All Forum Posts by: Nathan Gesner

Tenant's Dog Bites Roofing Contractor...Now what???

Put a bandage on it.

Seriously, I would notify the tenant that the dog must be removed from the property immediately. If they refuse, evict them. Your job is to remove the liability and you can't do that as long as the dog stays.

I don't know of any insurance company that will compensate you for a bad tenant.

Contact the tenant with an itemized list of charges and demand payment in full within 30 days or that they submit a payment plan with the entire amount paid off in 6 - 12 months. If they don't respond within 30 days, sue them and get a judgment. Then turn the judgment over to a collection agency and walk away because you'll probably never see a dime. If they pay, that's bonus money.

Learn to screen your tenants better. I manage over 300 rentals and I've only had a few tenants cause more than $2,000 in losses and none have caused more than $5,000.

 I agree to an extent. I think an even better strategy is to invest in nicer multi-family or smaller single-family. Rentals for under $1,000 a month will always rent well. My market is tough for properties over $1,100 - $1,200 right now but everything under $1,000 is still renting well. I've listened to a lot of gray-haired investors and they say the same thing. 

@Todd Powell my rental market is normally very strong. However, something changed two years ago and it's gotten tougher. This summer was really bad! Houses normally rent like crazy in the summer but this year I had hardly anyone looking at houses and some have even sat on the market for months. There's too much inventory, we lost a lot of higher-paying positions in the area, and more people are buying instead of renting.

@Yonah Weiss, I was referring to your first name.

Craigslist is awful. Try walking for dollars where you walk a neighborhood you are interested in, talk to the people or look for dilapidated property that may be ready to sell, and then start marketing directly to those property owners.

@William D.

It's like an ordinary bank loan but you have to negotiate with the owner on the details.

How much do they want for a down payment?

What interest rate will they charge? Some owners want a higher interest rate than the banks will charge, some match the banks, and others will take a low interest rate.

How long will you amortize the loan? This is how long the loan is spread out. If I use a 30-year amortization, that means the amount I'm borrowing is spread out over 30 years or 360 payments. This is how you determine the amount of your monthly payment.

Will the owner require a balloon payment? A balloon payment is a large payment to pay off the remaining balance.

Here's how it works.

I bought the property for $400,000. The owner required a 10% downpayment, so I gave him $40,000. I had to finance $360,000. We agreed on a loan at 5% interest, amortized for 30 years, with a balloon payment after three years.

Loan amount: $360,000

Interest rate: 5%

Amortized over 30 years equals a payment of $1,933 a month

However, the "balloon payment" is due after three years. After paying $1,933 a month for three years, I'll still have an unpaid balance of $343,000. I will go to a traditional bank and apply for a traditional loan. The bank pays off the balance of $343,000 and then I start making payments to the bank.

Make sense? You can negotiate purchase price, interest rate, amortization length, and balloon payment. There are a lot of options.

It's whatever your agree on and really depends on the Seller's goals.

In my case, the Seller is in his 70's. He didn't want to take a huge tax hit but he also didn't want to finance it for the next 30 years because he probably won't be around. I gave him 10% down and he will finance it for three years. At the end of three years, I'll have to obtain regularly financing. This won't be a problem because I already have 15% equity and expect that to grow over the next three years. I'll also have three years of financial history to show it's a solid investment.

A balloon payment of 3-5 years is pretty common. That gives the buyer enough time to build equity and prove the investment to a lender. But if the owner is willing to finance it for longer, why not?

It's not too early. Yes, you can take more risk because you have the rest of your life to recover but that doesn't mean you should throw caution to the wind and make stupid choices.

I think you have a great opportunity and you sound mature enough to handle it. Start talking to a lender about options for financing. Figure out how to find the deals (agent, direct mail marketing, newspaper, Craigslist, telling everyone you meet about what you are looking for, etc.)

Question: if you can afford the down-payment, what costs would need to be covered by a partner? I think you'd be better off finding a deal you can fund yourself and that supports itself.

Not through a standard lender. You can try owner financing which can produce some very generous deals. I just bought a six-unit property for 15% below market with just 10% down and 5% interest.