All Forum Posts by: Shera Gregory

First thing is to check with your broker on what they require. The primary message is that you are not soliciting for business from anyone who is already working with a realtor. How that is worded can vary. It's not that you are just letting people know you are a realtor, it's that you are letting them know that if they are already working with a realtor you are not after their business.

I would say no, it's not. Some landlords put a provision in their lease that explains what happens if the tenant wants to break the lease (a lease-break fee). This is different from the security deposit which has a different function. You still need the security deposit to cover damage.

If there is no lease-break fee in the lease then, in effect, the tenant is on the hook for the full amount of the lease. For example, when renting for $1000 a month my lease says that the tenant agrees to pay $12,000 to be paid in monthly increments of $1000. However, in reality nobody ever pays that full amount (ie leave after 6 months and pay you the full $6000 remaining). Often a lease break fee of 2 months rent is listed. Of course, this has to be in line with state laws, local regulations, etc and I'm not offering legal advice, just sharing my experience as a landlord here in Richmond.

That said, I would offer to use whatever portion of the security deposit is not needed to cover damage toward the amount owed by the tenant not fulfilling their obligation to pay 12 months of rent. That's usually about the best you can hope to get. That's why some landlords use month-to-month leases from the beginning. The 12 month lease winds up putting more of an obligation on you as the landlord since tenants often feel free to leave no matter what they signed.

Great question! Here are a couple of things to think about as you make your decision. When you leave your current company you can roll over your 401(k) into a Solo 401(k) that you create in a business entity you own. This is not difficult .. check out Sense Financial and other companies who will do all the paperwork for you. Once you are able to control the investments you can do things like private money lending with these funds. That would give you another way to network with other investors in your local market. It doesn't make much sense to own real estate in a retirement account since you don't get the tax benefits of depreciation, writing off expenses, etc. But having the funds to lend to other people will bring you into the orbit of those you can also do deals with in other ways. I don't mean a direct quid-pro-quo which could be considered a prohibited transaction but simply "being a player" in your market.

I would also recommend finding out if you can designate your current contributions as ROTH contributions. The company match will be non-ROTH but you may be able to make contributions now that you can use to invest which will not be taxed when you are ready to withdraw.

Another way to look at your options is this .. to learn how to play golf some people will want to pay for private lessons from a pro and others will want to put in as much time as possible hitting balls and playing with others who can provide tips "on the fly". It's not that one way is bad, just different. I know some people who say they never would have gotten started if they hadn't gone with one of those very expensive programs. So you need to know yourself ... would this jump-start you in some way that you wouldn't manage otherwise? If you feel the answer is yes, then I'd still advise caution since the "yes" may be coming from the idea that such a program will give you everything in need in a nice package and that's just not the case. You still have to put in the work regardless of whether or not you have a program (or golf pro) showing you the way.

I agree 100% with the idea of bringing on someone to your team who can help with the management. You can hire a virtual assistant, a "real" assistant, your neighbor's kid ... whatever you would feel comfortable with. So at least you have someone that you have trained to "be you" when you are not there or don't want to be there to "be you". Find a good solution for taking maintenance requests. I use cozy.co for collecting rent but my understanding is that you can use this for maintenance requests too. Then you can have your assistant keep tabs on those. 

However, I assume that much of the stress comes from the uncertainty of the income vs expenses. Any unplanned vacancy or big ticket item can punch a hole in your financial plans. It will take time, but setting aside more of your income to help cover those unexpected dips will eventually build up enough of a cushion that you won't worry as much about those things happening.

Finally -- if you aren't doing it already start networking with other local investors. You don't need to spill your guts. And do keep in mind that folks generally try to put a better spin on their business when talking to other investors. But you will find some like-minded souls who understand the challenges.

Good luck!! You are not alone!

Hi Tyler --- are you connecting with investors in your local area? I have been doing seminars in my area based on my spreadsheet analysis of potential flips and rentals. And, of course, using powerpoint slides for the presentation. Maybe something like that would be useful in your area too.

I know there are areas where you can pull these numbers so I wouldn't dismiss the opportunity just based on the home value. However, I agree that it is likely to be difficult to find a re-fi option for such low values. Have you called your local banks and credit unions to run this by them? My strongest recommendation is to confirm that you will have the ability to re-finance. You may have to combine the two under one blanket loan but even that could be close to the minimum that the banks will lend. Also, for the expenses I think that "replacement reserve" is your capex budget. This is only $600 per year or $6000 over the next ten years. Do you really believe that you will only need to put another $6,000 into each property over the coming ten years? Have you gotten an evaluation of the big ticket items and how much life is left? HVAC, Roof, etc? It can easily cost $2,000 in paint, flooring, etc just for one turnover when a tenant moves out. 

Assuming that you have looked at demographic trends to select a good location for your out-of-town investing and if you want to "get in the game" these could be reasonable options. Just realize that you may lose money in the long run if the expenses are higher than expected.

Do you own those free and clear or is there a mortgage on any of them? If you own them free and clear then you can get a mortgage on one or more of them. Best option will be talking to a local small bank that keeps their loans in-house instead of selling them off. Another option is getting a HELOC. Some small banks will do a HELOC on rentals up to about 75% of appraised value. You will need to call around to check. However, most banks won't do a HELOC (or second mortgage) if a different bank has the first mortgage. If you are starting from scratch or paying off an existing mortgage you could consider a combination of a mortgage and HELOC (again with the total limit around 75% of value). The HELOC can be good if you will use the funds sporadically so you are not paying interest when you don't need the funds.

Be sure to check on whether or not you will be able to sell off individual properties later on. The banks may have different descriptions for this. I believe that one is the "acceleration clause" but maybe other folks can chime in here to explain that better.

Also consider the liability aspect. If you are not using an insured contractor then all liability falls on you if one of those guys gets hurt.