All Forum Posts by: Trent Honea

Hindsight really is 20-20.  If I could go back to when I was 25 and first considered investing in RE, I would ask "Why not now?".  It took me another 15 years or so to actually "pull the trigger" and get into RE investing, and all I see other than missed learning opportunities is all of that lost compounding of interest.

You don't have to go big, but get going!  One small deal is all you need to start learning and start growing your portfolio.  Don't look back 20 years from now and think "Why didn't I start sooner?"

You could also probably find an agent who would help with the paperwork for a small fee, under these circumstances; maybe something like $100-250.  It never hurts to ask, and they should get something for their time and expertise.

Thanks everyone.  I'm going to let my insurance company handle it.  

For now, I'm planning to reinforce the existing cabinets myself today.  Since it's a safety issue, I think it should be addressed now, not later, unless it's unwise for some reason for me to do that.  

Also, we don't have licensed handymen in this state, and I don't know of one I'd trust on short notice.

Thanks to everyone for your responses.  I probably should have given more details, but I was a bit stressed when I posted.  The cabinets were installed according to supplied instructions, but in hind-sight I should have added screws just to be safe.  I don't know why they did not suggest that, unless it was for appearance, which should never outweigh safety.  Sadly I did not keep those instructions, however, and Home Depot has stopped selling that model.  In fact, I think they were on clearance when purchased.

I'm going to the property today to add screws with fender washers to the remaining cabinets, into the studs not the drywall.  I want them to be safe, and I have no problems paying for what was damaged, including a doctor visit.  I'm just afraid this is step one in either a lawsuit or in trying to "get as much as possible" out of me.  

Background:  The tenant has made unreasonable demands since day 1 and I regret ever renting to them.  For example:  The house was build in the 60s, so it has two-wire wiring and two-prong outlets in a few rooms.  It has been upgraded to 3-wire, 3-prong wherever possible and anywhere that has had remodel work done, but there are still a few two-prong receptacles where it's not feasible to re-wire without major expense.  He wasn't in the house more than a couple of weeks before he was demanding that I have it rewired "because old receptacles are unsafe, or he would get a lawyer".  (This is in a city that was doing full inspections between tenants with a focus on electrical before utilities would be turned, on because of an incident elsewhere where a tenant changed wiring and caused a fire for the next tenant.  They stopped the extra inspections, but this house has been inspected by the city multiple times since purchased and remodeled.)  In this instance, I had to show him the electrical code where it shows two-prong outlets are acceptable if original installation before he would back down.

I relate that story, and there are others, not to get into a discussion of electrical safety, but to give you an idea of the tenant.  I have been eagerly awaiting the day he moves out, but he has never given me sufficient grounds to evict so that's not an option, and I would not do it now anyway.  Eventually he will move and we'll both move-on.  But I fear he'll get a billboard-ad lawyer and see how much he can get out of this if I give him too much information.  I want to "make it right", but not give him anything that could be used against me in court if he does.  So I'm walking a fine line with him.

I have a few pictures of the cabinet that failed, including it being stuffed with very heavy stoneware plates and crockery. The weight of the contents most likely had much to do with the failure, as it appeared the integrity of the box was compromised by the base pulling out of the groove in the frame and distorting due to weight.  In other words, I think the cabinet box would have failed even with screws, as particle board just can't handle that kind of weight.  But that's not what happened, and now I'm trying to deal with the situation without making things worse.

Tenant called last night.  Kitchen wall cabinet fell when wife was opening it.  I went over there, and two, two-door cabinets were in the floor with a pile of broken stoneware, ceramic mugs, and glasses.  Tenant (the wife) said she was fine repeatedly.  I offered to reimburse for the cost of replacement dishes and come back to add screws to reinforce remaining cabinets.

Tonight, tenant texted me that he does not feel safe with the cabinets.  That I should replace them all since if one fell more could and someone could get hurt.  And also wife has a sore shoulder and some swelling and I should pay for doctor visit.

Cabinets were replaced in 2011, are from Home Depot, and were nailed directly to wall studs in multiple locations.  They are particle-board type and not heavy-duty, but have lasted through 4 or 5 previous tenants without incident.  Also, the part that worries me most, is they were installed by me.

Help, what should I do? Lawyer-up, let insurance deal with them, or what?

@Chris Soignier I agree. I'm a DFW native and I focus on West Fort Worth to Weatherford for my buy-and-holds. Even here in the West-o-plex the market is going pretty crazy. I submitted an offer down the street from a property I own in October, and offered list / market price. It was priced just right to cash flow and return a decent ROI for that area (about 10%). I lost to someone who offered 10K above list CASH. I don't blame them for taking that offer, but it's hard to compete with that.

I can't decide if it's a bubble or if we're just on the upswing of the the pendulum.  If not a bubble, I think we've got to be nearing the peak for appreciation in B/C areas.  If the market keeps climbing, I might have to think seriously about selling some of mine and taking the profit, but then I will have to hustle for new deals.

I'm not going to tell you what to do or even what I would do as our situations are different.  I would suggest that you consider several things before making a decision:

Financial Goals - Have you reached them?  There are mixed blessings here that need to be considered.  Paying off the properties would reduce long-term risk.  You say you are retired, so that's something I would suggest considering, reducing debt risk.  However, having a higher monthly income is also a form of reduced risk, as is owning a larger portfolio which can more easily absorb temporary set-backs (like a large cap ex) from a single property.  (A side consideration here are other goals such as family, lifestyle, stress reduction, travel, or whatever apply to your situation.  I could probably write 10,000 words about goals alone and barely scratch the surface of the topic.)

Market Conditions - Are there opportunities in your target market that are appealing?  In my target market, for example, I have to really hunt to find a decent investment, at least that fit my criteria.  I will probably start paying down mortgages on mine until the market changes, until I find enticing opportunities, or until my goals change.  I am a few years younger than you, have 2 school-age children one of whom is approaching college age, and am not retired YET but am nearing that point myself.  I want to grow my portfolio larger, but am not finding deals as easily.  Your situation will of course be different than mine or anyone else's.  I also assume since you are from Killeen that your tenants may be military or support people from Fort Hood, or they are at least among your potential customers.  With that base being a major area employer, what's going on there would of course need to be taken into account.  I don't know what's up, but I'd bet with recent changes in Washington, the military will be impacted in some way.  Just something to keep in mind in your situation, of course. 

Opportunity Cost - Tying up the capital in paying off a property could make it more difficult to act on a great opportunity that comes along.  There are so many possibilities here that I'll leave the topic for others to really cover, but I'll just mention a little.  You stated that you are considering paying off both properties over 18 months.  Alternatives include buying another property or more than one, taking cash out, etc.  Another option to consider is paying off one of the two, then re-assess your situation and the market.  I'm assuming here that if you focus on paying off just one, it will only take about 9 months.  Then you can reconsider all of this from that point with a stronger monthly cash-flow and see if the situation has changed.  (This is probably the approach I am going to take with my own investments, at least unless a great opportunity comes along.)

Cash-out ReFi - You could always cash-out refi as already suggested even if you do pay mortgages down, but refi takes time.  And also being from Texas, having gone through a cash-out refi myself, we have challenges others don't in this area. Due to our poorly-worded homestead protection laws, many banks simply will not underwrite cash-out refi of non-primary residence properties in Texas.  It's a real challenge to consider.  If you are interested in this approach, talk to your bank or a mortgage specialist.  You may have to talk to several before you find one that will work with you on this - I did. It's not impossible, as some major lenders will claim, but it is not as easy as in other states.  I have actually had loan officers from more than one major lender (BoA, Wells Fargo, and others) tell me it's illegal to do in Texas, which is just not the case. It's difficult but not illegal. For example, there's an 80% LTV cap, mandatory appraisal, minimum credit score, and limits on what the funds can be used for, and the list goes on, all written into the state constitution.  You also cannot use cash-out refi funds from your primary residence to purchase investment property.  This is intended to apply specifically to homestead property (primary residence), but many lenders interpret the code to apply to all residential property in Texas.  The wording of Texas 50(a)(6) is just vague enough to make many lenders wary of these loans, which makes them harder to find, and the terms are not quite as favorable as in other states.  It can be done, but it's harder than I would have thought until I went through the process.  Pushing it through as fast as we could, it took over 2 months to do, and often takes longer according to my mortgage broker.  (Yes, I found one that was experienced with this process and knew how to get it done, finally.  And that 2+ months does not include the 3+ months I spent trying to find a lender that would do it.  I found several that started the process saying they could do it, only to have someone up the hierarchy from them turn it down.)

Time and Work (stress) - I'm assuming since you are retired and have 8 units that you self-manage your properties.  If your portfolio grows, so will the calls on your time to manage.  Again, only you know how much you want to take here.  If you are not self-managing, this consideration is not as large, of course.

I hope you find this helpful, although it's is quite a bit longer than I intended when I started writing.  I have been considering all of this myself with my portfolio, and have not come to a firm decision either.  Whatever you decide, I wish you the best.

Your price is too high if it was rent ready for this market.  With rehab needed it's WAY too high.  This is Parker county, not Dallas county.  Prices have not gone up quite that far here yet (I wish they had, I'd start liquidating my portfolio!)

Regards,

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