All Forum Posts by: Kurt Gardner

@Christina Hall - haha, me too here in the Midwest!

@Cindy Szponder @Huiping S. - I do not see how going through the trouble of a 1031 and then finding another money making property would really be worth giving up this cash cow.

@Mike Hanneman @Crystal Smith - I agree with you...this is a pretty sweet deal and one I'd love to see in my portfolio. 

@Robin Valadares - Let this one keep cooking!

@David Chwaszczewski

That is an interesting strategy.  I particularly like the, "if you cannot obtain this yourself" deal.

I debated paying for it myself and having them pay me to maintain it, but I felt like it was a good option to "train" the renter to be responsible for themselves.  I can see how this approach would cut down on (eliminate) the question, "what do I do if they let it lapse?"

Thank you for the insight.

@Matt Moldenhauer

My agent prompted me on my most recent application for coverage to consider it.  I have four single family homes in a radius of approximately 5 miles.  This area is (and my entire area for that matter - STL) is notorious for getting pretty sever thunderstorms during the spring and summer.  It isn't uncommon to get a pretty good hail dump and that, as you may know, will cause havoc to roof and vinyl siding. 

Because these four properties are so close together, it is smarter to cover them under a "blanket policy" because 1) it doesn't cost me any more money each month to pay the premiums (doesn't save me any on the premiums either, lol), 2) I can still budget them month to month without any penalty to break the payments down (eg. no $2 charge or other service fee) just like escrowing the money, and 3) if an event occurs and I need to make a claim, whether on one or all four residences, I just pay the deductible one time instead of for each property ($1000 x 4).

His simple breakdown is, it's not really a special type of deal, it just has all the properties listed on one piece of paper instead of four.  I pressed him a couple of times to explain my risk in this, and as best as I can tell, I'm risking $3,000 if I keep them separate.

The reason I cannot escrow them is because the blanket policy has to be paid for once a month in one payment (or twice a year or once a year, whatever you like), and not from four different "pools."

So essentially I pay PIT on four properties with my automatic payment to the bank, and I pay "I" on four properties AT ONE TIME once a month by automatic draft to my agent.

Does that clarify?

As a BRRR-er, my initial reaction to this was "NO WAY." I appreciate all of your discussions on this because it has enlightened me to some degree about why the deal may be a good one.

Would (any of) you mind helping me with a couple of questions?

So, the "what if" regarding appliance/other minor repair happens is nagging me? I can easily see a murphy's law issue in the first year or two that would eliminate all the cash flow or a major chunk of it. Because there's really no equity in the property except for the cash flow, how does this make sense to potentially be underwater or just breaking even on the deal a year or even two after purchase (I assume the $140 per month Capex and repair amounts are positioned for this instance, but $1680 seems like a bit of a low amount amount considering what could happen? Maybe I'm just not as fortunate with my repair issues, lol).

What is the exit strategy?  Again, because there is no equity to begin, how to you get out of this deal if 1) repairs start eating you up 2) the market drops and the value of the property loses 10% or 3) you want to recap this money to be used in a different venture?

I apologize if these are dumb questions.  I don't think I'm seeing it from the right perspective, and I appreciate your responses in advance.

@Stephanie Leefers Welcome!  You'll find plenty of good help here, so use this space as your training ground when you find a deal you think may work...the professionals here are not shy to tell you an opinion, and it's a pretty good bet, they're going to be right.

I've flipped one and was pleased with the result (19% ROI). I will probably not venture back into that arena again for a little while for two reasons; 1) it was a little more stressful overall than BRRR, and 2) my price range isn't sufficient to make that level of stress worth my time as much as BRRR.

If you have a pile of cash yourself, or somebody else's, then you can do well and make great money.  I have enough cash/equity to keep buying and building my cash flow and long term equity at this time, and frankly that's where my goals are.

My biggest advice I could give is go as big as you can afford or feel comfortable with your flips.  The percentage/yield will be a better deal for you, and the requirements are essentially the same.  A full rehab for a bathroom is ~$5 whether you're doing a $100k property or a $250k property.  Additionally, when you go to sell a $100k property, $2,000 on the selling price is a much bigger deal than it is on a $250k property to the buyer.

There are lots of factors to consider, and we'll all chime in with our experiences for you.

Enjoy the fun and blessings on your venture!

@Gino Barbaro

yup, yup, yup.

@Jay Hinrichs

my goodness, man...amazing.

Several have stated the obvious and I applaud your boldness.

That boldness comes from a state of preparedness and confidence in current financial strategies.  I also plan for the worst, and expect to be ok in either case. 

Just when I think we're hurting as an economy, I drive around on a Friday/Saturday night in my home town and see EVERY restaurant parking lot full.  I see big box store parking lots FULL.  I see discretionary spending not slowing down (not statistically from some intellectual wannabe, but from posts on Facebook, work chat, and friends I see in church).

There will always be chicken-littles.  If you think a horrible financial situation is likely to happen, you're already in a good place...HERE.  This group/forum is the cold water to the face you need to get moving and do something about it, not just wring your hands and fret.

Yes we are financially not in a great place.  So what are you going to do about it?

As for me and my house...

Greg's advice is awesome, too! 

...head games.

@Sue Kelly and @Greg S. I would love you guys on my team anyday!

Sue has fantastic advice.

You should act and be decisive, now.

My take?

I really like the M2M situation you have with PITA, and that is your best leverage...it's amazing what a for lease sign plastered on her front door will do to an attitude - unless she's better prepared than all of us think, SHE has no exit strategy to get into a new location.  It will cost her two to three times what you're charging her right now to relocate, and you know that is not something she is prepared to do...she's all wind.  Shop for a new tenant and raise her rent to prove you mean business.  This will help you recoup your "painting cost."

Art, needs to be brought current.  Nice is great.  Money is why he is allowed to stay there, though.  You can't spend "nice."  Shop for a new tenant.

Money order, could be more timely, too.  Clarify with them that rent is due on time and in full.  Thank them for always being considerate enough to never let it slip past "X" date, but emphasize that it would be best for all if it came a week earlier rather than a week late.  Demonstrate this by how much they've paid in late fees over the past year.  Shop for a new tenant.

Overall, I'd be looking for a new tenant in each of the situations without evicting anybody yet.  I wouldn't even mention the term, but I would do my own diligence to find an alternative to what you have in each situation.

Could you live with all three?  Sure.  Is this what you really want month after month?  I'm sure it isn't.  You'll be ok.  Instead of fretting or getting angry/frustrated, be motivated and smile when you find that new occupant who will be the fresh start you are looking for!

Blessings!