All Forum Posts by: Jason Barnett

Ouch... I have never run into this problem myself, but I have to pitch in my ideas.

First and foremost: if you ever went to court then I am sure the court would say the management company had "apparent, but not actual" authority to request the maintenance services. In plain terms this means that the magazines, lawn cares services, etc. that were billed to you are legitimate and you have to pay those bills. You might want to make sure that these vendors actually performed the work by calling them up and asking for proof of service.

Second of all is your contract. If it clearly states that the property manager must get prior approval for repairs over $100 then the "burden of proof" is his. In other words the prop manager would have to prove they had prior approval, which they didn't. Hopefully your contract is specific about how they are supposed to get approval (written, email?) or else this could get tricky.

So the basic situation is this: you're going to have to pay all of the bills now (or whenever they're due), fire the property manager and sue him for breach of contract. You could in effect make him pay for all unauthorized repairs over $100, but you have to win in court first. He has failed to perform his fiduciary duties and I think you have a strong case. However, the cost of going to court might be greater than the cost of just paying all of the repairs.

Does anyone know if the landlord can sue the prop manager for lost rent? I would think probably not, but it might be a good tactic to ask for more and hope for what you actually are supposed to get.

Finally I would add this: if you fire this property manager could you find another one to replace him? If you decide to sue then you're going to have to find SOMEONE... and fast. If you decide that you CAN'T find a suitable replacement then you can just ask the prop manager for a credit memo and state that you should not owe the full amount of the invoice. You should only owe for those authorized repairs.

I am sure this is causing you a lot of grief. Be strong through this battle. Good luck Sam! Let us know what happens!

Typically hard money loans are used for rehab properties. These lenders want to make sure you don't just take the money and run so some will ask for inspections at various steps just to make sure you're staying on track. This makes life harder on you (the rehabber). This is basically the same thing that construction loans do, but the interest rate is higher and hard money will finance the monthly payments as well.

Private loans don't have to be hard money loans. Perhaps you can convince people to invest their money in your company and then you give them a 12% payment at the end of each year. Better yet you might convince them to reinvest in your company and then you don't have to pay out any cash until they are ready to retire. You still don't have cash flow coming out each month and you don't have the hassles of inspections.

You cannot deny housing to someone based on (among other things) gender.

That said... I understand what you're getting at. Here's what I've seen:

- Older people (male or female) tend to be better tenants. I love old people and yes, you are allowed to select based on age so long as you show a PREFERENCE for elderly people.
- Young couples are fine candidates (especially if both of them work)
- Young people that are single (single guys / girls) tend to be the flakiest tenants. Guys tend to be rough and girls sometimes have boyfriends moving in and out of the apartment.

My best tenants have always been the ones that have had the most stable financial support, PERIOD. This is really one of those situations where following the law will actually make your business better (crazy huh? :goofy: )

Jason,

Yes you are right, but the question is whether or not you can make the numbers work in your favor (over time). As takleberry mentioned above your risk is limited to the "delta" and the viability of the idea depends on how the averages work over a large number of tenants.

I think the idea can work, but the devil is in the details. How much is enough? Are there non-financial things you can do to get a person to leave a unit in good condition when they leave?

I read something else that might work well here. There are some landlords that will offer a "prize" for tenants that stay with them for a year. Perhaps a person would take care of the unit if they know you're going to buy them a new TV ($100 at Wal-mart).

In response to the issue of taxation: This is not a simple topic; this is why you want a good accountant on your team. The income that you report is going to depend on ownership structure (LLC? sole properietor? C Corp?). Many people WILL pay regular income taxes on the net income you earn, but others will receive passive income treatment. The same is true for tax losses.

Bankruptcies are a special animal. Sometimes a house is protected in bankruptcy and the owner will reorganize their debt. Sometimes there is a lot of equity in the property that the owner will not be able to protect so they might have to sell. But obviously anyone in bankruptcy is having financial difficulty so this has to be considered as a source of potential leads.

Cash is always the easiest way to buy; who doesn't like cash in hand?

The value of sub2, etc. is using other people's money (opm) to LEVERAGE your investments. This enables you to get involved in more projects at the same time and allows for substantially more profit OVERALL... assuming you have enough deals. If you only want to do one deal at a time and you can pay all cash then that is usually the best way to go.

It will be easiest for your friend if he just takes you on as a contract person. Write up a simple contract stating what you will do and how he will pay you and then you can worry about the tax stuff at the end of the year.

If your friend hires you as an actual employee then he has to register for unemployment taxes. This causes additional paperwork for him that he has to fill out (or he will pay some payroll company to do it for him). If this is the way you want to go then you can probably just google for "<your state> department of revenue withholding"

Back when I was in college I worked as a "consultant" to a small pharmaceutical printing company (they print labels for pharma containers). As part of the project I was supposed to do competitive analysis to find out what the competitors were doing. So I placed a ton of phone calls out to these companies and interviewed some COOs. Everyone was willing to open up to me because I was "a college kid doing a research project". In fact one guy was so impressed that he even offered to let me come and view his manufacturing facility and look over his profitability reports!

After performing all of this analysis I was supposed to prepare a report for the company that I was "consulting" and they were very interested in knowing what their competitor was doing. I knew that the profit margins were very, very valuable secrets that they would want to know. At the end of the day I didn't end up sharing the profit margins with the company I was "consulting", but I did share some of the other things I learned from the competitor.

The moral of this story: it's amazing how much information people will share with kids trying to learn. People let their guard down and at the very least they are more open to talking to you about things you would otherwise never learn. Take advantage of this for the next 6-10 years. Heck, for all I know you're not even a kid and yet I still typed out the story!

Well well well... it seems that we finally have a developer on board. Welcome! :D

I admit that I know very little about developing, but I certainly can agree with your beliefs about the internet as well as the current economic environment. I look forward to learning from you!