All Forum Posts by: Wade Sikkink

I have two suggestions.  First would be to find a different bank.  Specifically, talk to bankers at the smaller, local banks.  They often have less strict lending rules and put more weight on getting to know you vs. strictly the numbers.  If you can get a local banker to trust you, you can get a lot of leeway to do more deals.

The second is to trade up properties. I'm not sure what your current 5 properties are, but if they are all SFR's then maybe sell a couple and 1031 them into a 4 plex. More units but fewer properties. Ultimately if you want to keep growing in residential real estate you will have to make the move into multi-family. Maybe that time is now.

Good luck.

Consider putting in a coin operated laundry.  Then you don't have to change the rents and the tenants can use it or not.  Tenants can be hard on common area laundry's so getting commercial, coin operated machines would be a better route to go.  Maintenance on laundry machines can be a killer, and if you don't promptly repair them, your tenants will be mad that you raised the rent.  If a coin op machine is down and it takes a few days to get it fixed, oh well.

Good luck.

Make your life easier and include this in your application.  Our application has a section for previous landlord reference information and the disclaimer/release they agree to when they sign the application notes that we are free to contact the references they provide.

We have always had good luck when we call to check landlord references.  It's amazing that people will put their current landlord info on the application when they are behind on rent.  They must think that no one will actually check those references.

Agree with @Jay Hinrichs Waste of time.  You can't get blood from a turnip.  Even if you get a judgement you likely won't get any money.  Unfortunately this is often just a cost of doing business.  Your time will be better spent getting a new, better tenant in the unit.

We don't even look at credit scores.  We verify their income to make sure they have 3x the rent and we ask for past landlord references.  As long as their past landlord references check out, then we're fine.  Credit scores can get mucked up for a variety of reasons.  As long as they have made a habit of prioritizing paying their rent, then we feel our risk is low.

Hi Bill.  I think the answer depends on your goals.  Here's what we've done.

About 4 years ago we got back into real estate after a break of several years and bought a small apartment building.  This building is great because it produces reliable cash flow and a single vacancy doesn't hurt much.  It provides a good base for us.

This year we've started adding SFR's to our portfolio. We bought one in April and will be buying another next month. We're going this route for a couple reasons. First is, in our preferred market, there are not any multi's available, and the construction costs are too high for us to build one. The SFR's added an appreciation angle to our portfolio and broaden our base of potential renters. Our apartments have a couple families that live there but it's mostly single people. The SFR's have higher rents, and therefore attract a little different renter.

The multi cash flows really well, but likely won't appreciate at a very high rate. The SFR's also cash flow, but will provide more of an appreciation opportunity. Overall I like the diversification. Also, when you're looking at a portfolio of SFR's, they behave more like a big multi in that no single vacancy can hurt you that much.

Good luck.

It's hard to understand, but some people just live that way.  I'll offer two examples of how we handled chronic late payers.

First was a gal that didn't really have her act together.  She got behind one month, but assured us she would get caught up by the 20th and did, including the late fee's.  A couple months later she got behind again and didn't get caught up until about a month and a half later.  Again, she was fine for a couple months.  Third time she told us she was going to be late, we gave her notice and kicked her out (she was month to month).  She was in a downward spiral and wasn't going to make it out.

Second example is tenants we still have.  They are late probably 6-8 months of the year.  They have lived in this apartment for 6+ years and just don't manage their money well.  The guy is a flooring contractor and doesn't get paid on a reliable schedule, but makes enough money.  We simply allow them to be late, and they always settle up by the 15th or 20th of the month and always pay the late fees.  We collect hundreds of extra dollars a year in late fees from this tenant.  I don't bother with posting notices, etc.  I guess you could say we have an understanding....

Bottom line is that how you deal with late payers depends on your understanding of the real situation and your own tolerance with not receiving that payment strictly on time.

You can force appreciation on multi's.  We've done it by rehabbing units as they turn over.  3 years after purchase on a 14 plex it appraised roughly 150k higher than when we bought it.  Primarily because we had raised rents and completed some significant deferred maintenance.

With regards to the vacancy issue I would argue that a portfolio of SFR's is no different than a multi. If there is a vacancy in the portfolio, then the cash flow from the other units carries that vacancy. Just the same as having an apartment vacant in a multi. In fact, we've started adding SFR's to our properties for some diversification. The risk on each individual SFR is low because the overall cash flow can carry it if need be.

Buy and hold is a get rich slowly game.  You need to be realistic.  Snowballing the mortgages works, but you have to get up to a certain scale for that to accelerate things.  Time is your friend as your tenants pay down your mortgages until one day you wake up and have paid off properties.  I would recommend the shortest mortgage terms you can stomach.  15 year loans should be the goal for everything.

Good luck.

I would put the two tenants on the lease and have the community as a fully liable co-signer.  Conduct your background checks on the tenants as normal.  This way, the tenants are individually liable for damages and paying the rent as well as the community.  If they tenants don't appear on the lease, then they may not have a sense of responsibility to take care of everything.