All Forum Posts by: Drew Sygit

1) NEVER pick up rent without charging for your time! Who comes to your house to get paid? No one! Train the tenants, don't let them train you. If picking up rent is the only way you get it, then figure out why you rented to deadbeats and don't do it again.

2) If you're not ready to invest in PM software, create, download or buy a template spreadsheet to track rental charges and payments - and consistently USE IT.  Letting tenants fall behind and not knowing by how much is one of the biggest DIY mistakes.

3) Go Digital! Meeting prospects & tenants isn't safe due to COVID and even before the pandemic, it wasn't efficient. Keep time on the road for prospects and rentals to a minumum. Road time is better used looking for deals.

Don't try to do too much at once! Once you master these, come back to BP and ask for more ideas:)

Building on what @Joe Hammel said, the Ring Cities is probably what most OOS investors should stick to.

Most of the City of Detroit has higher returns with corresponding higher risks. 

As @Paul S. infers, too many OOS investors buy Class C properties in the City of Detroit, thinking they are Class B or Class A, and so they are not prepared for Class C challenges. 

"Fun" fact, just yesterday, we had a potential client send us some turnkey Detroit rentals a national Turnkey Provider wants them to buy. First red flag was they were told they can only buy cash - why? Because the properties won't appraise for the asking prices! All 3 properties were also advertised as Class B - the reality is one was Class C, the other two Class D! Of course, since there's no OFFICIAL/LEGAL definition of property class types, it's our opinion vs there's. We just know we wouldn't advise paying their asking prices in the neighborhood locations.

If you don't have MLS access for your target area, use Zillow to look at Sales and Listed prices in the area you want to buy. You should expect to pay close to top of the market for a true turnkey property, but don't ever exceed the average price.

Good questions.

1) If you refinance as an owner-occupant, standard mortgages require you to occupy the property for 12 months before you can turn it into a rental. So, you could be commiting mortgage fraud a federal offense, if you refi now and then buy another owner-occupant property. Many investors do this and get away with it, but do you want to risk it?

The good news is you state you refi'd in February, so if you keep your current mortgage, you only have to wait 3 more months to be "safe" - which is probably how long it will take you to find and close on your next property.

2) Even if you decide to refi, keep in mind CASH is usually an investor's biggest challenge. So, why would you want to put any cash into the refi? 

3) Regarding rolling points & costs into a refi, figure out the total costs, then figure out the monthly difference in the current payment versus the new payment, divide that difference into the costs to determine how long the monthly savings will take to equal the additional costs. Then determine your chances of holding the property that long.

4) Your dad can't use his VA mortgage eligibility for your benefit. VA mortgages are for owner-occupied by the veteran and only their spouse can be on the mortgage with them. If your dad buys, implying that he intends to owner-occupy and then does not, he'll be committing mortgage fraud.

Your easiest & safest course of action would be to stop your current refi and buy another owner-occupied 1-2 unit property with a 5-10% down payment, using a conventional mortgage. 

Better yet, buy an owner-occupied 3-4 unit using an FHA mortgage, which allows lower down payments on 3-4 unit properties than conventional mortgages.

One last thing, search here on BP for posts about structuring partnerships. Even though he's your brother, you want to have a written partnership agreement covering who pays for what, how profits are split and what happens when a partner wants out.

If you can continue to live in it, you may be able to skirt the city's 3 stranger rule - be sure to read the actual language of the law. You could also install a bathroom & kitchenette on one of the floors (for COVID distancing) and rent out on AirBnB, which may not violate the 3 stranger rule.

Otherwise, why not apply for a zoning exception and turn it into a 3-unit? 

Instead of thinking negatively about this property, think positive and explore your options! That's how you make money in this business:)

Yes, everyone here will need city & state and what type of property to offer any real solid advice:)

Recommend having inhouse manager still sign a full-price lease. You then have them sign a Management Agreement where their pay covers the negotiated rent. Otherwise, you may have a very difficult time getting them out of the property if they do not perform their management duties.

We're working with a client that just did the same thing on a 2-unit in Pontiac, MI.

Wish they would have contacted us BEFORE they even signed their purchase agreement!

Supposedly, the tenants had no leases, but now that we are pressuring them to sign new leases, they are presenting leases signed awhile ago for much less than the rent the seller claimed. 

Good News: In Michigan, expired leases legally convert to Month-To-Month (MTM) until one party gives the other a 30-Day notice (that must coincide with the term of the lease). 

Bad News: tenants didn't pay Oct or Nov rents, claiming the lease is with the old owner and since they have no lease with us/new owner, they don't have to pay rent. Very common ignorance problem with ignorant, low-demographic tenants that are just looking for any excuse not to pay rent. 

We sent tenants 30-Day Notices for Possession, which avoids the CDC Eviction Moratorium (that is only for nonpayment of rent evictions). So, were giving the tenants the choice of moving/eviction or paying their balances and signing a new lease.

So, we advise extremem caution moving forward with this transaction and only proceeding IF it is a GREAT deal affording you the means to absorb rent losses as outlined above.

Did you refi into another VA loan?

Hopefully, you refi'd into a conventional loan, freeing you up to buy another property 0% down, so you can repeat this process.

1) Use RV antifreeze, NOT automaoble antifreeze. It's safer in case it gets into your potable water. FLush the toilets to remove as much water as possible, add antifreeze to tank and do a "partial flush" so it gets into the trap of the toilet. TAPE THE TOILET SEAT SHUT SO IDIOT CONTRACTOR DOESN'T USE IT!

2) Open all the spigots/faucets and leave them open. The #1 way plumbing lines get blown is by expanding water having nowhere to go, which results in air in the lines (not the water) being "squeezed" and blowing out the lines. Look it up!

3) You can usually just turn the water meter off and remove it (so it doesn't get ruined). Only with extreme cold do you need to turn the water off at the street.

4) Obviously drain your HWH and leave the valve open

5) We've never used compressed air to blow out water lines and it's never been an issue here in Michigan.

6) We have used compressed air to blow out boiler lines once. Usually we just leave them running, but this owner wanted their property "mothballed" for the winter.

@John Smith Who do you think will screen applicant prospects better:

1) A Realtor that gets a one-time commission and never has to deal with the applicant again.

2) A Property Management Company that has to deal with the applicant for the entire time of their lease and if the tenant doesn't pay on time, explain to an owner why.

@Bill F. Couldn't agree with you more. Most investors are penny-wise and dollar-foolish, but we've found they all think they can create a better wheel. Some things it seems, they just have to learn the hard way!