All Forum Posts by: Karen F.

We know this market very well, spouse has been a contractor and we've been in the business for almost a decade.  We have been very, very conservative.  Previously, everything was bought for cash - OUR cash.  We've done quite well.  Husband inspected, we already know we're getting it for a fair price, probably a bit under what it would bring on the open market.  Husband has spoken to some of the tenants, we know what we're getting into, we know this town well, we know the market there very well.  Mortgage will be first, and we are paying the other 70 percent as cash.  Our lawyer will do title check, husband has already been to the town's office, checked the card, spoken with the building department about the building.  We're going in with eyes wide open.  We just have never been the recipient (or dispenser) of owner financing, don't know anything about how it's done.  I proposed and they accepted 2 yr term at 5% simple interest.

I just looked at your past posts.  I see you are in Washington State, and that at least one of these properties is in Ohio.  I want to cry when I see that you have taken lots of classes and read lots of books (at what cost?), that have persuaded you to buy apartment complexes far away from you, that aren't making you money.  Your opening post should be required reading for anyone who's thinking about buying rental real estate.  The first rule of real estate for poor shnooks like us is,  buy within 20 minutes of where you live, so that you can keep a close eye on everything yourself.  

The only reason that we got into this business is that my husband can fix almost anything himself., and likes to design and do renovations - himself, with maybe a young guy assistant or two.  He is like a carpenter/electrician/plumber/HVAC guy/social worker all rolled into one.  We search for properties together, negotiate deals together, I screen tenants over the phone, he shows, we discuss how to manage problems together, he fixes. Yes, we use licensed tradespeople appropriately when we need to, but they're all people who we found through word of mouth and who don't charge a lot.  I spend many hours researching real estate online, but I really enjoy doing that.  I also work in healthcare, and earned the money to buy the properties.  We've been doing it now for about 9 years or so, started small, slowly adding to our portfolio, buying for cash.  We've turned about half a million into a portfolio worth about 2 million over the 9 yrs, because there's been some increase in value, and it earns us a pretty good living, too, enough to live on.  We NEVER took a single class, and the only book I ever read was Landlording, because I heard the sample lease in it was good, although I did eventually read Rich Dad Poor Dad just cause it was a good "Ragged Dick" sort of story.  Both books were taken out  of the library, not even purchased!

You need to sell these far away properties.  You will never "turn them around" because the property management company is the only one who is ever going to make money on these.  If you don't have handyman skills, stay out of this business.  If you do, or could do the management yourself, sell all these and buy something very close to home.

Also, if you're in healthcare, consider combining real estate with what you already know, healthcare.  Maybe you should look into buying a white elephant near you, and turning it into the lowest possible level group home or "rest home", the kind that is not regulated, where you house people who are on SSI.  These are homes for people who don't require true nursing care, they just need a little supervision.  This might be your niche, that you can do better than most because you know the healthcare side of things.

Wow.  I feel for you.  Do you live anywhere near these properties?  If you don't I would say sell them.  You've gotten into three bad deals, all of them.  Maybe this business is not for you.

It's very difficult to find a good property management company.  This is why our rule is that everything we buy needs to be 20 minutes from the house, and we manage everything ourselves. I cannot imagine letting a property management company run our business for us.  I'm sure we wouldn't make a penny!    Property management companies take fees, but have no incentive to keep costs low.   If a tenant says something is broken, PM can call in a repair person who charges a high fee,  maybe isn't even competent, and since the PM is not the one paying for it, they don't care.  In fact, they may be getting something from the repair person they called in, as a kickback!  And you're out all that money, and none the wiser.

If you don't want to sell, and you don't want to manage the properties yourself, you need to get better property management in place.  Is there a local forum on BP for the area where your properties are located?  They might be able to help you find better property management.  Is there a real estate investors club in the areas where the properties are located, that you could go to?  We have these in our area, and my husband learns a lot from going to the meetings and speaking with other local real estate investors.

If you cannot educate yourself on "how to make your properties produce" (and really, there's no way to do this unless someone who has skin in the game is located nearby), then you have to sell them, at least the ones that are losing money.  And think, even the one that is producing, is the rate of return good on the 100K equity you have in the place?  Could you get more return on that money elsewhere?  Do you expect rapid appreciation in the near future?

If you are tapped out on trying to make these properties run, and it's not working, you really don't have much choice in the matter.

I have only ever bought for cash beforehand on investment properties. This time, because I just don't have enough cash on hand in the LLC that will purchase this property, the owner has agreed to hold a note for about 30% of the purchase price, for a 2 year loan at 5% simple interest, no points, with monthly payments over two years, can be paid off early with no prepayment penalty. It's all very casual - owner is eager to sell, we definitely want to buy it, and we've come to terms on a price that we think is fair. I just have no idea how to do this! No agents involved, just we'll use our own attorneys. Any advice?

So, you gonna tell us which slime bucket did this to you, so that the rest of us can avoid them?  I see that 2 yrs ago, you posted about how to invest 400K.  Hope they didn't get it all.

Please tell me that it was done as a hard money loan with a hard asset, namely the properties, backing the loan?  Otherwise your only recourse is to find their assets and collect on the judgement by freezing bank accounts.  Their homes and cars are probably protected from seizure.

This post should serve as a warning to all who are looking to make money by "partnering" with real estate investors.  If it's not backed by a hard asset with a mortgage, do NOT do it!

Ignore her request to speak with your attorney.  Do not tell her to get an attorney.  Just file all the paperwork appropriately as required in your area. Respond only to requests for repairs.  I assume she's paying her rent, otherwise you'd be evicting her for non-payment of rent, rather than just notifying her that you're not renewing her lease.  Be prepared that you'll be going to court for eviction for lapse of time, because this one's not gonna go quietly.

What's the housing court climate like where you are?  Where I am, lapse of time can easily take 6 months or more, if they're paying the rent.  For non-payment of rent, standard is about 3 months, and they can file all sorts of crap, even AFTER multiple stipulated agreements and an order of eviction!  So in my state, it's definitely worth it to offer cash for keys.  We usually will offer them a month's rent to move out voluntarily.  Sometimes it works, sometimes it doesn't.  

In a LL-friendly state, you don't have to do that.  Just file the paperwork appropriately, and it'll be over soon.

NO! These education seminars are for suckers.  You pay, but you really don't learn how to do it.  And then after you pay, you go and throw your money away on bad investments.  A relative did this - paid for some "teach you how to make millions in real estate investment" course.  Then he went and bought slum properties a couple of hours from home, threw money into them, down the toilet, found out that he couldn't make a penny out of them because the tenants didn't pay rent, destroyed the property, etc.  Finally sold them at a loss, after having poured so much time and money into it.

If you want to learn something, find out if there's a local property owners meetup near you, and start going to every meeting you can.  Lots of old farts who've been doing it forever will be more than happy to share valuable info with you, just for the price of your dinner at the meeting, and a small membership fee.  They'll have much more valuable, relevant info for your area, than would any course you pay for.  And you'll very possibly meet someone whose wife has been nagging him to "sell those properties, already, so we can move to Florida".

Online town property records site - most towns let you search by address.

You're 19?  Do you have a full time job so that you have income?  If you don't have a job, you can't get a loan to purchase a property.  On the other hand, if you don't have income, you can do a flip and the taxes on it won't kill you, because it would be your only income.  If you do have income that would make you eligible for a mortgage (and it's really hard to get a mortgage if you're self-employed), then by far your best bet is to buy a multi, move into it with your family while you renovate it, and quickly be living for free while collecting rent on the other units.  Then do it again, over and over. Honestly, I'd consider just selling the primary residence to fund all of this - except since you're 19, I doubt the house belongs to you.

Who owns the house that you would be taking the HELOC on? Do you? Does a family member? If someone other than you is the owner, and they're willing to do a HELOC on the house to fund your first deal, I would strongly recommend that you do NOT do this! You're a beginner and you're playing monopoly with someone else's money.

If you don't want to go to school, then I suggest you get a job doing renovation work for somebody with a crew doing renovations on flips or renovate and hold rentals.  That way, you'll get some on the job training for what you want to do in the future.  Unless you're already bankrolled, you're really not in a position to do this yet.