All Forum Posts by: JD Martin

I don't (or haven't at this point, anyway) buy units that are occupied, so it's not an issue for me. That's one (but not by any means the only) reason I operate this way. That said, if I was bent on going forward with the purchase, I would find out what the terms were for this tenant and end the tenancy at the first possible juncture. If they have a signed lease, you probably can't put them out without cause. If they are month to month, you are golden - you simply give them their notice that you are not renewing their terms - you won't have to give them a reason. 

 LOL. That actually made me laugh out loud. 

I've said this before, in that I don't really think much of the idea of wholesaling. That said, and despite my socialist bent (Go Bernie!), every "investor" who bites on a bad deal is one less competitor that I have to compete with when a good deal is on the market, and for me that can't be a bad thing. I feel as bad for new investors as I feel for people buying cars $5 grand over the MSRP off of new car lots. Meaning I don't care at all how someone else spends their money as long as it doesn't generally harm me or the greater good. Some of the people who get burned will learn from it - it may be expensive, but hey, education usually is - and get better, and the others will just be Darwinized and thinned from the herd. It works out either way.  

You are right, it could just be hypothetical. My experience is that usually people start asking questions such as that when they need an answer, not for future knowledge. You know, the "I have a friend that..." type of thing. It's an odd question considering the "We buy houses" people aren't really any different than selling to anyone else. The only difference is that they advertise and that they want a better deal because they're going to flip or hold & rent. 

 These two are generally top of my list as well, and I would probably add fire damage and heavy asbestos materials within to that list, because they can be crazy expensive to repair. Outside of that, if I'm already in the property - meaning that I've already vetted the neighborhood, the opening price, etc - the main thing that will make me walk is catching the seller in a lie. If I determine the seller cannot be trusted to tell the truth in any fashion whatsoever, I would have absolutely no faith in disclosures and the like. 

Example: had a contract on a house that appeared serviceable. Owners didn't have the utilities turned on for some reason, so I went through the process before the inspection. City refused to turn on the electric. When I asked the seller about it, they said they didn't know why the city wouldn't turn it on. I dug further and the city provided me a copy of an inspection report ordered by the sellers 10 days earlier that failed, and they told the sellers they would not turn on the electric without a new panel and a massive rewiring of the property. I walked from that property because the seller knew it wouldn't pass an electrical inspection, bargained with me with that knowledge, hoping that I wouldn't find out. When I did find out and told my agent I was walking, they came back and offered a few thousand more off. No dice, and I walked. It could have been a good property, but if they had been upfront with me about the electric I probably would have still bought it but would have priced my offer accordingly. 

Epilogue: they finally found a buyer at $5k less than the desperation price they offered me. I probably would have gave them a couple grand more if we had bargained in good faith. 

Great story, and a moral to boot! Although this was not "a friend", per se, it ended up kind of being a friendship, which I am certain contributed to the difficulty in making the change. 

I never do business with friends or family for this very reason. I want to feel absolutely no obligation to the other party other than the fulfillment of our business arrangements. It's also a reason I don't want to inherit any tenants - I want my own tenants, screened by me, signing my lease, under my terms. 

I use them all - CL, Postlets, Trulia, etc - but I find that my professional looking sign in the yard, and referrals, has by far generated the best options for tenants. In every case, I direct traffic to our website, which keeps pictures and information about current rentals so that it can help screen some of the traffic. We also have all potential tenants leave a voice message regarding the property they are interested in, and we return their calls with a time that we will be holding an open house on the property as we don't do appointments. 

I have found that a lot of the CL traffic is not very sophisticated when it comes to our application process, such as online applications, credit & background checks, automated rent payment, etc. 

Given your parameters and your location, I would probably:

1. Pay off the $9k in student loans to save the interest and improve your credit, since you can easily replace it with your low cost of living.

2. Consider relocating if the current job is not specialized or well paying, and purchasing some type of multi-family, rent out the other units.

3. Stay put if the job calls for it, gather up a little more proceeds and purchase something outright in a less expensive, growing or holding-steady locale that you are or can become reasonably familiar with. There are a lot of places in the US you can buy a single-family home free and clear for $40k that is not a total dump or in the ghetto. Boston, unfortunately, is not one of them. But with your low cost of living (how long can you live for free?), you could buy something in another locale, pay a PM to take care of the place, and still probably pocket 8-10% annually while you save some money for another unit. At some point, once you have a profitable place, cash out, buy another unit. 

First and foremost I wouldn't have any personal debt. Student loan debt is not bad debt unless it hasn't contributed to making any more money, but it still carries an interest rate even after the tax deductions or credits. To prepare for investment, you should have your own house clear first. Good luck! 

As an ex-squid myself (go Navy!), I say this with the utmost respect: If you have to ask your agent if it is a good deal, you're not ready to invest. *DO NOT* put your economic well-being in someone else's hands. Agents are there to make money. So are sellers, title companies, insurance companies, inspectors, and everyone else. You are the source of their income. 

So what to do? Narrow down what you want to do. Do you want to be a landlord? House flipper? You should pick something that you feel would be profitable and fit your own goals and values. Once you have done that, it shouldn't be a big stretch to learning about that particular aspect. Look to see what homes, apartments, condos rent for in the areas you are interested in. See what they sell for. Talk to contractors regarding what it costs in your area to put in a new heating system, replace a roof, upgrade electrical or plumbing. Go to Home Depot or Lowe's and see what supplies cost. 

There's no magic bullet. You really have to just jump into studying this stuff, and you will figure it out as you go. Start off small and mitigate your risk on the front end (i.e., if I can't sell this house for what I want, I wouldn't mind living in it, or I can afford to rent it) and have someone good with figures look over your deal. 

 I agree (Allstate is my carrier, btw) but I consider my risk mitigation to be careful tenant screening, adequate deposits, and desired marketable units in addition to the insurance I already carry. In other words, I won't ever depend on someone else maintaining anything for my benefit. If I made it a condition of renting, I would then be required to follow through with action if/when a tenant let it lapse. I would not want to get into a situation of having to evict an otherwise good tenant over something like insurance. Besides, they could cancel the policy today, destroy the unit tomorrow, and I wouldn't discover the cancelled policy until a few days later in the mail. It's the same reason I maintain a vigorous level of uninsured/underinsured motorist coverage; I am not going to count on the other guy having any kind of decent insurance - or any insurance for that matter - regardless of what the law says they must have. 

I recommend it but don't bother checking, as I have plenty of insurance to cover myself any way you look at it, and my insurance company will pursue any damages done by the tenant on their own - and if something bad happens and the tenant loses their stuff because they weren't insured, oh well.