All Forum Posts by: Ryan Pyle

I always give tenant references. They are always truthful and fact-based. I give no opinions.

I do it for a couple reasons. The first is that I would want the same courtesy from a landlord who I called for a reference. I'm usually excited when I get a tenancy reference call because so few landlords actually check at all.

Secondly, I want to reward good tenants and show bad tenants that their actions have consequences. Too many dirtbags skate by because people are afraid to call them out. This is my way of calling them out.

I see that you are including the mortgage as part of your expenses. That makes this equation difficult. Here is my assessment:

Assuming $50k/month income, your expenses (not including your maortgage) would be about $25k on average over the long haul. That leaves a P&I of $5k/mo. So, assuming a 20% down payment and a 20 year loan at 6.5%, you would have to pick this building up for about $826,388 including repairs and closing costs. That's $16,528/unit and a 36% cap rate-- all-in. That's one heck of a deal.

In my market, Toledo, OH, you don't even have to have carpet. There is no minimum standard. I know guys that use the cheapest indor/outdoor stuff they can find for Section 8 properties. Personally, I use a cheap, low pile, chocolate brown carpet. I personally think it's ugly, but all my tenants love it because it doesn't show dirt (read this as: they don't have to vacuum).

-We're you strictly buy and hold, flipper, other strategies?
I started flipping properties while I was employed full time so I could build up the capital to quit.

-We're you able to build your real estate business up to match your old W-2 income or did you have to live a more frugal lifestyle?
I make more than I did in my W-2, but I live a similar lifestyle. As has already been said in other posts, this is a very capital intensive business. Also, the cash flows are very inconsistent.

-Did you eventually end up growing your real estate business bigger than it could have been had you tried to work 9-5 and do real estate on the side?
Way beyond! Actually, the single thought that convinced me it was safe to go full time into real estate was, "if I put 50 - 60 hours a week into anything I will eventually be good at it." That turned out to be true.

-Do you miss the stability of a job?
When a big sale falls apart and I was really counting on the money, yes. But then I remind myself how boring and unfulfilling it was to be working for someone else. Like many, I didn't necessarily get into this for the money. I got into it for the freedom of knowing that every hour of every day is being spent building my own little empire and all of the benefit is going to my family.

I don't care what they think their asset is worth. I look at what I think it's worth and offer based on that. If that doesn't work for them, I move on. The only way to truly convince a seller that they are off the mark is to let the asset sit there with no offers. At some point they will realize that they need to drop the price or not sell.

Another point is that Realtors are sales people, not investment analysts. Their job is to move the property. You always need to use your own numbers and analysis.

Are you talking flips, rentals, what?

I'm finding great deals in multi's, mostly bank receivorships and REO's. For single family rentals, there are OK deals, but nothing great. For single family flips, I'm finding nothing, mostly because other investors are bidding prices way up...like $15k more than I would ever dream of paying. In my market, that means where I would pay $40k, the house is selling for $55k. But, that seems to be the case this time of the year every year.

Originally posted by Joey Fontenot III:

I just think there is something to be said for having a guaranteed check every month.

There is, but there is no free lunch. You will be subjected to annual inspections that will cost you money. You will also have to deal with your local housing authority's beaurocracy. I am about 50/50 market/section 8. I try to keep it that way. It seems to me that over the years the Section 8 inspections vary from crazy picky to crazy easy. The last 2 years have been really easy. My typical inspection has cost me less than $200 over the last 2 years. 3 and 4 years ago every inspection cost me over $750. No joke. I'm not sure if that's an ebb and flow thing or if I've gotten to know the inspectors well enough that they try to be nice to me. I'm hoping it's the latter.

Originally posted by Joey Fontenot III:

Two more questions I had were how do you guys with rentals handle repairs outside of a new roof or A/C ( I have heard some people make the tenant cover everything under $50, some split all repairs that were caused by the tenant etc.) and what is the most important part of your screening purpose ( income, general feel of the person, past history) Thanks again

I pay for all repairs no questions asked. And I do it with a smile. I see it 2 ways. First, it's a marketing cost. If I treat my tenants well, they usually return the favor. They also tend to stay longer. Second, if I make my tenants do any of their own repairs, I have no assurances that they are doing them correctly and using the proper materials. Also, if they get hurt while repairing my house they can sue me.

As far as screening goes, the most importnant things to me are 1)what kind of tenant are they? I try to visit their current residence to see if it is clean or dirty, I always call their current landlord...for that I prefer someone who is renting from a professional management company so I know I'm not talking to the applicant's friend, and I always check their eviction history with the local court.

Secondly, I look to see how I can recover any money they will owe me if they skip out or damage the property. For that reason, unless they are on Section 8, they have to have a job AND a long history of having jobs. That way I know that if they screw me, I can garnish their wages. If they don't have a good employment history, I require that they have a co-signer who does.

I would do some time of inventory liquidation business. I got a small taste of this last winter. A local HVAC contractor had installed 107 furnaces in a condo complex 5 years ago. The complex owner called him last winter and wanted to upgrade to 90% efficient furnaces. The contractor took back his 107 80% furnaces that were only 5 years old to help the owner offset his costs. I bought 20 of the furnaces for $100 a piece and sold them to landlords for $250 a piece. Not a giant amount of money, but for some reason I found it to be quite a thrill. I'd love to do those types of deals on a larger scale. I would need some type of storage space, but that is super cheap to come by in Toledo right now.

I smoked the CAO La Traviata last night. Great construction always with any CAO cigar. I thought it was pretty mellow for a maduro.

No one cares about collecting your rent as much as you do. No one cares about your property as much as you do. That's my argument for self-managing your properties. If you are doing low income, I think self-management is imperative. You need to show your face regularly to let them know you are in charge and you care. Otherwise you can lose a lot of money. Just my two cents.