All Forum Posts by: Jeff G.

@Ryan Hasan, keep in mind I'm new at this. I'm in the process of getting my first BRRRR. But, what I can tell you is this:

If you're looking to attract Section 8 tenants (or cannot lawfully turn them away simply for being Section 8 tenants in your state) you need to be aware of this little gem: Section 8 Fair Market Rents. Basically, families in the program are given a voucher for a house with a specific number of bedrooms. The number of bedrooms required is driven by the number of children in the family. Section 8 "fair market rent" is abstracted for a given geographic area. Since the reality is a given city or zip code may have quite a bit of difference in rents and property acquisition price from neighborhood to neighborhood, you can often make more than the fair market would otherwise allow for a given area.

For the wider market: in some areas square footage is king in other areas bedroom count is king. So sometimes you want to finish the basement (which may be more expensive than it sounds because of egress and ceiling height requirements) to add square footage. Other times you close off the garage and turn it into living space, you get the idea.

But, yes, as a generic rule of thumb kitchens and bathrooms kitchens and bathrooms are king. In some areas you can add Master Suites to the list, too. This does not mean you need to granite, etc. Go view rentals online in your target area that seems to be targeting your most likely demographic and see what their units look like.  Make your units look ever so slightly better than the competition without overdoing it.

You probably want to read this book: Buy, Rehab, Rent, Refinance, Repeat: The BRRRR Rental Property Investment Strategy Made Simple. It's available on Audible if that's your preference.

Is that helpful?

@Ryan Hasan, I'm in the middle of buying my first house and my first BRRRR is going to follow shortly on its heels. Here are some tips I've picked up just from working through the process with my wife and having been a long time listener to BP:

Most rentals have a base color of white, off-white, or a light pastel. If your walls are white or white-ish, you pick a darker accent color for all of your trim. It's the other way around if you have a pastel wall color, then your trim is some version of white. Don't overthink this, pick two or three common colors available in bulk that are low cost to you and run with it. The ceiling is bright white, the walls get one color, the trim gets another, stone work gets a third, often darker, color than the trim.

Go with the cheap stuff, just be sure to get the right kind of paint. I can't tell you how many rentals I've seen with pain that literally rubs off the walls. My wife and I have mostly decided on an decorators white for the walls and platinum gray for the molding for our house and for the rentals. We could change our minds but this color scheme or something close to it seems likely.

During the stagflation era (1973-1982) when interest rates were sky high, prices were rising due to a weaker and weaker dollar, and and wages weren't rising to match, how did investors make money? What strategies did they use to compete? What previously successful strategies tended to fail in that environment? What can that era tell us about the present and near-term future? What, if anything, will likely be different this time? Will it last as long as it did last time?

I don't have a crystal ball, same as you. But let's abstract some lessons from history. The only other time in history prior to the present we've encountered stagflation was from 1973 until 1982. So, we may be in for as many as 9-10 years of economic pain. Not to get political, but this time could be shorter or longer depending upon future elections and their implications on national economic policy. I'll just leave it at that.

The safe bet is to be cynical. Assume you're going to have to refinance into a worse rate in 5 years and adjust your plan accordingly. Rents have already shot up so they may be flat for the next few years. Start looking into ways to reduce your costs first and then look at raising rents later, once rental rates have started to climb again.

Some tips:

* Review what your vendors are charging you and try to find lower cost vendors in your area that still meet your expectations for quality.
* If units aren't separately metered, you probably want to look into that.
* If you have laundry on site, you probably want to charge for it, ideally with a card reader so that you can adjust rates if needed.
* Since most land lords have their greatest expense during periods of turnover you might want to find creative ways to encourage tenants to renew their leases and stay longer.

There are a few listed on Meetup.com. See Phoenix, AZ Real Estate Meetups. I don't know the area so I can't vouch for any of these.

It can be hard to find a *qualified* tenant, but generally speaking it's not hard to find potential tenants as applicants. If you're not getting any callbacks on your rentals it's likely you're priced above market. The way you prevent that situation is you figure out what prevailing rents are in your area and you price your rents accordingly.

This is not to say that you rent your unit for the mathematical average of rent in your area for a unit of similar square footage. Amenities matter. If your unit (or building) has more amenities you'll rent towards the top 20% of rents in your area. That is, assuming amenities and the desirableness of the area justify it. Similarly, if the apartment has seen better days and the area is sketchy, you'll lower your price to compensate.

Side note: you may want to read a book called Economics in One Lesson. It covers free market economics in an approachable way that won't bore you to tears. If you prefer audio books, it's on Audible.

New landlords often struggle to find *qualified* tenants that:

1. Have a reliable income source.
2. Have credit scores that suggest they pay their bills on time.
3. Don't have evictions in their history.
4. Don't have anything alarming in their criminal history.
5. Aren't going to beat up their unit.

Things to watch out for:

* Potential tenant is willing to pay you several months worth of rent up front. This is a big red flag and a sign of a "professional tenant." It's also the oldest trick in the book. Often, a tenant will pay those first few months in a large check or money order and then stop paying entirely. Tenants who do this have been evicted before (often many, many times) and may well know eviction law better than your typical eviction attorney. This can translate in to many lost months of rent.

* Large numbers of unrelated people sharing a lease. Sometimes this is normal, such as in an area that rents to college students. It's not a red flag by itself. But, a common issue is for several lessees to move out and stiff the remaining lessees with the bill. The remaining lessees will contest saying, "we can only pay x% of the rent this month." If you accept partial rent you may not be able to evict for the month in which you do. Also, you can end up with "musical tenants" who come and go in such numbers that it's unclear who is actually living in the property. That makes evictions harder and more costly.

What most landlords do is get something called a "joint and several liability clause" inserted into their rental contract. This makes every occupant equally liable for the rent. Also, savvy landlords will insert language into their rental contracts that basically say "nobody can live here that the property manager hasn't done a background check on." There is usually a small exception window of about a week to cover short term guests such as visiting family.

* Potential tenants with dirty cars. Messy is not a protected characteristic. If someone's car looks like they trash the interior, it's highly likely they'll trash your unit.

* Acts like an entitled a-hole from the start. A-hole is not a protected characteristic. If, during the rental application process, the applicant cops an attitude or behaves abrasively towards you or your management staff, it's a good sign they're unhappy with life and want to drag others down to their level of misery. Feel free to skip them.

Go to your nearest REIA and start talking to people and get to know them. You may want to look on Meetup.com and Facebook for meetup groups in your area. If all else fails, start your own meetup.

I don't have a specific recommendation in mind, as I'm not active in the Cleveland market. But, I do have some general suggestions that might help:

You can use https://lawyers.findlaw.com/, https://www.legalmatch.com/, and https://www.justia.com/ to find a lawyer. The first two have Amazon.com-like ranking systems.

Some eviction lawyers will work uncontested evictions for a flat rate. Obviously, in that case it's still a good idea to have a frank conversation about what happens if the tenant contests the eviction process. Some lawyers are "full service" in that they can also handle the post eviction collection process for you as well. That is, they send the legally required number of collection attempt letters — often by certified mail — to the former tenant and then seek a judgment, followed by a levy of the former tenant's bank account to collect missed rents and legal fees.

@Brad McCoy, try posing in the HUD, VA, and Tax Sales area of the forums. Most people who are just starting out don't have problems of this caliber. You need specialized assistance. 

Thanks!

Yeah, I've been to CT REIA a few times. I've met some good people there, but I never felt like there was enough time to actually network with others. Very often it felt like a pitch fest, usually for their several thousand dollar wholesaling course. I could be convinced to go back.