All Forum Posts by: Jerry W.

@Daniel Rosa, you might try to check with someone who is a specialist in fair housing laws.  I am not sure you can raise rent or evict based upon having a baby.  I do know you cannot discriminate based upon someone renting having children.  While I am not suggesting you intend to do that, it has been suggested by some folks.  It would be better to know your rights and duties before you ever talk to the pregnant student or even the other students in the house before you say something that might get you in trouble.  I am sorry that I don't know the rules here and your state might have  specific laws folks are not aware of.  Be safe and good luck.

@Jay Hinrichs, actually I have a few steel roofs on houses.  Even those are considered totaled by the insurance company.  Despite being slammed I am quite comfortable that they will not leak.  Those will be the last to be replaced.  I tend not to use steel because it takes a lot more people to put them on.  You can work on a roof by your self and and with another person you do a pretty good clip, but steel takes a minimum of 3 people and really 4 is needed to make good time.  The measuring, cutting on the ground, handing up to the roof, putting it down, measuring for square, then screwing it down usually means at least 2 guys on the roof, but 3 is better, and at least 1 on the ground, but 2 is better.  I know the BEST answer is hiring it out, but margins are slim and I need the exercise hehe.  I really to struggle to find 2 workers to do a roof, let alone 4.

I might as well chime in on the @Account Closed says he is making 1.5% to 3% on his rental houses, that suggests c/d property types.  That may not be the case, but it has the appearance of it.  There are all kinds of advice on this forum, some good, some bad, some just from a different perspective.  Take it, analyze it, try to understand it, and take only what makes sense.  Sometimes a negative comment galvanizes us to take action.

@Ryan Rush, I don't know if this will help, but let me relay my story to you.  January 1, 2019 lose job, not leave it.  Job includes insurance and retirement, now no insurance.  Open own business, not real estate, but spending a bit too much time doing my rental business.  I have been doing real estate for about 25 years intentionally.  I have a $100K line of credit, but have about $75K of it used including a full house I bought for $35K and used $5K more to put a new roof on it.  July 1, 2019.  Nasty hailstorm hits our town, every single rental unit I own in town is hammered.  Three units have no coverage for roofs as they had T lock shingles when I bought them and have not replaced them.  Twentyfour other buildings have insurance on the roofs, but deductibles vary.  Four of the 24 have only a $1K deductible and they are only making me pay $1K total not for each house.  One house the insurance agent didn't put coverage on and had $0 insurance on it.  Nine houses had a horrible insurance that apparently has a special deductible on it of 2% of the insured coverage just for hail.  I didn't notice it.  So my $150K house has a $3K deductible.  The insurance varies on the rest.  I had all of $8K in my rental account and maybe $10K in a special account from another business.

What to do?

First I fix my line of credit.  I get a mortgage of $40K on the house I bought and put a roof on 10 days before the hail storm.  I pay ALL of it on my line of credit, so now I only owe $35K on my line of credit.  I sell one of my rental properties I just bought and fixed up earlier this year as my newest addition to my rental stable.  I paid $75K and used $15K from my line of credit for the down payment.  I put about $10K in materials and paid labor into fixing it up, plus a lot of my unpaid time.  I sale for $105K so net about $20K, which I use to pay down another $20K on my line of credit.  Plus I get my $15K down payment back.  My line of credit is back to about $10K.  I sale the house I just put the roof on under a contract for deed.  I get roughly $10K down, payments mimic my mortgage payments for 3 years then I get a balloon payoff that will pay my mortgage off and give me a little money, but that is later.  Now I only have 22 hail damaged houses  and 3 with no insurance.  I am guessing about about $25K to $30K for deductibles and maybe $24K to put roofs on the ones with no insurance.  I actually do not know.  I have no firm commitment from any insurance company let alone any roofing companies.

My remaining plan.  Not put new roofs on the 3 without insurance.  I replaced the single pane windows the hail broke myself today, I went up and patched any spots that look like they might leak in the next year or two.  Those 3 issues are now kicked down the road for at least 3 years, maybe more.  Since I usually put 1 to 3 new roofs on my houses each year myself, I am planning on doing several roofs myself and collecting the insurance checks from them to fund deductibles on several others.  I am taking multiple bids on my damaged properties, I will keep the highest bids to turn into my insurance companies.  I will do the most expensive roofs myself.  I will give out my roofs I must do to the lowest bidder.  I have gotten quite a few supplies to patch roofs, to get through the winter.

I also am almost at full occupancy as I have rented 2 of my empty houses to contracting companies that have moved into town chasing hail damage repairs.  I am renting out some open space for stockpiling shingles and roof wrap, ice and snow guard, drip edge, coil nails, and plastic caps.  I am negotiating with a few roofers, and hope to make a deal.  You get the contract to do 10 of my houses on the condition you buy your shingles and materials from me, at a set price.  I will buy 1 or 2 semi loads of shingles at a time if I can swing this, and my profits will pay my deductible on the ones with a $1K deductible each.  I don't know where it will all shake out.  I hate having to put new roofs on houses I put new roofs on in the last 3 years.  I hope to have upgrades on some of my houses with Tlocks, to sculpted shingles for just the cost of the deductible.

I did sell 2 of my houses n response to this event, but my line of credit is paid off so I have credit to buy more.  I also have credit to pay deductibles if any of my plans above don't work.  It will take at least 2 years to see how this all shakes out, but I didn't let it stop me, and I plan to buy more houses in the near future.  I don't consider selling my 2 newest houses as a set back due to bad luck of hail damage, I consider it a blessing that I just happened to buy 2 houses that will sale for enough to cover the vast majority of the expenses from the hail storm, that I would not have been able to cover otherwise.

As to your problems let me offer some suggestions.  If your insurance company is making you put on new roofs and siding, maybe you need to shop around for a new insurance company.  Fire them.  I can assure that I have painfully found out that not all insurance companies are equal.  I was talked into buying a group policy on 9 of my houses and now regret it strongly.  I saved $1,700 per year by combining them.  it will probably cost me $18K or more in higher deductibles.  Who knew?  I have never had a hail damage claim in 25 years, now EVERY house in town has one.  No exceptions.  Luckily I have rentals out of town that are not affected.  You can get special policies to cover roofs with defects like Tlock shingles.  it is expensive, but much cheaper than putting a new roof on.  That would kick the can down the road a few years on some expenses.  See about getting a line of credit on some of your paid down properties.  I normally use only 15 year loans.  The payments are higher, I cash flow a lot less, but I pay down principal like mad.  Now I can refinance one property and pay off another and can borrow on that to pay for roofs if needed.  I have bought houses before by getting a second mortgage on a paid down property, that had 50% equity to cover my down payment on the new property.  I can do this without changing my cash flow by extending when my note is paid off.  I hate doing that, but it is an option.  Maybe refinance a loan to pay off a few credit cards.

I buy distressed houses, so by the time I fix them up, say replace broken water lines from being frozen up in winter, or put a new roof, or new sewer line in, so I have equity from day one.  I cannot make any money buying rent ready houses, the margins are too low.  You should not own a single house that is not worth more than what you actually paid for it.  You do have options, some you may not recognize right now.  You may have already thought of all of these.  I hope this helps.  I am actually not depressed about the situation.  There is no sense getting upset about things I cannot control.  I see the opportunity of buying more rental units in the next 5 years because some of these owners are going to just pocket the insurance check and not fix their property up.  When those roofs start leaking in 4 or 5 years, they won't have the $8K or $10K for a new roof and I will get a deal.  Learn from you current problems now and get smarter and stronger.  Life is all about growing.

@Steve Vaughan, congratulations.  I have been struggling with losing a few unwanted pounds myself.  I was doing great until Christmas and it was 29 degrees below zero.  I quit jogging to the firehall to run.  It doesn't help now that we had a really bad hailstorm and I have over 20 houses needing roofs and some needing windows and siding.  I am getting a light workout in 3 times a week, but would like getting back up to 3 to 5 miles of running a day.  I had lost about 12 pounds, but have gained 4 back.  Sitting behind a desk for 9 or 10 hours a day makes it hard.  Once I get a handle on insurance and adjusters it will help.  I am dealing with 4 insurance companies, by the way never buy American General insurance.  I never noticed my deductible was different from my $1,000 in all my other policies, it is 2% of the gross value of the property, so my one house that is insured for $150K has a $3K deductible.  That is for each house, hehe ow.  I have 9 houses on that policy.

@Evan Mendoza, Welcome to BP bud.  There are a lot great articles under the education section.  BP also has some free online books about investing and renting.  You really cannot get someone to type a reply to tell you everything about investing if you have not even read some of the free guides on it.  it is also tough to even try to answer your questions as we don't what state town or even what part of the country you are in.  The advice for New York and Las Vegas is wildly different.  We don't know how much money you make at your job or how much free time you have to manage a rental yourself or even to fix one up.  Tell us about yourself and what you are looking for and we will recommend some articles or books for you to read.  Be sure to set some key word alerts to see pop ups on areas or locations of interest to you.  My first piece of advice is start learning your market.  Get on Zillow or Realestate.com or Redfin and start looking at prices, locations and look to see how much properties are renting for.  You won't know what a deal is until you learn your market.  Good luck.

@Joe Polyak, I know very little about CA law.  There is an $800 or $900 CA tax on each legal entity owned that you need to run by your tax accountant.  They should bless this deal from a tax perspective in addition to the legal perspective.  Deciding the tax status is a very big thing too.  This is an area that @Scott Smith works in and he may be able to provide some advice.  I disagree a lot with his anonymity part of his perspectives, but I think may be licensed in CA, and works a lot with liability avoidance.

@Alan Pederson, what you are going through is absolutely normal.  I have had the same problems for 20 years.  Literally everything you mentioned I am dealing with hehe.  To make matters worse 2 days ago we had a major hail storm hit us.  I have not even inspected every house yet, let alone get boards over the windows of the ones with major damage.  Hire a contractor or handyman to help?  They are running like mad doing just emergency stuff at the moment.  I have had a few good handymen in the past that helped a lot.  I lost them to things like better paying out of town jobs, moving to wifes hometown to take care of parents, jail, even opening their own business and getting massively busy.  My best handyman now runs a handyman business and makes more than I do, of course he is working 14 hour days every day.

What I really hate is those dry spells where you cannot rent a house to save your soul.  I have had my two nicest houses empty for 6 months.  I have lots of lookers but nearly 90% of the good applicants end up telling me they are buying a house.  It doesn't help that one is right next to mine so I have to be super picky as my wife will not tolerate a problem family next door and I will pay the price if it happens.  Then there are times I have everything rented and I have calls from dozens of folks asking if I have a house to rent.  My vacation rental houses are really eating up time lately.  I really need to automate that process a lot more.

@Michelle Burgstaler, there is a small chance that some things might help. First the actual method of how you won the properties and your personal home is critically important. If the property is in a corporation, how the shares are owned, if it is an LLC what state and how do you hold your interest. If it is in personal names is it Tenants by the entireties? It would be worth it to find out. Depending on how the debt is owed and how the property is owned can be huge. Then talk to a bankruptcy attorney. A relative of mine used her credit card to buy alcohol due to her addiction. She would keep getting more cards to pay off old cards and snowballed a huge debt. She finally confessed when she was at the end of her rope contemplating suicide. Her husband took out a second loan and on the house and paid off about $20K of CC debt, only to discover a year later there was another $50K she had not told him about. They pretty much only had their house, camper trailer, 2 vehicles, and a few head of horses. All of the debt was in one her name, and the house was in tenants by the entireties. She was able to file bankruptcy and they could not touch the house as it was tenants by the entireties and he did not owe on any of the remaining CC debt so it was wiped out by the bankruptcy. They ended up having to buy back their camper and horses was all. That might not work for you, but it might. See a bankruptcy attorney and VERY honest with them. Good luck, stay the course.

@Alvin Uy, so much advice. I am not an expert on this, here are my thoughts. First you cannot 1031, or delay gain on property held less than 1 year, and it has to have been intended as a buy and hold I think. Unless you buy out of your IRA you cannot put your money back into it except the normal limited amount. I like Sub S corps much better than LLcs for flips, be able to collapse the Corp after the deal is done. You don't want contingent liability laying around. Have a written contract with your buyer before you put up money. Get it drawn up by a professional and get the advice of a local tax accountant, preferable a CPA. Be careful, you can lose money as well as make it. Good luck.