Did you ever say how you deal with bad tenants?

Any idea how many you have that are behind on rent, how often you need to do an eviction, how long the eviction process takes, how often an apartment is trashed, etc?

I live in Columbus and know someone with some duplexes on the Westside, it seems all I hear are horror stories about tenants that don't pay past the 1st month's rent, the furnace being stolen, basement with feet of dog crap, etc.

Is there anything you do to weed out potential bad renters? I have heard things like look at their car, require 2 months security deposit, chat with them for a while etc, wondering what your requirements are.

I bought my first investment property this year, the quickest way to #2 is a low price cash deal, but I wouldn't know where to start with property that needs rehab, and dealing with bad tenants seems like it would be a big issue.

Thanks

May I bring this thread back to life??

My brother recently just bought a 5 unit in need of some TLC. He financed it through a bank with a commercial loan and after talking to him its looking like he will gross $750/unit/mo and be servicing a 20 year debt at ~$800/mo. Now he loses some of that to management capX and some other risk categories but those are some numbers I can start to get on board with. I never really seriously considered buying into rentals before and I kind of made fun of my brother for wanting to be a "slumlord". I'm a traditional active investor and wouldn't mind diversifying.

What tools are you using to search property? There are many websites have you found a particular one that you prefer?

What sort of criteria are you using to determine if a property is undervalued and therefore a good buy? Is there art here or is it a science?

I found the part about the private investors vs the bank to be particularity interesting. You haven't gone into much detail (probably on purpose). Is it safe to say that the path you took to a relationship with these investors is not easily duplicated? Unless the rest of us can 'figure it out' are we stuck with bank terms?

I'm going to watch the videos but these are my first questions...

Oddly enough, and i've been bragging about it ALOT recently, but I haven't had a single eviction in 4 months. I've had plenty of deadbeat tenants, but no evictions. I've moved to figuring out how much it will cost me to evict, and offering them the amount in cash to just leave. So far they're leaving in 1/3rd of the time it would take to evict and leaving them in marginally better condition than compared to a set out. I've had a few people leave with a couple hundred bucks that i was 100% sure I'd have a nasty eviction.

I keep tightening up my requirements. I do just one month security deposit because Ohio requires you pay 5% interest on any amounts over 1 month's rent. Regular inspections are important, so is viewing their facebook photos to see if they live in a hellhole.


Pretty much everything I've got recently has been from personal referrals. For the first 3 years most deals were just MLS deals and foreclosures, but anymore i have people come to me every week with deals.

Plenty of people seem to do fine with offering investors a deal. Alot start off with paying 14%, then backing it down each time on subsequent deals. I'm KIND of trying that now, but paying 14% interest on a rental hurts a bunch, especially when banks as flawed as they are run 5% or so.

How important is it to have your LLC lined up before buying your first place? I stumbled across a decent deal that I was thinking about going to see. If its going anywhere it will be quick and I don't have my LLC finished. Should that be a deal breaker? If that's a deal breaker I'm fine with it I'm just not sure I should buy it myself and then transfer it to an LLC later.

The cost to move it to the LLC is going to be minimal , especially if you're in a fast moving market where it might disappear quickly.

I am really interested in this thread and would like to see it stay alive. I can't see the video on Reddit, can you post a link?

Have you ever considered small 8-12 unit apartment buildings? If you were interested in that type of property, how would you find them for a great price?  What is your opinion of those vs smaller multi family units as far as ROI and keeping expenses down.

The Youtube link is : http://www.youtube.com/c/InvestmentJoy

Haven't done a *real* video in a while due to all sorts of hatemail/complaints I've got. I'm sure I'll do more soon since I'm getting a bunch of the big projects finally wrapped up.

I've got two 5plex properties now, they're the biggest I have. A 6-12 unit wouldn't bother me at all, but I buy based on net ROI over anything else and so far i haven't found something that large that cashflows nearly as well as these most recent 4  & 5 units that I've bought in the past few months.

Finally partnered up with someone with some serious money so I'm *hoping* I can start to scale in a very severe manner. There's just so much stuff out there to buy with not enough market demand that I can really grow the business. Most people that want rentals want stuff in nice neighborhoods, etc and won't deal with lower end ,crappier properties.

Jeeze what kind of hate mail? You don't' strike me as a hate-able guy unless you have racist rants on your channel also that I missed.

"You're a slumlord"

"You're a capitalist pig taking advantage of poor people"

Alot of SJW type stuff, which I COULD deal with, if I had better feedback on the youtube and other public channels, but generally I feel like it's 50/50 in terms of positive/negative. It isn't something that I DON'T want to do, but the thing is, if I can make $500-$1k/hour doing the 'real' real estate stuff vs $1/hr shooting videos and stuff like that which also gets me hate mail, I might as well go with what's more valuable and stress free.

Oddly enough I feel like I have less stress from the ODs, Crackheads, Meth labs than I do the SJW comments. At least I can evict the criminals :D

Ok, so to slightly steer us back on topic could you elaborate to what the realistic risks of cheaper rentals? How often do you really see something destroyed and turned into a crack den? I'd like to buy up a half dozen units or so just to diversify my passive income and my main risk is junkies that destroy it after 2 months and leave or worse yet stay. Do your real world experiences shed any light on how many headaches are 'normal'?

Put another way... The longer you are paying me the more profit I can make above and beyond the rehab costs between tenants. If I am making $15,000 a year in rent after getting paid for two years I can afford to absorb $10,000 in property damage repair. If the tennent moves out after 3 months and I have $10,000 in damage I won’t last long. Whats the best way to quantify and plan for that risk?

Your normal landlords want to hit 1% of asset value in monthly rent. Your low end properties need to hit 2%. Or better.

Total losses last year between unexpected vacancy (I expect a 5% economic loss per year due to vacancy) I lost ~$25k or so in damages, destruction, court costs, etc.

That was across about 550 rental-unit-months (45 or so rentals x 12 months of availability). So that would put my added cost at $46/unit per month. My median rent is ~$550, so that's an extra 10% or so I tack on. Overall not TERRIBLE but something I should certainly improve.

My top expense of any unit ever was $7,500 last year due to the worst roach infestation I've ever seen, eviction and damages. It broke down to $2,500 in losses due to roaches (Two months of lost rent, etc), $500 in eviction related costs, then $3,500 or so in rehab costs. This was $7.5k/$25k last year in costs. This year I think I'll be under $20k in total losses with around 620 unit rental-months which means my cost was $30/unit or so. This is above my normal wear-and-tear budget of 10% gross rents.

Overall it isn't a bad deal IMO, there's certainly added headaches but it's overcome through superior ROI/Profit and the fact i have my own full time maintenance guy who drops my rehab costs considerably over hiring a 'professional' each time. My first rental in July 2013 has had MAYBE $750 in total maintenance expenses since then. My worst (The roach house) has had the $7,500 + $1,000 in ongoing costs since April 2014. It might seem awful, but my purchase price was $62.5k vs $42.5k. I might not come out ahead in the super long run but I've got a dozen mid-level single-family houses that do just fine with very, very minimal repairs each year.

In the end it's just a numbers game. I had a meth lab that cost me ~$5k in 2015. For some landlords that might knock em out of the game, but my incidental/disaster escrow took care of it just fine, and other than the roach-dungeon, I haven't had any with that substantial of expenses.

Here's video of the roaches on the one a month after we started treating. https://www.youtube.com/watch?v=9oYsvGQW-Jo (We had tried for a month using every possible chemical out there with minimal results. My bright idea was heat treating which had virtually no effect, however 3 more weeks of treatment and they were gone).

It all depends on the landlord, etc. I've seen tons of 1% people go under, significantly less 2% people go under (Usually they get tired of the ODs, crazy tenants and just sell out, however they don't actually go bankrupt).

I think that is very dependent on where your rentals are located. In my area average home price is about $350k and average rent for a single family home is about $1900. In parts of the country where you can still but a sub $100k house I think the 1-3% rule holds true. There are a ton on properties begin bought up by investors as rentals due to about a 13% yearly appreciation on residential real estate.

So if I understand correctly you have your own maintenance guy and probably have access to materials deals to reduce your rehab costs. Do you have any idea what you are saving by doing this vs the a traditional general contractor? I will likely need to hire a general for my work and I'm curious how your model would work if you were forced to go this more expensive route for rehab.

What happens when the market corrects?

I save about 30% or so by having my own in-house labor for my general stuff. In his case he's also good at HVAC, Plumbing and Electrical which is all nice.

As time goes on I've moved to a more traditional model with hiring a contractor. One of the guys I hired on 2 years ago for part time labor moved to full time, and now is more-or-less a GC running sites for me. I didn't want to hire any full-time guys anymore to do work, yet needed to expand and this by far made the most sense. He's making money and I'm getting crap done 5x faster now.



That's why I'm in rentals and not a fan of high-appreciation real estate. Maybe some areas can support it but I've spent a good deal of time going back state-wide and local market surveys all the way back to the 1930s. In general in my area real estate gains 3% a year in appreciation (Just a little over inflation). We see some 3-5 year periods gains of 20%-40% to only see time periods later on where prices have a huge correction and return to the norm. While not every single area is like this (LA, SF, NY and a few others), many , many areas are like this and should provide some warning to investors.

Having said this, landlords tend to do VERY well as long as they're not super leveraged.

This is a great topic, thanks OP for all the info. Watching your video's now, but sure wish the area/state I live in Washington State had anything near these prices. We own 2 houses outright now, and are currently looking at others to buy, our average price in the area I live is about $200k with some around $150k but they need a good amount of work. We are selling one of our homes simply because it's a waterfront home that we lived in for a long time, and it's worth $500k which will get us into about 3 other rentals netting us about 2k more per month. Once we get to 5 houses paid for it's retirement time for the wife and I at 45 years old cash net per month will be right at 10k which will allow us to live very comfortably because we have no loans of any kind. My wife always laughs when I say retire, and says you will always just buy a couple more which is true, it's to hard to turn away more cash.

Hopefully we can keep this thread going as there's a ton of info for anyone interested in real estate investing right here. Thanks again to everyone taking the time to add their own experiences to the list. We can save one another a huge amount of money just with the info shared.

Right now i'm at a point I feel I've gotta stop *for a while* and potentially hire someone part time to help me out with the paperwork aspect.

Have a good shot of hitting 85 before end of year.

Deals keep falling out of the sky.

Are they all word of mouth deals at this point? Like "oh you need to sell your house? I heard Shockergd is always buying" type stuff?

Rental acquisitions since ~March (Units 50 through 85)

#51 through 67 (16 total rentals split between a couple quadplexes , houses and a duplex) - Local investor meeting, elderly gentleman came and asked if anyone had interest, I was essentially the only one there willing to take on a large package requiring significant work.

68 & 69 - MLS Duplex deal - Lowballed a bank listing and took it, needed a new roof which usually scares off new investors.

71-73 - Triplex that got firebombed - Have breakfasts with a bunch of local landlords every so often. One of the guys 'accidentally' bought a house at sheriff sale. In his case he got wrapped up in bidding against someone else. He paid $10k for it, I took it off him for $15k and he put $5k in his pocket with a hour worth of work.

74 - Free standing house that was a owner-occupant. Really terrible shape, needed a new roof

75 - Landlord friend got in trouble w/ state over lead paint, offered to take it off his hand for a fee

76-79 - Local real estate agent had a house on the market that has been there for something like 3 years. She's called me off and on about it, told me to make an offer. Seller was asking $40k for it, I told her I'd give him $15k which really disappointed him. She + He asked if there's any way I'd increase my offer. I told her that if he would finance the house + 3 other rentals I saw he owned as-per the
auditor with $5k down that I'd take the house down the road for $40k. Was absolutely blown away that he took the offer.

#80 through #88 - In order to close the elderly gentleman deal from 50-66 i sold this one to a friend of mine who has rentals. He ended up not liking it too much and offered to give it to me for a fair price while also financing it with very minimal cash down.

#89 - Landlord friend had a lady call asking if anyone wanted to be given a house. He told her no, I told her yes (Lady living there will have to be evicted and has brought in bedbugs. On the upside it's 3500sf and gorgeous).

That takes me to #89 rentals, HOWEVER for the first time in 5 years I'm selling off a really garbage quadplex I bought off above mentioned elderly gentleman, taking me down to #85 rentals. If it does not sell I'll put the place way, way on the back burner to do mid this year.

Damn you’re doing way better then I am at moving forward fast. Great job!!

Does anyone have experience with buying multi-family properties with all the units leased to a local non-profit?

I've seen a handful for sale locally. The guaranteed market rate rent check seems appealing, but I'd imagine the inhabitants of the unit are somewhat sketchy.

I currently have 15 units, but am looking for ways to expand and was kicking around the idea after coming across the listings.

If the numbers make sense I would jump on that.

Yep, I wouldn't hesitate. Heck we've been considering re-fitting one of our 4plexes to a modified single unit for a non profit who wants to take in battered women. The numbers make tons of sense.