All Forum Posts by: Kurt Gardner

@Filipe Pereira

I had a ton of difficulty with my last purchase; a duplex that was in an area that had mining subsidence. 

The appraiser was very negative on the property and because it was less than 5 units, would only comp it based on sales, not a cap rate.

I purchased and got a good price ($92k - it will rent both sides $1050 each and pull about $400-550 cash flow conservatively each month). I estimate the value to be $150-160 ARV.

My banker is awesome; she saw the value in it and helped me keep from pulling out my hair over these last three months dealing with that nonsense. 

IF the money and numbers are there, be strong, stay tenacious and make the deal.  If the numbers aren't there, then take the advice you're getting from all the others and walk away. 

It's easy for me to say this, and it's hard for me to keep it in practice for myself, but you must not let emotions get in the way of a deal.  It ALWAYS comes down to the numbers at the end of the month/year. 

Appraisers are not friendly now - regulations are pretty tough on everybody.  You know what works.  Stick to it and keep pressing forward.

FWIW, I took my account manager smoked ribs...food bribes are legal!

@Ned Carey, @David Dachtera, @Joe Splitrock, @Sylvia B. - and many others who are giving an honest yet flexible answer on the query:

I'll toss in one more perspective.

Everything is permissible for me, but not everything is beneficial.  Everything is permissible for me, but I will not be mastered by anything.

You can accumulate debt or refrain from owing a person a dime.  Either way, you deal with debits and credits every day.  So whether you want to label it good or bad, you are engaged in acquiring debt and using your credits to service it every moment of your life (when you sit down for a nice dinner out with your sweetie, you incur a debt that must be paid at the end of that meal.  It is an extremely short-term debt, but it is an obligation to pay). 

Dining out is a fine thing.  Could you save money by eating at home so you do not have to lay cash on the table before you retire to your comfy chair?  Sure, is dining out worth spending that money?  That's up to you.  Should you dine out every day for every meal at the most expensive places?  Should you always stay at home eating beans and rice and use candles and have no cable or furniture?

Ha.

It's all in moderation and with an understanding that YOU determine the value of that debt/tool/bill.  My realtor is always fond of asking me, "what's it worth to YOU" when we're in the negotiation process for a new property.  The amount is often relative based on what my vision is for the property and what I want to do financially with the property and in the future with it.

Can I make a mistake by acquiring too much debt/paying too much for something?  Sure.  Can I miss opportunities by not being willing to incur just an extra $2000 on a mortgage to secure a very profitable property from another investor?  Yep.

Make your moves based on an over arching standard of investing; it is a rules based game grounded in hard numbers. 

As cold as that sounds, it can still be fun!  If the numbers make sense and keep you positive, then enjoy the game and move forward.  If the numbers do not make sense, don't berate yourself about good or bad use of your money.  Take it somewhere else to energize and grow.

Do not be mastered by the money, it is neither good or bad.  It is bad not to have any!  Use it as a tool, do not love it, do something good with it and enjoy the process, Joe!

@Chiagozie Fawole - as a seasoned SFH investor, my wife and I just closed on our first duplex, and I'm very "feverish" to get more. I can see that the SFH routine has been a great experience for us and we're still happy with our tenants and the progress we've made.

We've recently decided to alter our course now...we're going to regroup for about 6 months and then attack the multifamily units exclusively. Any SFH purchases in the future will be flips (in a higher price range, too).

It's great to hear a testimony like your's.  I thought I was over the "nerves" of buying, but I still have the butterflies when I think about a bigger property like that.  Thank you for sharing your bold account, and I hope you do accomplish that goal of 700 units.

@Mathew Pezon if you look at my profile, I confess right away.  I was very careless and foolish.  Thought I understood much more than I did.  Planned to do all the work myself, and trusted a friend knew more than he did.  We ruined the bones of a house we might have been able to rehab and save if we had simply done a few right steps at first.

We gave up on it because the foundation was falling out from under it...the city condemned it and we had to pay $10k to have them flatten it.  I still have a little bit left to pay off on the original mortgage.  The lot is finally almost enough to cover that balance so I can sell it.

I regrouped, studied up, and purchased another property 8 years later.  Finally got the confidence and found the "right" one.  I needed the perfect opportunity because I had failed so badly before, and I knew I had more still to learn, I gave myself plenty of "mistake room."  I bought that in 2012.  I still have it and it makes me good money.  I also have 6 other doors since then and one flip that netted 18%.  

We're changing our strategy in 6-12 months to focus on multiunit (4-8) instead of SFH. It has been a great learning curve, and I am blessed to have learned what I did. The key for us was staying principled in our purchases (no trash/C or D properties), and ALWAYS sticking to very conservative numbers. Risk is not something that is profitable in REI. It is calculations and adherence to a plan...and never quitting, lol.

Thanks for baring your scar, and know you are among the wounded but not dead. We are mercenaries of the market; rehab rangers; flipping fighters.

Blessings.

I see (good) principles in REI that didn't exist 10 years ago. I also see everybody and their brother trying to break into the business.

I think it's very regional, and subject to what incentives/recovery programs are still burgeoning, what recovery programs have succeeded, and what programs have failed in each municipality/market.

Personally, I wouldn't mind a drop...it makes investing so much easier...remember, the time to buy isn't when all the headlines say BUY! BUY! BUY!...it's when the headlines read, "Holy moly, the marked dropped, it crashed, housing values have plunged."

overall, I think it's just flat...I have to be more selective right now. run your numbers, buy smart, and carry on.

I'll toss in here.

Agreed with 30 notice analysis...In my state, 30 days requires notice prior to the beginning of the next rent period (e.g. your rental period starts on the 1st of every month, any notice given past the first then requires the NEXT 1st to roll around, THEN the 30 days begins and the tenant has to be out by the end of that month - notice given July 3rd, 30 countdown begins August 1st, tenant obligated to pay rent through and must be out August 31 - it is the same requirement if you gave the tenant an eviction notice on a month to month, so do not feel badly about this arrangement).

Also agree with the consideration above regarding prorating (if you are willing to cut yourself out of 1/3 your entitled rent).  If the tenant has been a good client and you feel charitable (there is nothing wrong with a compassionate business as long as you are not being taken advantage of or starving yourself/family), then I'd arrange with the tenant to deliver the keys to you on XX date and you will either a) prorate their deposit back to them according to the days they had "key occupancy" assuming the condition of the residence meets your standards to release the security deposit, or b) charge them the amount of the anticipated date XX on the 1st of August and then return their security deposit upon their subsequent vacancy and cleaning subject to your inspection.

Personally, I like the prorating of the security deposit better if you feel like the tenant is a good individual and will treat your property with integrity before they move, and it shows additional compassion by not tying up their money while they position themselves for a new location.

In any case, do not put yourself in odds with the law, and do not perform any activity that would allow your tenant to come back against you.  In a crazy world, anything could happen, and the tenant might need to stay longer, change their mind, or who knows?  Get an addendum in writing stating both of your intentions and work from there.

Yes, please!  I have relatives in Paw Paw, and have considered Kalamazoo...where is this magical cash flow fountain of which you speak?!

@Leland - awesome suggestions. 

@Leland - awesome suggestions. 

i have struggled with this and i appreciate the thread.  I have never raised my rents, and i know i am well below market.  Last year we gave each of our tenants a $50 off for Christmas break on their rent.  I guess im that guy that feels like i need to "woo" them and make sure i keep them happy.  This is making me think im being a "chump" for not keeping up with market.  

Does anybody care to share the "conversation" they have or the method of delivering the news?