All Forum Posts by: JJ P.

I'm not sure if I can post a link, but Dawn Richenbach, "The Note Queen," has helped me in the past. She does all types of loan purchasing and what not.

I would suggest staying closer to home for your first investment.   The time, effort and cost that you will incur when you factor in the travel or the outsourcing will eat directly into your profits and ability to really thrive as a "mom and pop" investor.   

I'm often the contrarian here, but I'm not a fan of leverage and expansion just for the sake of having more.   Your profile of goals is how we did it.  Maximize the return per door, instead of endless growth and leverage.   If 14 rentals can achieve your goal, it's time to stop growing and focus on how to achieve your desired returns.  Paying off the mortgages will help.  

If you trust yourself more than the stock market, and like the control over your own finances and wealth trajectory, then this is a great strategy. Also, the earlier that you have financial independence, the sooner you get to enjoy your wealth.   Thirty years is a long time to pay a debt down, but it's an even longer time to wait for enjoying financial freedom. 

 By maximizing your return per unit, that's an easy way to give yourself a raise.   I prefer to have no debt, because IMO, whatever the interest is costing you is money you're giving to the bank instead of keeping in your pocket.  It's like reverse compound interest-- the less principal you owe, the less interest you pay to the bank. So the sooner you pay it down, the quicker it will pay off.   There's no point in waiting to pay it down, as long as you won't leave yourself strapped for cash.  

The math would look like this:  If you snowball your debt payments, every bit of interest that you would pay to the  bank instead is liberated, presumably to pay down even more debt.  If you want to hit 45K a month, your current and projected rents need to be 45K a month, then you need to work off the leverages (mortgage debt) one by one.  If  you're currently making 12K, is that gross or net?  If net, then how much extra are your mortgages?  Your take home (net) will go up exactly the amount of your paid off mortgages, as they pay off.  So if you have 10 mortgages at $1000 payment per month each (10K a month in payments), every time you pay off a mortgage, you liberate an extra $1000 per month.   
For the purpose of simplicity, I'm leaving off the basic landlord stuff like rent increase projections, turn over and repair costs, etc.  

I really like the snowball calculator at Financial Mentor.   It's easy to plug in the numbers and get the "what if I paid this..." results in a nanosecond.  

I'd definitely find an alternative to paying $1200 a year off the top.   We used to pay for monthly Maintenace, and found that, in general, very little was done.   They'd show up, trim the same hedge they trimmed last week, blow some leaves from one side of the yard to another, and leave. 

After a few years of that, we did it ourselves, in part because we wanted to lay eyes on the place once in a while.  So, yes, you'd have a bit of a drive, but it might be the perfect excuse for a good look at the house. Plus you'll get to know the tennat. You may find that your rapport with the tenant leads you to tackle the PM duties completely.  That will likely raise your profit another $300 or so a month.  

We have the tenants care for the landscaping.  Then a few times a year, mostly in the springtime after the rains, we might go in and add mulch or weed, trim the plants a bit, etc.   

 It sounds like yours is very low Maintenace. That requires less upkeep than a lawn, and your monthly costs should reflect that. If you don't  call them on an as needed basis, at least tell the PM to have them come out once a month instead of once a week.  

Leave them, your view is framed beautifully now.  You have shade and privacy.   Who doesn't love a little cabin in the woods?

That fills in some of the missing pieces, but not all of them.  

Please clarify if the tenant trashed your house in that short period between the time that you inspected it prior to closing and the time that they moved out.  Also clarify if you had a rental agreement with the tenant and a management agreement with the PM for those 5 short days.  

 In a nutshell, the money paid through a security deposit and any additional monies the the PM collected for damages should have been used for repairing the damages.  That is, after all, the very purpose of a security deposit.   If the PM returned any money to the tenant, they shouldn't have, as the obligation is to repair the home with that money.  

 Why and how the former owner would get any additional money from the PM for damages to your home is something that is still opaque.  You will have to provide additional details for us to figure it out.   

Basically forget about future monies from the tenant.  They are not likely to show up in your wallet, especially if you couldn't even get the deposit that was already held. 

I see the issue as what ever the amount of the deposit was that the PM had should have been used to repair the damages and wasn't, perhaps because you didn't actually have a contract with the PM.   The additional issue is that the seller/former landlord shouldn't have taken that money back.  Very tacky, especially for a flipping company that is in the business of selling rentals to investors.  

Is it still managed by the property manager?  If so, then they should be making the deductions based on walk through or move out inspection, provide the tenant and owner a written list of issues observed at move out, and deduct the amount that the cleaning/repairs will cost from the security deposit.   What's happened so far?  Who has the deposit, who paid for the damages, and who is asking the tenant for more money for damages?  Were repairs made?  Did you inspect the property with an awareness of the damages?    Since this all happened months ago, it should have progressed somehow.  

Since you're new at this, I'll clue you in that basically the deposit is all you'll get from a tenant without going to court.  If you go to court and win, you still need to collect the money, which can be tough.  

If the deposit transferred to you, it is called Estoppel or Tenant Estoppel.   Yes, the money belongs to the tenant, but it is held by the owner/management company against the damage free return of the property.  The money does NOT belong to the former owner.  Where I see a problem looming is if the money is still in the hands of the former owner, there are damages that need to paid for, and you're left holding the bag.   Also there might be issues if no one is sure when damage occurred.   It was most likely there 6 days ago when the other people owned it, but was it there before the tenants moved in? 

Just out of curiosity, did you know in advance that they were moving out?  The cleaner purchase transaction would have been to hold off closing escrow until the property was vacant.   Then you could have just skipped the hassle of an exiting tenant and done a walk through inspection of an empty house.   I just suspect that you were taken advantage of in this... the sellers/flippers were your agents also, and did not act in a fudiciary manner on your behalf.  I suspect you probably signed off on an inspection or "final walk through" that basically says you accept the property as seen.  You already gave up your biggest bargaining chip...closing escrow and buying the house.  You may or may not have signed off on the tenant deposit, but as stated above, it's not really yours, just held by you.  

Not to burst anyone's bubble, but saying "there's no way that these properties are worth this much" is ignoring the obvious.  Multiple people tried to pay that much or nearly so, as evidenced by the bid up and the sales price.   The comps will follow the sales price.   

I once had a homebuying client who spent the first few months of his home shopping making offers that were somewhat tied to the purchase price of the property.  He'd make comments like "They should be happy making XXX over what they paid for the place."   He didn't get an accepted offer until he moved on from that point of view.   That is simply not a viable or rational strategy.   Apple or Amazon won't sell me a couple of shares based on what they were worth in the past-- choose any moment on the timeline-- last week, last year, 20 years ago--- it simply doesn't matter.  

Up thread I mentioned my grandma's beach house... the one she didn't want to buy because it was so expensive at $16,000.   The market moved the value of the house.   The market will move the value of today's houses and stocks.   The prices will rise and fall based on forces bigger than we are.   So, make a purchase that works for you based on a thoughtful investigation of the data that you have available to you.  If that means changing markets, buying a fixer, buying a condo-- something should make sense and that's the one you should buy.  

We allow pets and charge per month, per pet.  We absolutely charge, screen and add addendums for pets.  We consider the monthly fee to be about even with the extra wear and tear.   But, young children are hard on homes, also-- think crayons and milk spills-- so in some ways a pet isn't so bad.   We require a deep, professional carpet cleaning, door jamb and baseboard cleaning, and window track cleaning upon move out from all tenants, pet owners or not.   If they don't do this, we will pass along the cleaning fees by taking them out of the deposit.   We no longer hesitate to withdraw from the deposit any fees that are needed to restore our home to it's prior condition.  

Before we wrote it into the contract, we learned the hard way.  We've had tenants add pets one by one until there's just too many.   Once, one lady rescued a litter of abandoned puppies and they grew into teenagers at our house.  These were big dogs and obviously got potty trained on our flooring.  We charged for our costs on that move out.   I would not want a chained dog tethered outside in any of our units and would send a notice if that happened.  

 I don't mind an older trained pet, especially if the owners are home a lot.  A pet owner that is clean, works from home, and dotes over their precious furry family member is welcome in any of our rentals.  That's not a high risk pet.   If we have an applicant such as a retired couple, stable income, with an older dog or two, they are moved in without further ado! 

Disclaimer, firstly, I'm in San Diego County, and it's an amazing place to live.  There's neither dog poop or people poop problems in 95% of the County.  The La Jolla people are really complaining about the seals and sea lion poop, but that's a whole other story....

  Problem tenants come in all shapes and sizes, but I'd immediately repair the door, send her the bill, and send her a written notice that she is violating the terms of the lease by disturbing the neighborhood and damaging property.   You could either terminate the lease based on that, or give her warning that if she doesn't Cease and Desist such behavior, another violation will result in the lease termination.  

Personally, I'm with @Nathan G.,  I'd terminate the lease.   I suspect this behavior is just the tip of the iceberg and it's not going to improve based on one more chance.  A crazy tenant can really rack up a tremendous amount of damage to a house.  A mad, crazy drunk tenant could do just about anything.  Ditch the kooks and get somebody else in. If you wrote 2 lease contracts (hers and the roommates), perhaps you could just terminate hers.   The roommate might be eager for a change, also.   If you wrote them both on the same contract, that wouldn't be an option.  A lease termination only turns to an eviction if/when they refuse to vacate.  

Sometimes a small cash for keys arrangement could be made, just to facilitate a peaceful and timely exit and will cost less in in the long run... less  lost income and eviction expenses, than a court case would.