All Forum Posts by: Andy Luick

I forgot to mention this, check with your state laws to see if there are limits on NSF fees and late charges. You can usually google whatever your question is with the state and get a pretty good idea of what you can or can't do legally. I've never lost in court on the lease..except once and the judge was a friend which may have been why he dinged me a little. He ruled that the late fees has to be changed from a percentage (the old lease had 10% at 10 days, 15% at 15, etc) so I changed it. I won my case, made the change and moved along. Every state can be different so just check. I found out recently that GA has a $30 limit on NSF charges but mine has been at $50 for the past 15 years at least. I've meant to change it and did on the lease I signed yesterday. Always check with your local state laws to see what is permissible and it's not a bad idea to get legal review. I went to law school many years ago and often have an idiot for a client...but I hire the best when I do actually need a lawyer! Happy Investing!

@Richard C. - exactly and that's something we all forget. A ton of "law" is made at the bench by magistrate court judges which is what my friend did to me above. I think he did it instead of pulling himself from the case. Some judges take it easy on renters....some states like CA are waaay to tenant friendly...it truly depends on where you are.

My lease is a very tough landlord lease with a ton of "bite you" provisions if you're a bad tenant. I had a lawyer renter once who requested an hour to modify the lease. He gave me his revisions...I handed him a fresh copy of my lease and said here you go. He wasn't happy but he signed it. Having a tough lease can often keep a tenant in line knowing that it might cost them dearly to break the lease or create damages. I explain to every tenant that it is written for the worst possible tenant and everyone signs off on it.

@Steve A. - congrats on what you are doing to date. However, most everything has it's run and the "sun only shines so long" on most opportunities. I don't understand much about what you are doing but have seen enough online marketing boom & busts to realize there's nothing stable to what you are doing. You might be the less than 1% exception and I applaud you for that but, remember how hard it was to get that job even with an MBA.....I'd be real reluctant to let that go anytime soon. You're doing fine doing both and you've only been doing the online stuff for 4 months and made $150k? That's awesome and I pray it continues for you but I'd be prepared when it doesn't continue to yield.

I'd take the profits you bank now and put it all into real estate..just buy for cash. There are others here who can give you brilliant advice on how to structure that. You're in Indianapolis which has been touted on and off for a decade as a great rental investment market. You, like others including in my own area, think that your market is appreciating. It's really not.....your market is being driven up by hedge funds backed by venture capital groups and when the plug gets pulled on that, which it will because to me their model is seriously flawed, values will plunge and you don't want to be sitting on mortgaged properties. This is just my opinion so take it for what it's worth. You'll see the hedge funds slap all these properties into derivatives and them market them out to pension funds who will get stuck with the junk when it crashes. Real estate investing is and always will be a "mom & pop" endeavor in local markets. I don't believe you'll ever see a true national brand outside of real estate brokerages simply because there are way too many variables. I digress but the point is don't count on appreciation.

Pay your property manager well.....it's the most difficult part of the puzzle and the part that most people don't want to contend with. This is why "turn-key" is so popular because it frees investors from being hands-on. No one will happily or successfully manage properties for very long at much below 8% AND rent it for free if I understood you correctly. Give him or her the 1st month rent and get it rented faster. You might want to consider partnering with a "boots to the ground" operator in your market who has done this for a long time. You put up the cash....he or she puts up the know how....you buy, fix, rent and flip and split the profits. A model very similar to what I do except I do shared housing a whole different animal. I'll cross my fingers for you.....just don't throw caution to the wind...but, if you do and it fails, you're young enough to recover and start again. Most truly successful people have failed repeatedly along the way....including many of us real estate investors. Happy Investing!

Why not just give the tenant a quick call and make sure she is initiating the transfer today. A gentle nudge with a new tenant usually works...or she just might say like mine do sometimes, sorry but I'm getting paid late so I'll pay the late fee. You can do it in a nice way....I do it all the time. I do grant them some leeway. I had a tenant last month who had issues with stolen identity and some unauthorized transfers from his account....he was 3 weeks late with rent and didn't pay a late fee.....and mine is pretty steep.

Here's my late fee:

"LATE FEES: Time is of the essence. If the rent is not paid by the 1st day of the month, tenant shall pay a penalty of 10% of the monthly rent if the rent shall be paid by Resident to Management on or before the 10th, 15% if the monthly rent is paid on or before the 15th and 20% if paid on or before the 20th, plus a further penalty of $10.00 per day thereafter until the rent is paid shall be paid by Resident to Management as additional rent, due and payable each day. Each daily failure to pay such additional rent shall be a separate event of default. In the event any check given by Resident to Management is returned by the bank unpaid, Resident shall pay a $50.00 return check fee to Management as additional rent in addition to the aforementioned daily late fees, with all subsequent payments thereafter due and payable in certified funds."

As to latches - you should have some language in the lease that addresses waivers as a "one-time" waiver and also a severability clause in case a judge tosses out a particular provision in your lease:

"WAIVER: No failure of Management to enforce any term hereof shall be deemed a waiver, nor shall any acceptance of a partial payment of rent (or any payment marked "payment in full") be deemed a waiver of Management's right to the full amount thereof. No term, covenant or condition of this agreement may be waived by Management unless such waiver is in writing and signed by Management."

Hope it helps. I am usually very firm with tenants and they tend to respect that. We have a tenant who lost his job last month and I covered his rent for this month until he finds new work. With shared housing, it's a bit different and part of my model is creating the right "mood" in the house. The house with this tenant is 4 males sharing a home...it's pretty interesting as a major tv show just filmed us and this house for a documentary.....and these 4 get along like they've lived together for many years. Happy Investing!

@Danielle Jones - did you already buy it or is this just one you are considering? Is it going to be a rental or a flip? Older homes are the most difficult ones to work with but the most fun for me....I grew up in a 200 year old home and cut my "handyman" teeth working on them. First consideration would be whether it's in a historic district. Check with the town and make sure there are no restrictions on use. I just spoke with an investor who paid cash for an awesome old house but now found out that the town..and it's a very small GA town....won't let him make any changes to the exterior beyond paint and it can only be used for approved commercial uses. He thought it would be fine as a residential rental and now he's stuck because there aren't that many businesses interested in renting an non-updated office in that area.

2nd, I'd probably look for some well renovated older homes in the immediate area and try to talk to those owners. People who renovate older homes are very proud of their work. They will also let you know about the headaches, unexpected costs and probably are a good source for what subs to you and not use. Sherman burnt a lot of older Atlanta homes down so it's hard to find them in my area but I love them.

3rd, if there is any kind of historic overlay district, you'll be very limited in what you can do with the house, particularly the exterior. You may be stuck with the drafty old windows for example.

You can do blown-in insulation and not have to open up the walls. Back when this place was built, most people had a couple of sets of clothes so closets were 2' wide and just as deep. You can expand these to modern dimensions - just save any of the crown molding pieces as you'll likely not be able to buy any to match. If my brother were there he could hand cut what we need to match..as that's what we often do on our projects for clients in atlanta.

Chat around in your area and you'll probably find someone who sells old doors and windows and the like. He might even have old trim to match yours.

Have fun and keep us posted. If you haven't bought it yet, just realize to take your estimated rehab budget and double it just to be safe! Love to see the video can't you post it here? Happy Investing!

It's best to never advertise with an actual address. We never do...even when we are selling the property, we usually don't release the address until we know who and what we are dealing with. CL is a cesspool for scammers...there are some good deals to be had there...but tons of scammers. We had an owner who tried to rent her property on CL and did so with the address in the posting. She showed it a couple of times and then went on a two week vacation. When she returned, she discovered that someone else had changed the locks and rented the home out to a new tenant. She wasn't sure who it was but it was likely one of the people she showed the house to and she mentioned she was going on vacation. Perfect opportunity for a criminal. It came to light later on that this guy had rented the same house to several people. Sounds insane but it happens and this was in a very nice suburban neighborhood.

Whenever you are renting your own properties, chat with a potential renter, get their basic info, run a basic background on them, send them the application via email and them meet FIRST at a public place. Have them bring a copy of their drivers license and the complete application. We always do it this way with our properties and it has worked well for us. We get less than 5% of our renters from CL but the bulk from referrals or other online sources. Just be extra careful out there and realize that, while you may very honest, others are not and are simply opportunists seeking the chance to take advantage of you or your property.

I ran into a scam in atlanta about 5 years back where a guy would somehow figure out the timing on foreclosures....get in there and put new carpet & paint. He then marketed the properties as rent to own often on CL which is where I found him. I went to a couple of his properties myself. He had very nice ladies at the front door for open house day and I imagine if an agent showed up, the ladies were there to tell them the house was already sold. Prospective tenants say new paint & carpet and a cheap deal for "no credit" buyers. I heard later on that he would "sell" these properties to 4 or 5 people at a clip and then disappear. It amazes me what goes on in the world....truly does. That's probably why one of the fastest growing industries in the US is prisons. Sad but true so just safeguard yourself and your properties.

You're probably best off to head to your local REI group and see if you can find better management by chatting with fellow investors. They often won't tell you who to use...but will share who NOT to use. Dawn Anastasi often posts on BP from your market and might be a good resource although I think she rents and manages her own stuff. The biggest headache and largest blocker of profits in the business is the management end. I don't relish doing myself but we have yet to find a better option here in Atlanta. You might want to consider renting them out yourself and just using the management to collect the rents. You'll probably have to pay the managers more or even give them a performance incentive...a bonus percentage for the place staying rented or performing at a certain level. Investors often get cheap with the wrong things....a good manager is worth their weight in gold or platinum! Let us know how it works out....

Lots of great responses here. To me, turn-key operators or marketers are best described as simply those offering an investor to purchase a hands-free, passive investment. As a potential investor you need to carefully evaluate what they are actually offering you. A large number of investors who are priced out in markets like CA, NY, HI will seek out "turn-keys" as a more viable option. I operate in metro Atlanta and we get daily inquires from cash investors from these states and many foreign countries. As with all types of real estate investing, there is a ton of variety among the turn-keys, some are "boots on the ground" meaning they and their team are very active in most or every aspect of the business model in that market. This is essential to your success.

Take a look at what each operator offers you and what the benefits and risks are. Some will offer you properties that they already own - these may already be renovated & rented...or they might be as-is where you can get their help to repair, rent and/or manage the property for a fee. Others might operate as our group does, to partner or joint venture with you to find, buy, fix, rent/manage and sell off distressed or off-market properties. All of us have mark-ups somewhere...either in the price of the property or in the labor/skill to required turn the property. I prefer a model where the turn-key provider has an financial incentive to perform, meaning they receive the bulk of their return from the property actually performing as promised. Turn-keys get slammed a lot online just like wholesalers do but you'll find this to be the best way to put your money to work in markets you would never be able to reach otherwise.

I would be leery of the whole "rent-ready" property as most of those stay empty for significant periods of time. Look for something that is rented. We do shared housing and that's a whole other animal. A lot of out-of-state & foreign buyers have been badly burned in Atlanta where buyers see values from a few years ago and think that is what they are buying today. The property might be rented already for you but there is no guaranty that it will remain so. Be cautious with the pro-formas as that's just like internet dating - I can't tell you how many times I have gone to meet someone on an internet date and could not even recognize them from their pictures...the marketed image and the reality were never even close. The same is true with buying from afar - as the 1,000s who have bought in places like Detroit and been burned can attest to. How someone says a property is "going" to perform and how it "actually" performs are often totally different things!

If you decide to do something on a property needing repairs, make sure the seller or joint venture (jv) partner will video the property in as-is state and do some progress videos. That is how my group does it and I'll be happy to share our details with you. Video will never lie but pictures do all day long. I spoke with an investor recently who bought a turn-key, paid for repairs and was sent pictures of the progress. Turns out, he bought a property and owns it but the pictures he was sent were never of his property. He paid fully for repairs that were never completed and now has to pay again or just abandon the property. Yes, BP'ers will say he should sue the operator. If you have to run to a lawyer, more than likely the cause is already lost and you're just tossing money into a pit IMHO.

Absolutely get a feel for the group you are thinking of partnering with....even a direct purchase is a partnership in my eyes as you are relying on them to get it done. Passive investing at some level is a great way to go but you can't be passive on educating yourself on the options. All you can try to do is cut your risks and being a part of BP is a good step towards doing that You have some very accomplished operators and investors from all over the country writing and posting here.

If you feel pressured by a hard sell....simply walk away. Make sure you understand each model presented to you as they really can be vastly different. Ask lots and lots of questions....good operators will try to educate you on their product, the process and their respective markets. Happy Investing!

@Marcia Maynard - posting is a good idea for future deals or anyone dealing with rural properties or vacant land...especially large tracts. It wouldn't have worked here as this squatter was already there, living open & notorious for all to see, had the buyer gone to look. It's sounds like the squatter is probably fairly well educated and may have even raised the question of adverse possession. You won't hear of it very often but it goes back to old english common law where the government wanted to make sure that land was used and not going to waste. It's a good idea to check into your state's laws to know the timeframe - CA is a surprisingly low 2 years.....while NJ is the longest at 30 years. So in this case, the squatter probably tried to raise this in court but couldn't prove he lived there openly for 30 years. NJ was once the "garden state" with tons of farms where it would have been easy for someone to try and raise adverse possession so that's probably why it is so long. Posting the land and remaining vigilant about the signage and regular inspections is a pretty good idea especially for those who deal with vacant land.

But CA at 2 years is a bit scary! Some state require that the squatter must also pay the taxes on the property for a certain period of time. Adverse possession often comes up in cases where the corner of a garage has straddled a property line for many years. If you find yourself in this situation ever, a quick solution may be to simply give the person written permission to use that portion of your land...that breaks the time and chain for them to later claim adverse possession and ownership. Understand that someone successfully claiming adverse possession will become the owner of that portion of the land. A little quirk in our historical laws that could cost you if you aren't paying attention!

It's fun to have toys but just be very careful using debt, even with a cashflowing property...to buy or pay for them. If the tenant stops paying or the global economy crashes...you're in deep doo-doo. I was running around with an investor today in my contractor truck a '02 Ranger...he had to hop out of his Bentley to come ride with me. In conversation, he asked if I had a higher end car tucked away somewhere. Nope - just not my thing! I have a bunch of cars all paid for in cash but nothing fancier than '04 Sequoia to carry the kids around and client groups. Like most of you, I keep my money working in rentals or joining partners to buy & flip more.

If you're retired and want to enjoy....good for you...you earned it. My new investor got to run through half a dozen deals with me, wanted to do several off the rip, but we'll do one and see how it goes. After half a day with me, he remarked that I reminded him of Sam Walton who he apparently knew. People in our business often forget that the guy driving the Olds or Buick is the guy with money....most flash has no cash, at least in atlanta. Not always as with my investor today. He loved the Bentley but didn't buy it...he earned his money the hard way but his wife wanted him to drive something at that level so she bought it with his money! Classic...it's all about living the life you want to....enjoy yourself be but very careful with leverage. Happy Investing!

@Bryan H. - I'm confused are your rentals in NC or Detroit..or both? The first deals sounds like a gem but it also sounds like it's in Detroit. We see some deals in the 30s here but, like most, they are $30k rehabs. Most of what we are buying are all in for $50k to $80k and are producing net rents of $1,000 to $2,000 a month after all expenses. Happy Investing!