All Forum Posts by: Jeff Filali

If you market to pigs, you get hogs...

One thing I've been doing that I have found really helps attract better tenants is raising my property rents a little higher then everyone else.  But when I buy a property I actually do all the updates and repairs and make the properties nice.  I see other landlords around me in low ball battles, practically giving their properties away, 1 month free, no deposit, etc and I raise my rents every property based on having a newly rehabbed and updated property, and I may not get as many calls, but the calls I get are the ones who want to pay a little more for a better property.  I feel like if you want the cheapest tenants in town, you're going to get what you are advertising for.

Example.  I purchased a 2 Bedroom house in a neighborhood where the rents are normally $400-550 for 2 bedrooms.  Mine rents for $625 and I didn't have any problem getting it occupied with great tenants who have never been late one time.

I've always used this same approach though in previous businesses, if you provide better value and service, you can charge a premium.

I've only been in this business a few years, but have purchased a lot of deals.  Mostly from motivated homeowners, and bank foreclosures, which I understand and expect many of those to be in bad condition.  But lately I've been looking at more and more Investor owned rentals, and multis, looking for value add potential properties. 

I am simply amazed at the condition of some of the properties, and of course the PM tends to get the blame.  But to me the PM is basically an employee. Seriously, am I wrong here?  I know tenants do not always take care of properties, many are dirty, but there's a major difference in recent tenant damage (within last 12 months) and issues you can tell have been long term damage that was never repaired over years.

I went into one where you could tell there had been a long term water leak causing the floors to be very soft where you worry about falling through them, and mold all over, I'm not talking just in the bathrooms either. Another one several sections of the ceiling were hanging down.  Another property the tenants had electric space heaters and said the building had a gas leak, so the landlord told them to buy space heaters and deduct it from their rent because it may be next winter before they can fix it.  Many with terrible roofs that look 30 years old, where you can see bare wood in many spots with missing shingles.  Trashed parking lots, broken fences, missing awnings, broke windows... Its one thing if the inside of units have issues, to me its even worse when you can see major issues from the outside.  That's just pure laziness to me.

Than after contacting you wanting to sell, they want full retail value for their property of what it will be worth once you do full rehab, and get the occupancy, and rental rates to where they should be.   Am I missing something here?

Purchase & Sale Agreement and send to Title Company.

1-1.5%+ all day every day in Oklahoma.  Almost all of my holds are around 2%, but those are a lot harder to acquire.

If you're going to do a lot of loans, there's software programs.  I do some private lending and I use Money Lender Professional software, but its like $300 to purchase the software.  There's also note servicing companies who do this for a monthly fee.  But if you're just borrowing from friends/family one at a time, there's probably other free options.

I don't have a problem with anyone charging for their time or legitimate service... My problem is the majority of mentor/gurus who are preying on those newbies who cannot afford it. Many will pressure them into "just put it on your credit cards, and you can pay it off from your first deal". When they know as well as anyone the majority of people will never succeed, or it will take longer then that, and will be in a bad situation 30-60 days from now when the CC bill starts rolling in.  

@Peter Turner and @Roger S. I use the exact same and typically the same grey/grey/white color scheme as well on all my rehab rentals.  Looks great.  FYI, if you have Lumber Liquidators in your area, they have a huge spring sale going on this week on all their flooring.

Call your CPA, everyone's situation is unique.

I mainly use Lowes & Home Depot as well, but if I see deals at others places, I'm not afraid to save some money.   If you have a Lumber Liquidators in your area, they have a huge Spring Sale on flooring this week.  

@Kate J. Almost zero leverage. Almost all my held properties now are rented.  My build strategy is simple really, it all focused on ramping more capital at first without over leveraging. 

>>>>>My Process & Exit Strategy<<<<<

I've never lost money on a real estate deal yet, or even broke even for that matter. I never predetermine my exit strategy on any deal, meaning I don't look at deals as this one is a wholesale, that one is a fix-flip, and that one is one I'm going to hold as rental. In the long run I want to have a lot of buy/hold rentals, but I don't have to look for them, they'll happen.

This is my process and exit strategy on every single deal.

Step 1: Never go above my criteria numbers, for SFRs (65% ARV minus repairs) & for Multi-Units (50x gross monthly revenue), if it doesn't fit that, its not a deal for me. (Note: in your market, your preset numbers may be different, but figure out what they are & stick to them.)

Step 2: As soon as I have a signed contract, it's forwarded to Title Co., and I start offering to wholesale the contract prior to Closing, and I'm not afraid to turn offers down. 

Step 3: if I do not find contract buyer prior to closing, I close the deal myself, clean up the yard & remove any contents, and continue offering it "as is" wholesale for up to 2 more weeks, while scheduling contractors to rehab.

Step 4: If it's not sold by 1-2 weeks after closing, then my GC starts the Rehab but I keep marketing it as "under construction" with list of planned updates and the price raised to ARV. (If the right offer comes mid-rehab, I can sell it & contract with rehab included.) You don't have to wait until the rehab is finished to sell the property. Builders pre-sell properties all the time, so can you.

Step 5: Post-Rehab continue to offer for sale cash or other financing only. Usually I allow up to 15 days at full ARV or even a little higher to see interest level. If a lot of interest but no offers, may let it go a third week. If it hasn't sold by three weeks, I A. Lower Price, or B. Offer other terms in Step 6.

Step 6-A: Offer Rent-to-Own

Step 6-B: Offer Seller Financing

Step 6-C: Offer as straight Rental

Recap-

I never predetermine which deals will be my buy & holds, I look to wholesale or rehab/flip every single deal, because growing your capital only puts you in a better position for more deals. The buy & holds will happen once they don't sell and make it to step 6. Sure there may be ones that are perfect for buy and holds, but I still offer those for sale but may be firm on a higher price.