow for more purchases.  But that's me.

@Brian Larson Very familiar with your area as well as I taught at Trafford High School, before consolidated with Penn.

When I was starting out I had little to no cash, and college debt, albeit not medical. The first 11 properties that I bought were all financed 100% in one way or another.  I can say for anybody else but for me, if I wasn't able to finance properties, I would not have been able to grow the portfolio.  I told myself to borrow as much as I can for as long as I can.  The first property was 9% interest; the second property was 9.5% interest and the third property was 15% fixed to 30 years. I owned the first property for 24 years, the second for 37 years and the third property for 23 years.  Although I did refinance #1 and #3 three times each to cash out and lower the interest rate.  I can't tell anybody what they should do, I can only say what I actually did. 

We have a separate ESCROW type bank account where each tenant has a separate sub account tied to THEIR SSN.