All Forum Posts by: Account Closed

How do you go to the Philippines for a business deal and leave with a $million dollars in your pocket?

You bring 2 $million with you when you go there.

My wife is from Cebu and I am from California. We purchased several homes already built, 3 homes we had custom-built and 3 condos and a bungalo in a huge resort that were already under construction. 

The homes that were already built never gave us a lot of problems with the exception that it is very difficult to find an honest property management company and all our money was stolen a few times. One major problem we have is transferring money from accounts to California because the bankers are anal about verifying everything to the point every request for a money transfer is annoying.

The contractor who build the 3 homes did the worse construction cheated us horribly. He failed to obtain any permits, failed to install plumbing, did not get electrical wiring from power likes to the homes, the roofs leaked and there was about 50 other problems. It took us a few years and had to pay off government agents to get electricity on the property.

We lost our entire $50,000 down payment we paid for the 3-condos and the bungalo project. This was a fairly large construction site that was going to be a resort since our condos were on something like the 17th floor. We received a letter stating the owner of the project decided he was going to change the condos and bungalos to hotel rooms. Prior to investing in the project we figured we was going to make a few million in profit based on the future value of the condos. We sued the owner of the project, Filinvest, a very well-established company and the judge promised us a little better chance of prevailing if we gave him a pig for his birthday. Needless to say, Filinvest, the company we sued never made a court appearance and the case dissipated. Maybe, Filinvest gave the judge 2 cows.

I love the people in the Philippines, but when you want something that is type country where you literally have to pay someone off to get things done. Every time we purchased a property we could not get the transfers processed until we paid someone in the government agency. When we want water or electricity turned on we have to pay someone inside the utility companies. 

Great ideas!

The companies that rent dogs have been around for many years, but there are a lot of requirements to have dogs and a lot of downside. There has to be adequate fencing that is more for protecting the dogs than the intruders. Even people walking around the neighborhood often tease the dogs. Fences often fall apart before jobs are completed. There are scheduling problems that lock you out of your own property should you want to work late, go onto the property 'at-will' and toward the end of the job when fences are removed you become vulnerable. The cost is fairly expensive when compared to other options.

The best and cheapest security is having someone live outside the building in a small travel trailer,or even a simple shed. We tried having people live inside the homes or buildings, but it is super annoying to have to work around their cooking equipment, food, clothing, etc. and keep moving them around the inside of the building.

We find day laborers and pay them as little as $100 per week to live in a shed or in a small travel trailer outside the property. We look for decent homeless people already living in small mobile homes parked on the street and they are ecstatic to get a place to park their mobile home and $100 per week. We build portable outhouses with regular toilets and we even furnish a small travel trailer or mobile home with water, sewer and electric connections. We install motion lights around the perimeter inside the property, inside the building and we attach lights and bells to every light. So, if anyone gets onto the property from somewhere that cannot be seen the bells ward our security person.

I don't know why so many people think they need to explain to tenants the reasons for raising rents. It is not their business and telling them some lame reason doesn't make them happier so they stay longer.

Does a grocery story apologize for making packages of food smaller and increasing the price at the same time. Do products at Best Buy come with little stickers explaining why prices increased? Does it make you feel better when your best tenants give you notices to move out and the notice comes with their reason?

Is there some sort of a guilt thing landlords have when collecting rents?

I learned several years ago that the less you explain things for most situations the better off you are. When you give tenants a reason for raising their rent you literally create an argument.

One type rent increase letter we send to tenants says,

"Due to the increased costs to operate we increase rents 5% to 8% every year. Your new rent, effective September 1, 2020 is increased to $1950.00."

That is not so hard to write, not hard for the tenant to swallow and the words don't create an argument.

When signing a new lease, almost every tenant asks when they will get a rent increase. We always tell our new tenants they will get a 5% to 8% rent increase every year, but we don't always raise the rents that much. Sometimes, we will skip a year with no rent increase.

To answer your comment, I find that the majority of landlords are very disrespectful to tenants, blame everything on their tenant that goes wrong with the property and talk down to tenants.

As for being 100% pure business, there is absolutely no feeling or love for tenants when it comes to rent increases or terminating their tenancy. What do you do with a tenant who has terminal cancer and cannot pay their rent. Do you stop collecting rent for 1, 2, 3 months, or even wait up to 5 years while you feel compassionate and pay the mortgage and bills from your pocket. I asked an attorney about this question at a convention meeting and the attorney said you have to evict the tenant, immediately. I suppose it is nice there are some people who are more compassionate than businesslike, but how to you explain this to your investors and how do you tell your family that your investment business busted because you worried about your tenants' feelings, thoughts and personal problems.

After going through this thread, I can see there are not many people I could partner with and still be civil since so many people want to be in business and want to be reckless when maximizing profits and give my share away. Maybe, for many people it is they get more reward by being nice to tenants than running a business like a well-oiled machine.

We hear every day that a high percent of businesses fail. Maybe, the successful business owners go the extra mile to overcome the obstacles that would result in failure. So, you want to be nice to you tenants, give tens of thousands of dollars away over a 10, 20, or 30-year period and you end up needing a $50,000 foundation repair, or a roof, or you get sued for $100,00 for some type of harassment or discrimination that is not covered by your insurance company. Over a period of time, you give your tenants $100,000 in rent deductions you could have charged and you still end up with evictions with loss rents that cost you $10k each and you end up with rental units that cost $8,000 to $12,000 just to clean, carpet and paint.

Be sweet and worry about your tenants, but I cover my butt and protect my family's financial status by increasing rents to maximize profits and cover the unknown. Believe me! I meet nice landlords every day and hear stories about how they can't pay their mortgage because their tenants' rents are too low and they are afraid to evict tenants because they are behind 6 months to I've heard as long as 3 years. Those are the really compassionate landlords!!!

You purchase a duplex and your tenants have been there 10 years and paying $150 below market. The very first things most tenants expect from a new landlord is a rent increase. 

The amount you increase the rents depends on some factors, e.g. the condition of the apartment and whether or not you can afford to handle the costs to get a new tenant just after you closed escrow. But, the overall practical business model should be to increase the rents as fast as you can afford and not as fast as your tenants would like.

About 5 years ago, I purchase an 11-unit apartment building (odd number of units?) and every rent was $500 below the market. It was obvious that I could not afford to raise all the rents so high that the tenants would move and I could would not have enough money to have the loss of income and remodel all the units at the same time. So, I increase the rents for 10 units by $50 (that is $6,000 more gross income every year) and I terminated the tenancy for one tenant. 

I remodeled the apartment and increased the rent from $800 to $1500 per month. That is another annual gross rent increase of $8400. In 10 years the total gross rental income is now $144,000 and when you factor in the appreciated value of the property based on the Gross Multiplier rule-of-thumb my realized profit is $187,800 at the end of the first year 

You have to be insane to constantly worry about what your tenants can afford, or worry what they will do if you terminate their tenancy. They are tenants. They go rent from some other landlord.

This is what I did with this 11-unit property in the past I paid $1,225,000 for the 11 units about 5 years ago. I gutted and remodeled 8 of the 11 units. I increased the rents for almost every to $1500, $1650 and only one unit was increased to $1250. 

The chart, attached, was not designed specifically for the profits I want to show, but it gives you an idea regarding how increasing the rents by the end of the 2nd or 3rd year gave me a $943,000 profit and at the end of 10 years my profit is about $2.2 million.

I own several apartment buildings and some are worth more than $7 million. By understanding that rents need to be increased to maximize profits and by understanding that tenants are only tenants (they don't get a say in business decisions) I have made $millions by doing exactly what needs to be done to achieve what I do.

By using my business model and philosophies, 9 months ago I paid off the 11-unit building and I paid off a 14-unit building on the same day. Last week, I paid off a 28-unit building worth more than $7 million and in about 4 to 6 weeks I am paying off a 24-unit building worth more than $7 million. 

Why (how) can I pay off all my mortgages? It is because I make business decisions based on math and business logic and my tenants' problems are not for me to worry about. I am not heartless. I will give my tenants a 60-Day Notice To Vacate and give them an extension. But, tenants think about and know every day that their tenancy is subject to rent increases and termination,

'at-will'.

I would never ask a tenant if a rent increase is too high. That puts you in a position that creates an argument. Of course, any rent increase is too high for me. You make your rent increase based on business logic and not base on any of your tenants' personal issues. If I asked my tenants about rent increase I would never be able to increase rents.

As for the answers for the subjective and objectives; you are 100% right and there are many times we cannot increase rents, but the overall business model is to raise rents as much as possible until you reach a point where your tenants will make a sane decision and move, or raise until you cannot find a new tenant.

Before this virus started we rented most apartments before tenants moved out and we increased rents $100 to $200 with no problems. Since this virus started, it is taking us 2 to 3 months to find tenants and we held back from increasing rents by the $100 to $200 we used to increase them after a tenant moved.

I always live by the rules I preach. I've increased rents and had tenants threaten to move. Later, the tenants actually moved and I don't give the situation a 2nd thought with the exception of one apartment unit I wrote about a few weeks ago. I evicted a good-paying tenant last year because he moved a dog into his apartment and he was very rude to my wife every time she approached him. It took me 9 months to find a new tenant and my total loss was about (guessing) $12,000. I shot myself in the foot on that one, but, at least, I have a set of guidelines written in stone that I follow. I don't allow dogs and will evict any tenant the first time they jump in my 92 pound wife's face like they want to get physical.

A lot of bad logic! The rental business is like every other business on this planet where every business tries to make the most profit possible. No sane person who wants to maximize profits will sell products for less than possible. It is obvious there is a curve where sales and profits decrease when prices get too high, but it takes business logic and math calculations to understand where the top of that curve is. 

Put another way. Suppose you are my professional property management company for 10, 20 or more rental units. I would fire and sue you for incompetence if you told me you caused me to lose tens of thousands of dollars in rental income because you feared tenants would move as a result of an increase, or because you did not raise the rents because the tenants paid on time, or you did not raise the rents because the tenants were there a long time and kept the place clean. The only way to maximize profits is to increase rents to what the market will bare and up to the highest part of the curve possible. 

We don't do rent increase projections base on the psychology of of what is happening with our current tenant, today. If we did we would be taking wild guesses and lose tons of money. We do rent projections based on no less than 10 years and this makes the rental business exciting and fun.

Don't think you can see inside tenants' heads so you can determine factors related to increasing profits.

If your tenant moved because of a $5 rent increase then the tenant is a basket case, not the type tenant worth keeping and you should be so lucky they moved.

Contrary to my philosophy and business sense, we had a tenant with two children in one of our best apartments that could have demanded a rent increase of about $400. The tenant was in the apartment for about 18 years and due to their kids college costs they could not keep up with payments for their utilities and their phone, electric and gas was constantly being turned off.

So, me being a fool, I increased their rent every year by only $20 to $30. Then, when both of their children graduated from college one was a pharmacist and the other was a doctor (can't remember) or had some other high-paying job and increased their rent by $150.

I was figuring that since both children were still living in the apartment each child would have to pay only $18 per week. One of the children became so angry over the increase she immediately gave a 30-day notice to move her parents out of the apartment.

The point for this story is that it does not make sense to try to keep tenants by keeping rents low because tenants seldom appreciate a landlord's generosity. They will move when they want and when you don't raise rents you are the loser, anyway.

We stretch out every investment calculation to a 10-year period. With these calculations, it does not make sense to try to keep a good tenant by keeping the rents low because you lose 10's of thousands of dollars and even when you keep rents low your tenants will move for a various number of reasons, anyway.

We raise our rents every year like clockwork even if we raise it only $10 per month. This sets up your tenants' expectations to get some sort of rent increase every year to keep up with inflation.

We send the same 1-line letter every year.

"To keep up with increased costs we are increasing your current monthly rent from $1500 to $1550 effective on September 1, 2020."

Some of the landlords who have the most serious problems when selling their properties are those who lagged when increasing rents. There are several properties currently for sale in San Pedro California where the properties are under Los Angeles Rent Control. The 1-bedrooms are currently renting for $875 per month and the market rent is $1600 per month. Los Angeles has a maximum annual rent increase of 4%. If you purchase one of those properties it will take you more than 15 years to get the rents up to $1600 and by then the market will probably be at about $2200. Essentially, you can never catch up with the market price for rents when a landlord did not increase the rents enough in the past.

Increase rents and if they move you will often be much better off because every time a tenant moves we increase the rent for the new tenant anywhere from $100 to $500 more than the previous tenant. Suppose, you increase the rent by $200. That is $2400 per year and $24,000 in 10 years. If you have 2 units you just made an additional $48,000. If your property sells based on the Gross Multiplier rule-of-thumb then if you increase your 2 rents by $200 you earned $200 x 2 x 12 x 13 GRM (average) = $62,400 + $48,000 for increased rent = $110,400. If you increase the rents by $30 to $50 every year, after, you will earn something like $300k to $400k.

I've been a plumbing contractor doing mostly residential plumbing repairs consisting of replacing sewer, drain and water pipes. I've also been investing in real estate for 55 years.

When a property has a raised foundation the sewer and drain pipes don't concern me because we can replace the entire water and drain system in one day.

The problem with a concrete slab is cast-iron drain metal is porous and looks like it is full of air pockets. As water flows through cast-iron the metal is inevitably washed away on the bottom and a hole is carved through the pipe often for its entire length. Because the drain pipes are laying on soil they will continue to drain even with holes in the pipes and you will never know you have holes in them.

The problem with cast-iron arises when a pipe clogs under the concrete. It is very common with a 30 to 50-year old property for plumbers to put a auger in cast-iron pipes and the auger digs deep into the soil.

The 25-unit apartment building next door to my office was in the midst of being remodeled and all the drains were working. I told the new owner that we cleaned some of the drains in the past and our augers dug into soil. I recommended that he replace the entire drain system and told him he would find that there was no bottom on 90% of the drain pipes. When he excavated the pipes there was no bottoms on almost every pipe.

The cost to replace the entire drain system for a 2-bath house on a concrete slab is about$25,000. Add another $8,000 to $10,000 to replace water pipes if they are still iron. Add another $8,000 to $10,000 in case the sewer outside the house is bad.

One of my employees purchased a home on a concrete slab about 130 miles from his personal residence. A few months later, a drain clogged and he had to jackhammer the slab.

I would not turn down a property because of the condition of the drain pipes if the numbers make sense.

Inevitably, every iron drain system has to be replaced. The life expectancy for cast-iron manufactured in the early 1900's was 60 to 80 years. The quality of the cast-iron manufactured in the 1950's was not terrible, but was not as good as earlier cast-iron. The cast-iron manufactured starting in the early 1970's has a life expectancy of 15 to 20 years and we get a tremendous about of leaks in the newer cast-iron in less than 5 years. In about 2004, I purchased an apartment building that was 18-years old and the owner sold the building because had more than 50 leaks in the copper water piping and sewer and drain pipes.

As for the crack; show me a property that doesn't have a few minor cracks inside, outside, or in foundation walls.