All Forum Posts by: James Galla

@Aditya Hejib

I'm in the tougher neighborhoods, so it's just an auto- eviction if they are late. They get their notice and then it takes me about 5 minutes to file the thing in court after that notice period.

Your tenants certainly know they didn't pay rent, and it's no excuse to not pay - they literally had the full month to prepay. In fact, you said "they are having a baby," which doesn't sound like they are in the hospital. They deliberately chose not to pay rent and sound like they are using the whole baby thing as an excuse to avoid basis necessities. You should at least prefer an honest explanation such as "I forgot" or "I was negligent in my discretionary expenses and found myself with insufficient funds to pay."

If I ever decide to inquire about the reason for non-payment of rent, I'd do that during the notice period.

@Joseph Ancharski

What? Red flag in the approval process? What approval process? And, what lender does he work for that cares about the name of the LLC?

That lender must not be in real estate and has some weird criteria. There's no legitimate reason to hide the purpose of the LLC from your lender, either - so if that was his angle, it doesn't make sense.

@James O.

PMs make a living on cutting into landlord profit margins. But, that's what you pay them for. Texting tenants removes the benefit of not being in contact with them in the first place. The last thing you want is tension between the tenant and PM and you being the outlet for relief.

If you have an issue with a PM overcharging, you ought to redefine the scope of the relationship. They will pull charges for service calls, sure, but you should limit the extent and conditions under which a service call is warranted. "Oh no, my lightbulb went out" is just an example. I can imagine some PMs sending their handyman out there and hitting you with a service fee.

That's an obvious example of waste. Another area is the discretion used in conducting a repair/replacement. Often, when's replacement is warranted, the PM will take the liberty to secure a higher end product. This leads to a higher quality of property and a higher standard/frequency of maintenance, whether that is throughout the tenancy or especially at turnover time. Anyways, the major function of the PM is to disconnect you from the tenant, and you would be circumventing that purpose by putting yourself out there as a source of relief.

@Hani Alomar,

Midwest, aka, low-tier property? If that's the case, a "correction" isn't going to have the biggest impact on the volume of dollars you spend (i.e., a trash pit in Michican is still going to be a trash pit after the correction). Of course, it depends on the local market.

I'd refocus on more important issues such as identifying the market you want to invest in. If you're going for the classic California investor strategy of purchase 10 properties worth $40k a piece, your issue is going to be tenants and property management.

For reference to my earlier comment on volume of dollars - what happens when a market correction reduces the $40k property value in half? The impact is a $20k unrealized loss, whereas in your California market, that may be $200k with all your eggs in one basket.

@Jaco Braja

My preference would lead me to an FHA on a multifamily. It probably wouldn't be much of a fixer upper due to FHA requirements, but I would couple the FHA loan with first time home buyer programs to minimize out of pocket. Then you'd have up to three sets of tenants right off the bat.

Maybe savings and upgrades along the way justify a refinance.

@Kimberly Mitchell

Step one: consult an attorney and make sure you don't need a license.

@Matt Everling,

I think that's true of many renters. After all, who wants some upstairs neighbor with cement shoes stomping around as they please?

Privacy comes at a premium, and you should look to your market rent to see how much more you can extract on a single family home against a multifamily and whether that premium beats the cost savings of a multifamily (e.g. capital expenditures).

For example, I have a single family, and in reviewing market rent, I noted that multifamily units and apartments often included utilities in their rent price whereas single family units didn't. The going rental rate was also higher for a single family home compared to a multifamily or apartment.

@James O.,

Sounds like your PM is doing what PMs do best - eat your margins. Either they are eating your margins or you are not appreciating the quality of the market the rental is in.

I lean towards eating your margins, though, because it's in their interest to hyper upgrade the property. Essentially, if it's not in premium condition, they can warrant a service call and the associated fees.

Be careful when you confront them on it because you need to consider their defense. For instance, if you get a low tier fridge that makes the property unmarketable, you'll likely see some tension.

So, you need to consider your market again the fridge you would select and the fridge your PM selected to see if it's worth the argument.

@Bryan Cavellier,

Over-upgrading has consequences not only to your rental style but also the value of the home. When you over upgrade, you don't actually recapture the full cost of the materials you used for the upgrade. This is because appraisals are heavily geared towards the comparable method.

Moreover, higher grade properties in lower grade areas will face additional limits such as school district and quality of life in the area. These reasons are typically why you don't see developers building castles in the ghetto.

Something you should be cognisant of is the tendency of some property managers to over upgrade the unit in preparation for the next tenant. If they are doing the upgrade themselves, they are cutting some money off the top in a similar fashion on how they charge for service calls.

@Dane Larsen

$33/m is pretty low. I guess you could try Straight Talk and find how much minutes/data you use. That way you could just pay for what you need and buy more minutes as needed. It could be like $5/m or $10/m if you don't really use the phone to talk/text and you use as much wifi as possible.