All Forum Posts by: Justin B.

I don't see a problem with it.  I did rent a house in a college area to some students and I'll tell you what I did:

-- First, We did make one parent co-sign and be responsible for the entire lease.  You can also get each kid to have a parent co-sign.   Without a parent (that you have fill out an application) co-signing, I'd recommend against doing it.

-- Make sure to get a good deposit. We required a month and a half total deposit.  You might get lucky, but cleanup will be a little more than normal with college kids usually.  The risk is also a little higher.  Remember, you can't hold the deposit for normal wear and tear, but we did have the carpet torn up pretty bad on ours in one room and it had to be replaced.  That was beyond normal repair and the deposit more than covered that expense.  All in all it was a good experience and with the deposit more than covering the carpet replacement, we were fine and got good cash flow for a year.

I'm sure some people have some horror stories but you can typically get a higher rent if you rent to 3 college kids (for a 3-bedroom for example).  We got abut $150/month higher at that point than we get now (a family is in there now).

Hope that helps.

I have 5 properties in the area.  2 of them came back with reasonable increases and the other 3 we're appealing as they were ridiculous increases.  One went up almost 40%.  I know the Memphis area well and there is no way we're seeing that level of appreciation.  If we were I'd be dumping all of them and taking the cash!

I can certainly see your frustration David, but I'm all about building relationships.  I just simply don't take the attitude of "What can do you do for me if I help you".  I always try and put more into a relationship than I expect out of it.  When you do that, good things usually come out of those relationships.  Having people reaching out is simply just a result of your success in real estate and people wanting to learn from you.  I certainly don't have the time either to "mentor" everyone who asks me a question, but I try and respond (sometimes it takes me a while if I'm busy elsewhere) to whatever I get.

The point is, you never know the details behind who is asking for help.  If I took that attitude, I never would have met a couple of key people who have been instrumental in my own success in real estate.  With that being said, there are some people who are just looking to mooch and want specific information that I'm just not willing to give.  I try and nicely point them in the direction where they can get more information.  I do believe researching specific areas, etc can be done without a bunch of conversations.  Google, and other posts on BP are great places for that, but if people truly have an interest in learning more about how I am successful, I always try and make time for that.  I will always try and guide people in the right direction and share my experiences.

The thing is about Zillow and other similar sites are that they can be dead on or completely off.  I've seen them be within $1k of the appraisal and off by 100% (in both directions).  I wouldn't go as far as to say they are worthless and crap, but if the only thing you base what you're doing is on Zillow, that will get you into trouble.  It's not a bad place to "look", but you really have to do your own comparison looking at houses that have sold that are similar and what they are going for.  While I may peak at Zillow to see what it says, I never put any weight on it and just use it as a hopping off point to drill down and do my own comparisons.

The short answer is never use Zillow as your only resource.

All the information is on the meetup.com site for each month's meeting.

BUILD RELATIONSHIPS.  I put that in all caps because it's extremely important.  Building relationships is the cornerstone of everything you do, not just in real estate, but in all business and your personal life.  And make sure you build those relationships with people you like.  If they like you, they will reciprocate.  If one party just takes the stance of "what can you do for me" it will never work.  Those relationships are very easy to recognize and you just end them.

I have spent the last 15 years of my life with that philosophy.  I find people I enjoy and just build relationships.  Sometimes they are just good friends, sometimes they turn into great business relationships, and sometimes they fizzle.  I can say with 100% certainty if I did not follow that practice I would not be where I am today.

The important thing is to put more into the relationships than you ever expect to get out of them.  Be a good person and treat people well.

Now, in response to your specific question.  Go meet with the person and build a relationship.  You don't have to be "ready" to meet with anyone.  If they don't want a relationship with you, it will be apparent and you'll move on.  Again, if you go into the meeting hoping to "get something", it will almost never come to fruition.  Go into it thinking what you can do for them.  If you think you have nothing to offer anyone, you never will, so don't think like that.

I have a simple response.  How much money can you make by selling?  How much money can you make by renting?  For example, if you can pull $100k out by selling (and it may be tax free if you've lived there for 2 of the last 5 years), and only make $300/month by renting, I'd sell.  You can take that $100k and turn that into $1-2k/month cash flow by buying other properties.

If selling basically nets you nothing, you rent it out.

That's oversimplified of course, but do the numbers.  If you can take the cash you make by selling and turn that into more cash flow than renting by buying other properties with it, do that.

No need for multiple bank accounts.  Worst case, you have 2 if you are required to hold deposits in a separate bank account.  It's all depends on your structure.  If you had three 4-units all held the same way (same entity), as long as the bank account is solely for that business, you wouldn't need but 1 for all 3 (and maybe 1 more for deposits).  Some banks require separate accounts if the properties are big enough with capital for each one, but I doubt 4-units would meet that requirement (It doesn't where I am).

I don't know the area, but the numbers just don't seem like they work.  Even if your mortgage is $2k, you have taxes, insurance, and maintenance, which can easily eat up the rest.  If you're buying to hold, spending that amount of money for such little cash flow doesn't make sense to me.  The disclaimer is that I do not invest in areas like that.  All the houses I have bought have been $100k or less.  I am under contract for a 12-unit apartment complex that costs less than that.  If you think there is value in a flip and you can make some good money there, go for it, but for buy and hold, this one is a walk away based on the numbers.  It doesn't pass my 5-minute analysis.  Plus, that's a LOT of money for 1 unit.  Vacancy is either 100% or 0%.  If it's vacant, that's going to be close to $3k/month on your shoulders when it's not rented.

If this is the only area you want to invest in and you aren't interested in going elsewhere you may be stuck with deals like this, I just don't see the value up front.  Sure, in 10 years it could make you a lot of money.  I'm not discounting things like mortgage paydown, appreciation, etc.  I just don't invest for far down the road like that.  I just don't see this as a good deal, unless I'm missing something.

Like most folks, I'm not surprised by the response.  I actually do all my loans with one bank.  I bank there and get loans through them.  If you haven't done any other deals yet, I don't see what the issue is.  Plus, hopefully, future loans will be easier through them.  If you already had 50 units under your belt, the banks would be clamoring to loan to you hoping that one day you'd move your stuff there.  Then you'd have the advantage.  Until then, play the game to win!  I don't see any negative here to moving your business account(s).  Plus, I assume the current bank you bank with said no to the loan (as that's where I assume you went first) so why not move somewhere that wants your business and is willing to do business with you.