wmark1963

Hi wmark1963.
Do you mind if I call you Mark? It's easier to remember. If it's not OK, please forgive me for the posts I already did it in.

Would you be willing to share some information? You seem to have a handle on the legal part of rentals as a business.

I won't ask you a ton of questions until you give me permission.

Thanks,
Rina

Sure. Mark is fine and ask away

Alright, where were you when I needed you on Friday?! Just kidding.
I have lots of questions. Do you want me to just hit you with a whole list or deal with one thing at a time?
I'll have to come back later to ask, though. (I need to get a laptop to just have with me all the time!)
By the way, Thank you for taking the time to help. I really appreciate it.

Sincerely,
Rina

Sure. Just pop in the whole list. Ill answer what I can.

Mark,
I'm going to write up my questions in a document & then copy them to your guestbook. That will give me some time to think about it.
In the meantime, I looked at that 4-plex today. Very nice. I'm debating whether to buy it or put the info on this site. It's a very good deal.
Hmmmm.
I also looked at a 3bdrm REO, turned out to be a "3-closet with a shaky bottom" (teeny bedrooms and foundation problems)
I've been thinking about looking in the Tulsa area since that's where my girls are living right now. I spent a day looking when I was down there last, and have been following the listings online (of course you can't see the neighborhoods online).
What made you decide to buy out-of-state? What % do your managers in Phoenix take? How often do you personally check on your buildings?

I'll be back with my list. Promise not to laugh if some of my questions seem stupid.

Thanks,
Rina

I would be careful about foundation problems. I don't worry about plumbing or electrical problems or of course paint or carpet. But I shy away from foundation issues. Can be very expensive to fix.

What made you decide to buy out-of-state?

I wanted cash flow. It was and basically still is impossible in SoCal. I saw a "travelling road show" by a broker, dipped into a VA foreclosure and the rest is history. (At the time they provided all inclusive service- buy,sell, manage.) There are other benefits: AZ is a non-recourse state in terms of mortgages and VERY easy to evict: 45 days or so from 5 day notice till I have to bring the sherriff out.

What % do your managers in Phoenix take?

None. I only have SFRs. I manage them myself. They are basically hassle free. That is why I got out of multis. I couldnt manage them myself. And my opinion of proprty managers is almost universally low. I have a buddy who has property in Tucson who finally found a good one- after firing like 2. They take 10% of the GROSS- which is pretty typical. The problem is that for single families that would be more than 100% of the NET!!

How often do you personally check on your buildings?

Honestly, not very often. Or really as often as I should.

I get very good tenants, treat them right and fairly. And they stay forever. I have had one tenant with me for 15 years I believe. His rent is still below market since I dont raise it that often or that much so its good deal for him. But he causes ZERO problems and does almost all the maintenance himself. So its a win-win for me.

I get the occasional plumbing call and A/C is pretty common. That's about it.

I did have a tenant move out last October to buy a house (after being with me 7 years). So I was actually ok with that. If they are gonna leave, I want that to be the reason. I had the property rented 2 weeks after some minor rehab. That is what I love about single families. Easy to rent, very stable, easy to sell.

I totally agree.

What do you think about the 4-plex? The owner seems really decent. I walked through 3 of the 4 apartments yesterday. One of the tenants has been there 13 years, is 60, I'm sure he'll be there for awhile yet. Another, she (& her father she takes care of) have been there for 7 years. The other 2 are rented out, all look like they're taken care of well. The building has passed state weatherization and is licensed with the city. I couldn't find anything I didn't like about it. He had a market analysis done a couple of months ago (by the realty company I work with, ironically) at $159,900, He was asking $149,900 but now is at $139,900. I was thinking of offering him $120. The rents are $475, $450, $450, & $375 (for the older gentleman, which I probably wouldn't raise until he moved, although it certainly could be). I just have a gut feeling it would be good. I don't have that "make it work no matter what!" feeling but I'm starting to get there.

Where you have A/C issues, we have heat issues, but they're very rare.

How far is your furthest property?

We, too, usually only have a turnover when someone is buying or moving out of town. I have a very good relationship with every tenant. That's one of the fun things about being a "landlord" (is there a better word for that?)

Actually, with the new business, Buyers Match LLC, what I would really like to do is buy distressed homes (preferably REOs or HUD), fix them up, and then rent them out, giving the renters an opportunity to buy them after a year, or each year at end of lease?,. If I get them at greatly reduced prices, we could still make plenty of money, and I would love to provide that opportunity for people. Do you think I'm being unrealistic? With the market the way it is now, I know it would work, but I don't know about in the future. We have done it once in the past for a family that rented from us for years (they had already paid for that house 3 times over). We sold it to them for double what we paid, and they got it for half the current market value. We were both very happy.

I'll talk to you more later. Thanks so much for listening!

Rina

If you are buying a 4-plex it MUST cash flow because there WILL be turnover. It wont appreciate like a SFR or be stable like one either. Just my guess but even 120 is probably too high with those rents.

My farthest property is in Phoenix. So a 1 hour flight. I used to have property in TX and getting to it was a pain. (Longer flight plus kind of out of the way so inconvenient flights on top of it.)

I have considered getting back into low cost areas but right now Im thinking it wont happen. Too big a hassle to get out there and I dont trust property managers to handle it.

No.. I dont think you are unrealistic at all. That is basically how I got started. My first property was a VA repo that I bought with vendee financing (10% down.) The VA didnt do source of funds so I put the ~6K on a credit card. (Really!! Just like on tv. hahahaha.)

Then the broker I was working with got me a tenant who signed a 3 year lease option with a 50/50 equity share during the 3 years and automatic 10% rent increases. It was a great deal for me. The tenant let the option lapse and is still with me as a renter.

If I were going to sell in a market like this I would set up something similar.

Hi Mark.

I was wondering about the lease option thing. It seems a little complicated having to reserve the extra money for their downpayment. What would you think of, instead, when they qualify to buy the house, just financing the downpayment for them. If it's a first-time homebuyer, that might only be 10% or less, depending on what kind of help they can get. The purchase price could be high enough (very fair, though) that it wouldn't really matter if you got the money back or not. Just a thought.

I'm meeting with a business banker tomorrow. I'm not even sure what all we'll be discussing. I'll need to open a new checking account for the business, and I'm guessing we'll discuss a line of credit. I'm going to request $1,000,000.00. I have no idea what you need to qualify for that, but I'm bringing all the info on our properties. They can laugh at me all they want, but I'm gonna need it. That will buy & fix 10-15 new single-family rentals. I can almost guarantee to gain 50%-100% in equity with each purchase, besides the cash flow. I'll take whatever they'll give me, though.

There are SOOOO many good deals here right now. I know I can't buy them all, but I'm gonna get what I can.
Do you want to buy any up here? I'll manage them for you.
I'm only half serious. I don't really want to work for someone else.
We do have GREAT fishing, though, if you needed to "come & check on your properties".

Anyway, maybe I'm shooting myself in the foot by diclosing all this, but what better place to get input from like-minds.

Sincerely,
Rina

Hi my name is Jonathan Moreno and i am a new student in the Dean program but i am stuck. Therefore, the question i have for you is what contract or form do i use to lock a deal and where can i find them? If you have any information please contact me at Jonnymoreno@**** or 860-406-1056.Thank you

You want to use a Purchase Contract and under the section for "Buyer", you would write: Jonathon Moreno and/or Assigns. (I believe there are contracts on this site.)

Hope this helps,

Mark

I have so much stuff going on in Phoenix right now. Im just trying to organize so I dont end up running in 1000 directions.

I signed a contract on a REO yesterday. Ill post it in "Deals" at some point. Value is 160-170. Purchased at 92,500. Needs almost nothing. Some caulking in the bathrooms and some landscaping then good to go. A medium to long term keeper. I am taking equity from another property to go 80/20 so it's NMD.

I talked to a guy yesterday who has set up a REALLY good system. It works something like this. They buy distressed property (REOs, short sales etc) below FMV.

At least 25K of profit for the investor on the back end and the property requires paint and carpet ONLY. So they would buy a proprty worth 210 for 165. Finance it interest only and put 4K into it in repairs. You would have roughly 21K in it.

They VERY seriously pre-qual lease option buyers who REALLY want to buy. Get them in touch with a mortgage broker etc. They collect 6-8K in non-refundable option money (used to offset the price I guess- maybe down payment). So at that point the investor has ~14K in the deal. Property cash flows 150-200 a month. At the end of the lease, you get your investment back + ~25K. So 110% on your money in one year. He says that 95% of the tenant-buyers DO buy the property.

I was seriously gonna look into it but it looks like you have to apply to join their members only club, pay monthly fees and sign a buyer's broker agreement. Too much like late night infomercials for me.

Couldn't you do it on your own?

I was thinking, with the relationship I have with our bank/broker, maybe I could send people their way if I financed the down-payment. (Of course, I realize the bank/lender isn't going to lend to someone else based on MY creditworthiness.)

The 6-8K non-refundable option money, I'm confused. Who collects that from whom?

hi mark i have a question please, found a ton of reo's just to mention a few,like some of them are going for as little as 15k and up and not much rehab to be done on some,of theese prop are ready to live in have the cash but not sure what to do yet please advise me in this matter.thanks harold.

Couldn't you do it on your own?

Yes.. I will seriously consider it. THe hassle will be getting the tenants to clean up their credit, pay off the collections, work with my mortgage broker etc. Worth it in the end I suppose but not something I typically do.

The 6-8K non-refundable option money, I'm confused. Who collects that from whom?

The realtor would collect it from the tenant/buyer. In the past, the group I worked with kept that as their fee. But apparently these people pass it on to the investor.

Do they collect it from the buyer's loan? How does the tenant come up with that amount?

Make an offer. You say the REOs are priced at 15K. How is the nighborhood? What is the property really worth (ie fair market value in TODAY'S market.)

My guess is they would readily cash flow, and if they are in decent areas (NOT war zones) and don't need much work, there is NO reason to start picking them up.

A good deal is a good deal, even if you offer asking price ie DONT get hung up on getting a discount.

No.. no.. THis is much earlier in the process. Here is the timeline:

1) Investor buys property below FMV.

2) Tenant buyer with some cash ~5% but bad credit is approached. They put up the cash (non-refundable option money) and move in. (Think of this as a security deposit for a rental but more than that since it gives them the RIGHT to purchase the home at today's price.)

3) Tenant buyer makes RENT payments for a year while cleaning up their credits. (maybe some rent is credited toward the purchase price- maybe not)

4) Tenant buyer and their spiffy new credit get a new loan and purchase house. (Price is typically less than FMV but more than what investor paid.)

Sorry, I'll finish reading this later. Gotta go to a dinner.

I am still debating whether I want to try to LO these properties and get my cash back out in a year or hold them till the market rebounds and then sell 1 or 2.

Both are attractive options. I may just run ads and see what happens.

marcus, i would like to ask you about the REO that you purchased, do you have a seperate real estate agent, when looking for REO properties? like do you have a regular agent, and also a REO agent that just deals with properties like REO's,VA's,HUD homes?

Mark,

After the year is up, if the tenants don't yet qualify for the loan or aren't sure yet if they want the house, and still stay on as tenants, do they then have to forfeit the deposit and start over with ANOTHER deposit? Or do you allow them to hold it over for another year? ...I suppose it's whatever you want to do.
I think when I do one, I'm going to just let them decide at the end of the year if they want to buy it, and have them pay the FMV at that time. Then I'm not locked in to any promises, either. I think up here we're still at the old-fashioned kind of hand-shake thing, anyway. My word is my bond. (Of course, I don't trust that when I'M on the buying end!)

I talked to the banker yesterday, they're going to loan us $5,000,000.00. Just kidding. It's a more complicated process than I thought. Sounds promising, though. I have to get all my numbers together. (I had only made a spreadsheet of the assets, mortgages, taxes, insurance, & rent income) I'm so used to just going with my gut on everything, I have to start thinking like a banker, and figure out the cash-flow thing. It won't be hard, I have all the numbers. What I don't get is, on your tax return, I've been told (in the past) I shouldn't be showing a profit. How the heck do you not show a profit? And how can that be to your benefit for getting more financing based on cash-flow?

Alright, one more question: How much, or what percentage, would you say a person should hold in reserve for expenses? I know you had stated somewhere in here that cashing out some equity to hold in the bank might be a good idea. I was thinking a number equal to 6 months worth of payments would be good to always have on hand. What do you think?

I hope you don't get bored with answering my questions, I still have a LOT I want to learn. I don't expect you to just be my personal mentor, but at least if anyone else has the same questions they can learn from reading this, right?

Anyway, I very much appreciate it!
I really respect your knowledge and your opinion.

Rina

sully,
I know you asked Mark the question about the REO agent, but I thought I'd give an answer, too. Look in your guestbook.
Rina

No.. I have one (and only one) real estate agent. She is top notch. My experience with agents is that 90% of them are horrible so when you find one who is good and compatible with what you are trying to do, use him/her as often as you can.

So when I want to list or am looking for market info or MLS info, I only make one call.

There MIGHT be some benefit to researching REOs myself and offering directly to the listing agent, but that is more than outweighed by the benefit I get from my realtor.

After the year is up, if the tenants don't yet qualify for the loan or aren't sure yet if they want the house, and still stay on as tenants, do they then have to forfeit the deposit and start over with ANOTHER deposit? Or do you allow them to hold it over for another year? ...I suppose it's whatever you want to do.

Exactly.. it's entirely up to you. The contract calls for the option money to be non-refundable and forfeited after the year. So you are certainly within your rights to do that.

You also can write a new option contract and roll the money over.

Or you can turn them into straight tenants. Or just not renew the lease and end the "relationship".

A lot of it would depend on how the year when. The more problems, the less likely I am to be "forgiving".

I think when I do one, I'm going to just let them decide at the end of the year if they want to buy it, and have them pay the FMV at that time. Then I'm not locked in to any promises, either. I think up here we're still at the old-fashioned kind of hand-shake thing, anyway. My word is my bond. (Of course, I don't trust that when I'M on the buying end!)

This may not be a bad idea in this market. THe benefit to the tenant buyer in a typical LO market (ie an UP market) is that the tenant/buyer locks in the price NOW and buys below market a year from now (or 2 years from now or whenever the lease expires).

What I don't get is, on your tax return, I've been told (in the past) I shouldn't be showing a profit. How the heck do you not show a profit? And how can that be to your benefit for getting more financing based on cash-flow?

Your tax return IS counter to getting financing from the bank. One thing that does help is that you can take depreciation on your tax return but this is NOT a cash expense ie the bank shoudl add it back in for cash flow purposes.

The real benefit of buy and hold is long term. Your expenses stay (roughly) the same ie PI should NEVER change and I hopefully only a little. So it's that pesky T... as in TAXES. But your rent should go up. SO long term your cash flow improves. And this DOES show on your tax return.

Alright, one more question: How much, or what percentage, would you say a person should hold in reserve for expenses? I know you had stated somewhere in here that cashing out some equity to hold in the bank might be a good idea. I was thinking a number equal to 6 months worth of payments would be good to always have on hand. What do you think?

Well, to dodge the question... I think it depends on your other finances and what you are buying. Multis will need more reserves than snigle families. Newer homes need less than older homes. But if are around long enough, you WILL end up doing roof-work, replacing hot water heaters, carpet and paint. And it's not cheap. 6 months is probably plenty- even 3 is probably enough. And I would also add that it can be cash or credit. I use my HELOC and do NOT keep it in a checking account.

Thanks, Mark. Very helpful.

I live here in the Phoenix area (Mesa to be precise) but my question is do you only do your deals in Phoenix or also in some of the other cities in the Maricopa county? The next time your in the Phoenix area again to check on your deals that you have going on, it would be nice to meet you so i could treat you to dinner or lunch so we could talk (just a suggestion).

I listed Phoenix but really Im only on the westside currently. I used to own in Mesa but it was just a hassle getting around from Mesa to central Phoenix to Glendale.

Currently, I have one house in Peoria and the rest in Glendale. I am looking to stay on the westside.

I would be more than happy to meet with you. Right now, I am thinking that I will be back in Phoenix sometime in June. So lunch would be fine.

Post a reply to this or PM me. I can send you my contact info.

Mark

Hey Mark, just wandering if you got the PM I sent you? I was on my laptop the day I set it so I just wanted to know if the PM was sent to you at all. Thanks and take care.

I sent you a PM about 2 or 3 weeks ago and I was just wandering if you received it? I know you have been very busy of late so I was just seeing if everything was ok? Later.

Mark, just read the 3 "Getting started" forums and the 3 "Reassignment" forums and I noticed your comments consistently were sound and sage...now reading your profile, I see that your balanced viewpoint comes from experience...single and multi units in multiple areas...in particular, being totally new to this, I wanted to thank you for the concepts of property having "many" prices based upon time (i.e. 6 mos, 3 mos, 1 mos, etc) and the very practical advice of asking the seller "WHY?" because that is all about motivation...thanx again! wib

Hi Mark,
Since you mention you live in Ca. and have a lot of experience, do you have some advice for my strategy. I am going through the Mentoring & Training program DG offers. Why do you say So. Cal is not conducive to the "buy and hold" mentality? You say that California does not "cash flow." I don't understand what
that statement even means. Can you help?
Thanks

The problem with buy and hold in Cali is that the rents typically are not enough to cover what you have to pay out (mortgage, property taxes,insurance, repairs, utilities etc).

This is what I mean by the property does not cash flow (also stated as the property has negative cash flow).

THis has obviously changed with the recent downturn and in some outlying areas may no longer be true.

(I had a friend who said you could buy an older-70s- house in Escondido [NE San Diego suburb) for 150K. I did not look into it but if you could rent it for ~1500 [and I believe you probably could] then you would be in business.)

Hi Mark,

I was just reading some of the forums and found that you do some investing in AZ. My husband and I have been on this site for about 3 months now and have been searching for great deals. I am also and RE agent here so we come across a lot more great deals than buyers. Are you familiar with the Anthem area? If you are interested in buying more properties here let me know. My email address is jbrninvestments@cox.net if you just want to contact me directly. We look forward to hearing from you.

Niki

I WAS WONDERING WHICH TECHNIQUE TO USE I HAVE NO MONEY TO PUT DOWN,ANY INFO WOULD BE APPRECIATED ,NEWBIE TO THIS.STROHBUSCH62@****

May You have Great Success on your Journey!

Thank You for All that You Share.

JJD

hi there ...what are the consciences of buying a property as a primary when you dont intend to occupy the property as your primary residence? What is the worst case scenario? and have you ever done that?

Need HELP!!
Good evening everyone!!

I am still new to the game, but I am having incredible results. Update: I am continuing my journey reading 30 days to real estate cash and I am on the verge of finally landing a great agent....So excited!!! However....I got a call from this owner who needs to sell quick! Did a lease option contract with prev sellers, but didn't file or use title search or the like, but have been paying the mortgage since April 2013, well the bank told her she has to come up with 3,000 plus more dollars before Nov 5th foreclosure hearing. Well, I thought this might sound like a Greg Murphy strategy, but I am concerned about the paperwork...what do I need to do? Prev owners wants NOTHING to do with the home, went through a bad divorce. Please any advice? I also thought about a short sale, not sure?

Would be my 1st deal if possible. I am gathering comps, photos, putting the package together now!

Thanks in Advance!!