All Forum Posts by: Kristina Heimstaedt

This is a great opportunity to diversify or follow suit with @Joseph M.'s idea of getting a property that is more well protected during downturns. Maybe consider the LTV and look around at where your coworker could potentially go in order to get a better return rate. There is still cheap money to be had and could be a great opportunity to increase the cap rate on that money such that the process could be repeated and get into the BRRR method. Your coworker could also look into doing a cash out loan and increase the volume of properties that way.

Your coworker may also want to consider incremental rent increases to improve cash flow. In the state of California, you can increase rent at a rate of 10% or less with a 30 day notice. Anything more requires more notice. We keep all of our tenants on a 1 year lease and every year we increase rent between 2-5%. It helps us to keep up with market rents and to stay ahead of the 2% tax increase average. We got flack when we first tried it, but now tenants beg for new leases because they like where they live and they stay on top of the rent roll. I also let future tenants know that there are incremental increases at the end of the year that way there is no shock at the end of the year when they renew. 

Oftentimes in leases, you will find that there is a clause that if there is any neglect on the tenant's part, the tenant is financially responsible for the repair to protect landlords in just such scenarios. More often than not, these are plumbing issues because a small leak can turn into a major problem and even mold. 

I had a tenant who fell asleep with the shower on that caused it to rain in the apartment below. We had several problems with this tenant and we used this final straw to approach the tenant and said that they were actively destroying the apartment given the excessive cost that they caused on the property. As a result, we gave the tenant the option to move within 30 days as though we were just giving notice, or that we would do what we could to evict them. Because they didn't want any negative impact on their credit, they moved in the 30 days, we got a new tenant and everything went back to normal. 

If I were in your shoes, I might tell the tenant that I expect the tenant to pay the contractor's bill or that you might need to make some major changes at the end of their lease. Sometimes leaving things vague like this can be somewhat of a scare tactic, for lack of a better term. In all reality though, you're giving your tenant a choice. However, no matter their decision, you're in control of the outcome and can prepare accordingly. Even down the road if the tenant comes back with any flack, you get to say that you gave them a choice and they made their decision. 

Best of luck!!!

@Alonzo Thomas The other bonus about getting involved in some aspect of the business is that you might find that you prefer some aspects over others and can develop your own business based on your assets and skills and be aware of what positions you'd like to hire team members for or outsource. There are plusses and minuses to every job even within real estate, but you won't know what your sweet spot is until you jump in. Even when you listen to stories from other people, more often than not, they started in one aspect of real estate and either absorbed or transitioned into another facet. JUMP IN AND DON'T LOOK BACK

@Heather Morris your landlord is operating a business and will want his money. However, life happens and as long as you can make it up the following month or turn in a late fee, your landlord has no reason to be upset. Double check your lease. You ought to have a clause that indicates how this situation should go if you're late. When in doubt, refer to your paperwork and follow along. No matter how this shakes out, you always look good for following your paperwork. 

@Rob Adams if you're open to leverage and rehabbing right away, you can still find some great deals in Orange County. I sold one in Newport Beach that was one house from the ocean that I sold just under a 4% cap rate without leverage. I had a client miss out on a potential 6% cap rate because he wasn't ready to pull the trigger and the property was vacant. I think there is a lot of power knowing what something can rent for and knowing what your capital expenditure would be to get it to a cap rate north of 5%. Feel free to reach out to get a better idea of which properties would work over others. kristinaheimstaedt.com

Bummer is that you do need to honor the leases. However, in the past we have offered to return entire security deposits without question in exchange for current tenants to break their lease and move sooner rather than later. When they are incentivized to move early, you can gain access to the property to upgrade it and increase the rent. We also increase all of our rents every year by 2-5% in order to stay ahead of property tax increases and to slowly follow the direction of market rates. Best part is that when tenants become accustomed to gradual rental increases, they don't get sticker shock when you go to increase their rents the following year.