All Forum Posts by: Justin B.

I'll try to answer your questions simply and to the point.

-- Yes, you are correct in wanting a breakdown.  You don't need it too detailed, but you do need each major piece broken out.  There will most likely be a combination of expenses to take and items to depreciate.  The IRS requires that you do so according to their rules, so for example, you will need to know what part the roof costs.  He may very well be able to provide you detailed expenses after it's done, but you should get the breakdown beforehand so you know you aren't getting taken for a  particular part of the job.  Not that people are crooks, but if the average roof install is $10k for your area and size of house and you see $17k on his quote, you know something is up.

-- As for paying for a bid, that is not common here and I live in one of the most expensive areas in the country.  If it is commonplace where you are, fine (a little research can tell you that), but I've never heard of it.  That's part of sales.  Anyone who's every been in the business that sells anything knows this.

Good luck!

You know I started out with a similar mindset. I didn't have 1,000 SFR's, but I thought 100 was realistic. I got to 13 and shifted over to MFR's. I didn't do it because it was hard. If I wanted, I could have kept going and done as many as I wanted. I have a pretty good system in place to where time was minimal, but at 1,000, you'd definitely have people working for you just to manage. At some point, you'd have your own PM company. Also, tons of things change over time (almost every factor), so more than likely time and changes would derail you. I set my goals one year at a time. I do have somewhat looser goals for 3 and 5 years, but I never go beyond that because I leave myself open to adapt to the changing landscape.

I went to MFR's because MFR's are too easy (once you have the right experience). A 12-unit apartment takes about the same amount as 1 or 2 SFR's. I also moved into a BRRRR strategy because the profit is much larger. So your goals are fine, but you must always adjust goals along the way to fit your true motivator. Mine is cash flow. I'd just rather do 10, 20, 30 (and down the road larger) unit purchases because you can have 1,000 units much quicker that way.

I think you should do 10, then 50, then 100, then after 100 if you are still gung ho about it, go for 1,000.  Why not?  I just think once you have the kind of cash coming in that 100 (or less) would bring you, you just start to see how it easy it is to buy larger and make even more money.

Good luck!

I didn't read every response, but here is the bottom line.  As long as he pays his rent and doesn't violate any terms of the lease, you should do nothing.  Unfortunately, the only time you have the ability to really determine who is there is during the application process.  Once the keys are handed over, you're subject to the law and the lease agreement.  He may have several ways to get money (family, friends, CC advances, etc).  How he does it, you don't care.

What you can do is hold strict to the lease if you want.  If the lease says rent is due on the first and considered late on the 5th for example, you can start eviction proceedings (again, check local laws for how soon you can do so).

There is also the school of thought of working with tenants.  If he's been there a while, never been late, etc, then I'd see if I could work with him somehow.  Maybe waiving the late fee.  In general, it always pays off to be nice (to a point).  However, at some point, you have to get him out if he can't pay rent.  At what point that is, is totally up to you (and everyone on here will have a different opinion).  Your personal situation and how badly you need the rent certain plays into that.

Good luck.  And if you're going to take advice, make sure to qualify it.  Take advice only from people who have been through that situation.  Even then, take their situation into account and formulate your own plan of action.

So I didn't read the other responses, but I have a few questions you should ask yourself:

-- Is it a good deal (do the numbers work)?
-- If the worst case happened and it just didn't rent, would floating the expenses for this property change your quality of life in any way (For example, would paying your mortgage, buying food/clothes, etc be affected)?
-- Do you have any gut feelings that say you shouldn't do it?

If you answered yes to the first question and no to the other 2, then I'd say jump in.  When it comes to real estate, I think the 2 biggest things that will cause it to be a negative experience are stress and it being a bad deal.  The bad deal one is obvious but stress is often overlooked.  The only way to really ensure stress is as minimal as it can be is to make sure the worst case scenario doesn't break you.  Now, with that being said, once you get on in your investing, you may feel very comfortable doing deals that you couldn't float in the worst case scenario, but your confidence and ability to keep that from happening at that point would also be very high as well, but on the first deal (and the few that follow), as prepared as you think you are, you should make sure the worst case is ok for you financially.

It all depends.  If you make good money and the OT is a good chunk, I'd say do that.  If unlimited OT is always available maybe my advice is different (there could be a good mix).  But if you think this is a short term thing, it could be a great way to get some extra cash for future real estate investments.  If it's a short term thing, I think you should jump all over it.

But as with anything, no amount of money is worth unhappiness.  You said a baby is coming and your ability to do a lot of OT once it's here may be gone.  I'd take advantage now.  I have 2 kids and do real estate.  If unlimited OT came my way, I'd decline because I want the time I don't spend on real estate to be with the family.  Just leave your wife alone with the kid for a couple of weeks while you work.  She'll put an end to it real quick :).

So I have 21 properties across 2 companies and I use TurboTax.  There is definitely some "hacking" I have to do in TurboTax in a couple of places to get it to come out correctly (going into forms mode and manually editing, not difficult), but it works.  so far, it's only been for the depreciation pieces which can take some finesse depending on what you're doing.

I would recommend that whenever you get to the point of needing a CPA, I'd have the CPA firm do your bookkeeping and then it's very easy for them to do your taxes.  A bookkeeper at the firm would do your bookkeeping as opposed to a true CPA, but the CPA will review and do the taxes.  Depending on where you live and the number of properties, you could expect $2.5k-$5k/year for this.  I'm not quite ready as it only takes me an hour each month to do the books and maybe 4-8 hours each year to do the taxes.  At some point, the complexity and time involved will be worth the expenditure.

I'm certainly not a CPA, but I'm good with numbers and was able to look up 95% of what I needed to know.  I do have a CPA buddy that I've asked questions of a few times and I send him a gift card or something for his time anytime I use it.  I'll eventually use his firm to do everything, but I'm not there yet.  So it really depends on how comfortable you are with it all (which in the world of real estate can be fairly easy depending on what you're doing.  If you're doing 1031 exchanges, a lot of selling, or other complicated things, it might be worth it.

It's a great concept I've used many times.  I didn't read all the responses so forgive me if I repeated anything.  In your example, that $50k may have only cost them another ~$250/month in mortgage payments.  Now they are making $750/month cash flow.  Again, using general numbers here.

They take that $50k and do it again.  Once they refi that one, they now have $1,500/month cash flow and $0 invested over 2 properties.  I'll let you do the math on the rinse and repeat strategy going forward.  It's basically a "no money down" type concept.  They did tie up their money for 10 months so it wasn't truly no money down, but now they have $0 in it and can rinse and repeat as time goes on.

It's one of those things that there is just no reason to ask.  If you ask what their political affiliation is, whether you rent to them or not, it's a very odd question and you're asking for trouble.  I can't think of a single situation where a person's political affiliation has any effect on their ability to pay rent.  In fact, the "protected" classes actually have more effect on the ability to pay rent than political affiliation, and you still can't ask those questions.  Unless you want to be potentially national news, don't ask :).  That has never been a question I've asked when renting a property up to date and so far hasn't had any bearing either.  In fact, until I saw this thread, I never even thought about it :).

Banks do lend to LLC's for under 4 units. I've done it 13 times. The terms aren't as great as you get under your personal name, but to say it can't be done is just plain wrong. I'm just replying to that part :)

Are you taking a loan with the same bank that has the REO? If not, then yea, they may require a pre-qualification letter from your bank but if not, they should qualify you before accepting the offer. I have several REO's and I've never had to get a qualifying letter because I used the same bank for the mortgage. They wouldn't have accepted my offer if they wouldn't do the mortgage for me.

And NEVER pay asking for an REO. My offers are what I feel it's worth to reach my cash flow goals. I'm typically 20-30% less (depending on price) with my offers. One I went in with 50% less and got it. The banks are not in the business of renting real estate. As long as your offer can pay off the existing mortgage and there isn't huge interest, you'll get it most likely. My last REO was listed at $90k and I got it for $47.5k because it needed a fair amount of work. I offered $45k and we settled on $47.5k.

Good luck!