All Forum Posts by: Will Kenner

@Earl Gaines Awesome getting 4 units with 3.5% down and house hacking. Best way to build the rental portfolio. Well played!

@Llewelyn A. Great story and so true. At the time, it always feels like prices are outrageous and we're buying at the peak. Yes there can be fluctuations, but fast forward 10+ years and it becomes "I'm so glad I bought when I did!" 

We experienced that same thing buying our primary residence. My wife found her "dream home" and insisted we get it. Total emotional play - exactly what you don't want to do with an investment property. But it checked all the boxes and the wife wanted it, so there was good reason to at least look at it. Original list was ~$849k and it sat for a few weeks with an eventual price drop. It was late 2009 so I felt somewhat comfortable making a move as prices in our area were down considerably and it there was a good chance we were near a bottom if not there. Of course everyone around us was saying "don't buy real estate, it's a bad investment", so that didn't help. But my wife insisted we press on and we eventually got it for $725k. For about 2 years after I was kicking myself because I felt I could have negotiated down more. Time passed and we were enjoying the house so much that I stopped caring about the purchase price. Now 12 years later we've been approached by realtors wanting to sell our house at a market value of $1.3M with the average home price in our neighborhood pushing $850k. Clearly that few extra $10k I thought I could have negotiated is a moot point and the original purchase price seems like a bargain while saying "I'm sure glad we bought when we did!"

@Tom Roberts There shouldn't be any issue with billing the unpaid additional rent. And yes, it is the tenant's responsibility to keep track of scheduled rent increases and additional rent/terms when staying past lease expiration. As far as pursuing legal action if they don't pay it, I'm going to assume it would not be worth it, but I don't know the dollar amount we are talking about. Chances are attorney's fees will outweigh the collected balance. (I would defer that to @Ronald Rohde for his take however). I would consider it a "win" if they have at least paid their base rent and NNN's and left without hassle. But certainly send them an invoice for the balance of additional rent due today. This will either get them to pay it, or spark conversation for leaving/renewing. Ideally, you get paid and they want to re-sign another lease to avoid the hassle of moving!

@Ryan Russell In my experience, I've been able to acquire a property in my name and quit claim it into an LLC. I've also done this between my main holding LLC and pass-through LLCs for each property. This transaction should not trigger a loan call. I do however notify my lender either at time of purchase, letting them know my intentions of quit claiming later on, or before making any changes. As long as there is no significant ownership (ie new, additional, or different members of the LLC than are originally on title) the banks have been fine with this. Regarding Episode 527, I believe (it's been a while since I listened to that one) what Pace was talking about was insurance for a due-on-sale clause when buying subject-to, which is a different matter than what I am reading your question as. I don't believe the insurance was for simply moving a property from a personal name to an LLC. Other BPers correct me if I am wrong.

@Judson Osbon Great story and beautiful family! 

@Adam Nesheim Based on the information you provided, I would definitely consider option 1. You'd get into a property with the least amount down and significantly decrease your housing expense, all the while having the tenant help pay down your mortgage and you build equity. In your analysis, you also include 8% management fees. If you're living in one of the units, you can disregard that cost since it would make sense to self-manage, which will bring you closer to break-even. When you're ready to move on to the next property you can then get an FHA for that as well and bingo, you have two rental units and a separate primary, both with little money down. For option 2, I would avoid at all costs. Yes you can withdraw from an IRA for a first time home purchase, but you loose out in tax-free compounding. Real estate offers many tax advantages as well, but keep them separate. You want to build wealth through multiple strategies. (You can eventually buy a property IN your IRA, but that's more advanced than where you are right now, but you'll get to that point in time.) I don't think option 3 is needed if you can get an FHA in option 1. Also, if you finance the down payment AND the rest of the cost, you now have two payments and chances are you'll be spending more on housing than you are currently renting. Lastly, since you are new to real estate and already have a side gig, and presumably a fill time job, don't get into wholesaling. That is a full time job in and of itself and will take a while before it produces enough income that you can live off of. The goal is get money working for you, not you working for money. With wholesaling, you're going to have to work for the money, and work hard. Hope this helps!

Mold can be another issue that tenants often disregard or aren't responsive on. So in addition to Landlord/Tenant responsibilities I also have a section on that as seen below, if anyone finds it helpful..... (and always open for suggestions on improvement!) 

1. 29. Mold and Mildew Responsibility

1. 29.1 Mold and Mildew Prevention: Tenant acknowledges that it is necessary for Tenant to provide appropriate climate control, keep the Premises clean, and take other measures to retard and prevent mold and mildew from accumulating in the Premises. Tenant agrees to clean and dust the Premises on a regular basis and to remove visible moisture accumulation on windows, walls and other surfaces as soon as reasonably possible. Tenant agrees not to block or cover any of the heating, ventilation or air-conditioning ducts in the Premises.

1. 29.2 Reporting Requirements: Tenant also agrees to immediately report to the Landlord:

1. 29.2.1 Any evidence of water leaks or excessive moisture in the Premises;

1. 29.2.2 Any evidence of mold or mildew-like growth that cannot be removed by simply applying a common household cleaner and wiping the area;

1. 29.2.3 Any failure or malfunction in the heating, ventilation or air-conditioning system in the Premises; and

1. 29.2.4 Any inoperable doors or windows.

1. 29.3 Responsibility for Damage. Tenant further assumes any and all responsibility for damage to the Premises and Tenant’s property as well as personal injury to Tenant and occupants resulting from Tenant's failure to comply with the terms of this Mold and Mildew Responsibility clause of this Lease.

1. 29.4 Default. A default under the terms of this Mold and Mildew Responsibility clause of this Lease shall be deemed a material default under the terms of the Lease, and Landlord shall be entitled to exercise all rights and remedies at law or in equity.

@Tyler Benner Despite potentially not "making much" on this property (which who knows, could surprise you when you sell), you've made the best investment - in your "education" of rehabbing with a side of landlording! That will pay dividends going forward and enable you to do much more. Good luck!

@Zach L. That's unbelievable they've not paid for 18 months, sorry to hear that! With job openings at an all time high, there's no reason (other than protection from Sac-town) they couldn't have made rent. 

Along these same lines, we had a tenant not pay 2/2020 - 8/2020 and trashed their unit on the way out to the tune of $28k. Curious if anyone also knows if a similar program is available in WA state that would pay retro-actively?

David, just listened to Episode 566 of the Real Estate podcast where you talked about credits at closing. It was a bit confusing when you said that a buyer can only get a credit up to the closing costs, but then later used an example where the credit was more than closing costs and the buyer could use those funds for improvements.

Does this limit only hold true to prevent buyers from unnecessarily getting credits when there’s no documented need for repairs?

If there is a legitimate repair needed on a property that's documented at closing, would the limit not apply then? So in the case of buying a duplex for $500k and it needed a roof for $25k, you could still get a $25k credit even though this exceeds the value of closing costs?

Also, would this apply to both commercial and residential loans? Repairs in the commercial space, as you know, are often big numbers, well beyond closing costs. I haven’t had to deal with credits for repairs yet as I’ve been fortunate enough to have had the sellers complete them before closing.

Thanks for the clarification!