All Forum Posts by: Jonathan Holmes

Firstly, let me say though I have been investing for a handful of years I have only been an active landlord for a the last three. 

I find myself now reaching the point when I have begun to experience some of the staples of landlord existence. Repairs, turnovers and today I found my first lease violation. For some back story I currently am house hacking a duplex with and FHA loan which allows me to keep a close eye next door. I also have recently decide to use the BP lease and after spending time going over it, in my opinion its great option for new landlords and bargain on top of that.

This morning while leaving my property I notice some cigarette butts outside the rentals garage. The lease says no smoking on the premises. The whole drive to work I was debating this and trying to decide what to do. There were smokers in both units when I purchased the property and I well remember the time and effort it took to clean and repair the smoke damage. As I drove I thought of every reason I could not to call the tenant even at one point thinking maybe a text will do. However, as this was a new tenant and the behavior is not acceptable I knew that I needed them to hear my voice and be put on the spot. I thought about all the post on BP and wisdom handed out by people who have done this longer than I have and I had firmly decided despite my desire to not be a "jerk landlord" I had to protect my property and confront this tenant. 

I called and after getting a hold of the tenant I reminded her of our no smoking policy which she was agreeable to. I then reminded her of the conversation we had prior to lease signing in which she stated neither her nor her boyfriend smoked. At this point she cut in and said her boyfriend had quit smoking prior to the move in but otherwise there was no smoking. I then told her her about the cigarette butts I found and she stated  "I am going to kick his ***." As much as I hate to sic a mans significant other on him in this particular case I feel there is a good chance he will get in line and everything will be golden. If not I know my next step will be a cure or quit notice and then and eviction after that if need be. 

I wanted to put this out there for the new people even though it will likely be a minor situation. Remember the lessons from the BP community. Keep an eye on your property, protect your investments, train your tenants and in my opinion rule number one remember to have a spine.

Personally I would believe that if you signed on for a loan to use it one way all while planning on using it another you are in a shady area I wouldn’t go. You may need to broaden what sort of living situation you’re willing to accept or the time frame for your goals. Regardless of whether or not you get caught or the bank decides they care you’re going about things in what could be construed as a dishonest way. That is never good. Ask your lender directly which scenario is acceptable or not. Trying to skirt around these rules is going to get you bit eventually.

You want to be real careful doing anything that could be considered fraudulent. What you’re basically asking is what’s the best way to trick a bank into financing a build. I have heard of people financing builds that included finished basements that had bedrooms bathrooms, a living area and a separate entrance which they then rented. Once it is constructed it is yours and you could then decide to rent a portion out. You should look into the Reno loans and consider buying a wrecked multifamily and rehabbing it. That loan allows you to remove everything but the foundation. I think it would be a more ethical option all around and less likely to get you accused of bank fraud.

That’s reasonable assuming he has children and wants them to inherit. However he may need the money to pay for his next living situation or even his living expenses. It is common for people homes to be their most valuable asset. I honestly suspect your offer has little chance of success but at the end of the day you never know until you ask and it never hurts to ask. You may start the conversation just by saying “ have you considered carrying the loan for any length of time?” I often ask “how much cash would I need to bring you for you to be comfortable carrying the loan for a while?” You are likely going to hear no. It is almost always no. In fact even when you hear yes the terms that usually follow are so bad you are going to say no! So don’t be afraid to hear no and just put it out there. This isn’t meant to be discouraging in a way I find it very freeing.

The thing about owner financing is that you need to understand the motivation of the owner. There are many reasons to offer owner financing and each one will require a slightly different deal. To that end, I would ask you why would the owner take your deal? What would be the benefit to them over a standard offer? You need to answer these questions first. I suspect a 70 year old man will not be interested in a loan with a 30 year time frame.

You are walking into a very questionable area. On the one hand if I buy an FHA property live in it for a year and a day and then move to another home with a different loan they will probably ask me why and want a reason. It sounds like you will be looking to get the second loan very soon after the first. I suspect you will have great difficulty coming up with a reasonable and honest answer to why you need to move from the home you just built into another home you’re going to build. That is a very questionable decision. An alternative might be to look into building a SFH with a separately metered two bedroom in law suite over the garage.

My first investment is a duplex that I am house hacking. I bought it with an FHA loan and had the sell cover closing costs. My total was not quite 5k. There is a reason the FHA Househack is loved. Of course I also purchased this in a tertiary market in northeast Ohio so depend on your market your results may vary.

My older sister owns roughly 40 to 50 mobile homes. She has them in a few different parks. Her original strategy was to owner finance them to people. After she realized almost every person would default and lose their down payment she felt morally compelled to transfer to just renting them. This has been profitable as well. The lot rent will have a lot to do with your cash flow some areas it is so high to make renting prohibitive. If you can rent the trailer for 500 dollars and lot rent is 250 you will have a hard time making money. She has tried to pass lot rent onto the tenant but it still will hold down your rent. 

The upside is that you can pick up one of these for a couple grand put a couple grand into it and then rent it out for a profit. The one I own with her she charges 450-500 for rent and the lot fee is around 150. Everything else is profit. 

It is still risky, no insurance all cash into it. It is certainly not for everyone.

I took the money that I used to spend on dinner out, movies, and other frivolous nonsense and put it into a savings account instead. Now I save every dollar that my investments make and TRY to save from my W-2 job. 

I once received as a gift a set of bits from my Dad which he claimed contained "everyone I have ever seen in my life." I recently used on to take on a cover in a dishwasher which according to the instructions was factory sealed. I would snap a picture of the head and head to your favorite home improvement store. Some one will have the proper bit.