All Forum Posts by: Jeff Takle

Hiya and welcome. You may want to check out some of the local landlord/investor groups if that's your thing. Usually great information passed at the meetings. As long as you're prepared that someone will be selling you something every single week, it's a bearable situation that provides good connections and some great tax/investing information.

AREI-WIN has a meeting in Andover, MA, not too far. http://www.arei-win.com/investment_meetings.html

And you can find 5 local affiliated members of the Massachusetts Rental Housing Association at: http://massrha.nonprofitoffice.com/index.asp?Type=B_DIR&SEC={FBE6E635-6C2F-4CC3-BDDB-F5B2731D2916}

Very cool idea. We were having this conversation just last week on whether and how to integrate SMS into our maintenance request process as a means to get notifications faster to the property owners and vendors. Like you said, not everyone has email or checks it every 10 minutes, but everyone has a cell phone! What better way to communicate to the people who need it that you have a maintenance emergency?

Or, like you said, that rent is due! Another good example of leveraging existing technology to do our work faster and more efficiently.

Great! We've gotten really good response and are going to select 20 people this week and next to start beta testing. Testers will get $500 worth of free services in return for participating in an 8 week test period. All you have to do is use the system and answer 10 questions each week for 8 weeks. That's $500 in value for answering 10 questions a week. Can't beat it.

If you are interested in participating, please PM me or reply to this by Sunday, May 14th. Testers will be selected in order to represent a spectrum of likely users and all will get free use of the product for 1 year's time.

Thanks!
-Jeff

Tasigurl,

I'd add in a few things. First, spending a little money to get set up right can often greatly reduce the amount of time you have to spend on your properties. If a $40 piece of software saves you 1 hour over your lifetime, it's probably paid for itself. If it saves an hour a month, it's definitely worth it.

Second, I disagree with all cash's thoughts on the separate checking account. While it's great to watch margins and not to overspend where unnecessary, you will find it much more difficult to survive an audit if you commingle all your personal funds with your rental property expenses. It will also make it considerably more difficult for you to understand exactly how much money you are spending on the property, when it's being spent, and what owning the property is doing to your bottom line cash flows. In addition, it will probably make it much more complicated during tax time. This will likely either result in you paying an accountant $1,000+ to do your taxes each year (large, unnecessary expense) or spending many hours reassembling your records to do your own taxes. In addition, you are MUCH more likely to overlook potential write-offs without keeping your finances separate. My recommendations:

-Get a separate checking account for each property. They're free and if you keep them all with the same bank, online banking should keep it relatively simple.

-Deposit all rent received directly into the specific property's account.

-Have your mortgage(s) for each property drawn directly from this new checking account (instead of from your personal account).

-Use the debit card for a property account to buy all your repair materials, painting supplies, gas when you drive to visit the property, credit checks for the tenants, etc. All you income and expenses will be recorded in a single, simple place.

This will justify to the IRS that you are running your rental properties like a business, are reporting your deductions properly, and are not trying to hide anything. It will also provide you clarity on what your money is doing. Without this knowledge, all your "ROI" calculations are pretty useless since you're essentially sketching out a budget but then never checking to see if your spending looks anything like what you budgeted.

In terms of what software is out there to help...It is difficult because many of them are complex and expensive, I would recommend trying one with a free trial period that allows you full use of the product without having to yet fully commit or spend. Without being self-serving too much, I think I can help you out on that front or at least point you in the right direction--please PM me and we'll talk on the side.

Credit checks will range between $5-$35 each and you may also want to consider doing criminal checks and landlord registry checks. There are hundreds of vendors online. RentGrow, Equifax, AMS Ties, Mr.Landlord, SafeRent are all big. Or find a software package that does the rent collection, notifications, invoicing, maintenance requests, AND credit checks online for you!!! :D

Jeff

In addition, a lot of the EFT places online will also represent a check up to three times for no extra fee to try and get it to clear. If it does clear, they add the NSF fee on top of the rent and pull the whole amount out. The net to the landlord is the same (they get paid full rent) but the online company collects the NSF fee from the tenant.

In addition, we're working now on a "guaranteed rent collection" program which I think is going to be HUGE in the rental market. It costs a premium, of course, but basically we collect rent and pay the landlord up front, regardless if the tenant's check clears or not. We do this by partnering with several debt collection companies and two banks to reduce our risks, increase collections, and reduce costs to the landlord. Ballpark costs, if you had a property with 10 units, it might cost $400-500 / month to guarantee rents across all of them. Not cheap, but if you have higher-risk rentals, it's well worth it. I'd say this will be the next big wave after electronic rent payments, and is maybe 2 years away still from the mainstream. Neat stuff coming!

Sorry to say but I agree that it might be too costly to pursue the money and you may never see it even if you get a judgment.

I hate having to use lawyers sometimes, but they should really be used any time you're buying an option or doing anything you haven't done a bunch of times before in order to protect from stuff like this. A $300 review by a good lawyer would likely have prevented all this.

Another option is to find a lawyer now and have him draft a letter to the owner stating that you're taking her to court for the $1,500 plus whatever else you wanted to seek, but would be willing to negotiate a lower amount to settle out of court and avoid legal fees on both sides. Might be able to squeeze a little out of it that way.

Good advice. In addition, you will probably be able to grab some financing using a "no doc" or "low doc" loan. These come with higher interest rates, but they don't verify much/any of your information so you'd likely be able to get something. Here is the basic hierarchy of low documentation loans:

Full doc loan -- normal interest rates
Verified income, verified assets (VIVA)
Verified income, stated assets (VISA)
Stated income, verified assets (SIVA)
Stated income, stated assets (SISA)
No doc loan

Sliding up the scale will reduce your interest rate. No doc will be expensive, but it's a way to get a few hundred thousand dollars (may be capped at $417,000-ish). Not all lenders offer these programs so you'll have to shop around. Last suggestion: be totally honest with your lender mortgage broker about your situation, age, income, etc. If you mislead them, it will likely come out in the process and you'll miss closing dates, sales will fall through, etc. By the same token, no need to gush all the details up front. Just say you're seeking a no-doc loan, with stated income/assets and then just answer their questions as they pose them to you. Good luck!

I beat the same drum all the time, so I apologize, but...

Do a search on this forum for "LLC" and read some of the other threads on investing through LLCs. I'm not sure why you'd need to develop a business plan for presentation purposes if you wanted to invest through an LLC. Presentation plans are used for getting financing and a bank is going to look straight at your personal assets if you're using an LLC. If you're trying to create a REIT type experience, there are a lot of SEC rules so make sure you're not walking on those by selling "interest" in the LLC in a way that violates them.

If your goal with the LLC is to hide ownership, consider using a series of trusts, which can hide benficiary. If you're looking for legal liability protection, see some of the threads on this forum.

Doing a business plan right can take a LOT of time. I'd just make sure you will see specific benefits from doing so before going through that process. I may also just be ignorant on how local banks might take a bp as justification for lending. Has anyone done this?

Also, San Francisco seems unlikely to bottom out totally so you're likely to be able to sell your home for a profit whenever you do decide to move away. I agree with all cash. No reason to sell if you have to move into a smaller place, further away, unless that's inherently what you want to do anyway. Also, SF market rents are still way behind home prices and it's WAY unlikely you'll get $6,000 rents for a typical home of 600-750 range, so it's no good as a pure rental.

My thoughts: Don't get caught up in the hype of selling and "making money" on your home if you still want to live there. I did an investing trip out to SF last September and we couldn't find anything under 700k for even the most basic single family home in and around SF. Sell it when you're ready to move to Arkansas and live high off the profits.

Yameen,

To address another one of your questions: yes, you may lose the deal if you have 100% financing to someone paying more cash down. That's a risk. But, if you have no cash to put down, it really isn't an issue--you don't have options. Things you can do to help your negotiating position:

-Learn something about the seller and write a cover letter to your offer that somehow connects with them. "Having recently divorced, I am rebuilding..." or "When I was in the Marines (like you), ...". Sometimes that makes a personal connection that's emotional, which always trumps rational.

-Get your lender to write the pre-qual letter and title it a "Fully Approved for Financing" letter. The guts of the letter are the same, basically you are fully approved as long as everything you told them checks out. It's completely non-binding to the lender but the seller may see two offers, one "pre-qualified" and one "Already fully approved for the loan" pending verification. The second offer looks stronger.

-Find out something about the seller and structure your offer to meet their needs. I.e. if they want to sell now but stay in the house for another 3 months, include a blank post-occupancy settlement agreement in your offer and let them know you're open to that idea.

-Consider striking some clauses in the agreement. I hate suggesting this because it greatly increases your risks, but you could forego a home inspection or--much better--do a home inspection "For Informational Purposes Only" which means that you won't nickel and dime them for every bent pipe or dirty outlet. Nothing really prevents you from going back and asking for minor repairs after the home inspection FIPO, but it makes the seller feel like you won't and you still get a professional to tell you if there are any major issues with the house. The seller is still obligated to disclose or disclaim any safety or major structural problems, both of which may be found during the inspection.

-Offer to pay for a professional moving company for the seller. Everyone hates moving. Make it easy by shelling out $2,000-$3,000 for a mover. Make sure you're not moving a 6 bedroom, 4 floor house before you suggest this, though!!!