I can’t tell you how much I’ve learned from all the posts over the past year or so. So keep it up!
Quickly, here is my situation:
I have one rental that I “thought” was a great deal at purchase, but I’m questioning that now. I bought it in a rough, but up-and-coming neighborhood for $132k, put 25% down and got 4.5% 30yr fixed non-owner occupied financing (Jan '09). Monthly pmts are $660 and rent it for $1,200. I spent most of last year fixing it up and rented it out at the end for 4 months. They didn’t “trash” the place, but they skipped out on the last month of rent (so sec. deposit went towards that) and I had to do a lot of cleaning. They moved out Jan. 15th. I thought I’d take the time to do some fix-up/improvements and put $2.5k into it over the past month (including the cleaning bill) and rented it back out a week ago. Two days ago, I was told that the sewer is broken and it’ll cost $3k to fix. The house in general seems to be in great condition, so is this just a bump in the road? or am I in the wrong business? If I make this repair, then I’m improving the property and protecting it against future problems with the sewer, will have no profit this year (if nothing else goes wrong … yeah right).
So, in addition to gladly getting your comments on the situation above, I’d like to find someone who is successfully LL’ing over the long term and buy them lunch every few months. I live in Denver, CO so if there is someone on these boards who wants to meet sometime, let me know. That being said, do any of you have any good stories or suggestions for finding good mentors?
I think you are just fine. Occassionally you will have big repairs like your sewer. It’s part of the business and you simply set aside some money and deal with it when it happens.
Every new landlord needs to learn to toughen up their screening and to stop trusting tenants and taking them at their word. They lie. You have to verify everything about them. Write own your standards for tenants and do not make any exceptions for anyone.
Also, you will eventually put together a list of workmen who can be trusted (at least partially) so that you aren’t getting billed for unneccessary repairs or overcharged for work.
Never ever take a tenant’s word that something is broken and needs to be replaced. They don’t know. Their only answer is to buy a new one. You go yourself and see what isn’t working and why before you call a repair man. That saves you from paying an electrician $200 to go and flip a circuit breaker.
I assume you’re joking about the lunch thing, but just in case you aren’t … I’m not looking for a mentor to pay. Maybe I’m naive, but I’m hoping that there are people out there who have successfully established a portfolio of properties that provide them with enough of an income that they aren’t hustling as much every day and can (and want) to meet with and talk to young upstarts like me. I don’t want to get them to do things for me. I just think that there is a lot to learn from people who have done what I want to do and done it successfully.
I guess that’s a good question for the people on this forum … have you found mentors and if so, do you pay them? Obviously if they gave me good advice that saves me from making costly mistakes, then I’d be in their debt. But I honestly just want to learn and listen to how someone else did this successfully. I want to ask them questions like, what was your biggest mistake, biggest success, what do you think of the current market, etc. Am I crazy to think that a successful real estate LL’ing investor would take a lunch meet up and talk about that stuff?
Thanks tatertot. I’ve read a lot of your posts. It’s encouraging to hear from you. I’ll keep forging ahead and build more of an emergency fund for things like that.
Do you do anything to assess your properties for big things might be needing repair in the next several years so that you can save for them? Obviously you can’t predict everything, but do you or anybody else do anything proactive/preventative like that? I don’t know enough about all the things that could go wrong with a house to do an assessment like that myself.
I remember reading some REI type book where the author stated you should start a separate savings acct for each different category of repair. It sounds stupid to me to have a roof savings acct, sewer line savings acct, etc. Just have access to some money and have a balance available to draw from when things come up. You’ll be able to tell your roof is getting pretty bad, but some things just crap out on your with no notice (appliances).
Some things you can save for. You can tell that your roof will need replacing in a couple of years, and exterior paint is on a fairly regular schedule.
Heaters and water heaters last a long time if you do regular maintenance. Unfortunately, they never give you any warning. They work one day and don’t work the next.
Stoves are cheap and easy to repair. Replacing dishwashers and garbage disposals is cheap and easy.
Most of your big repairs are going to be from tenant damage and there is no way to predict that. You can reduce the damage by screening carefully. Tenants aren’t good and then turn bad when they move into your place. If they are bad, you can usually find out if you screen hard enough.
Stuff like the sewer line collapsing aren’t predictable.
What you can predict is that you will have big unexpected expenses on a regular basis. So you maintain a savings account and keep a good credit card open and available for emergencies.
Find your local landlord assoc. Become a member ,go to the meetings and you will find several that will be willing to discuss their business with you once that they know you and know that you are serious. Landlords do not want to discuss their business with people because of the slumlord syndrome, but once you get past that they will open up.
Home Inspections are governed by States, not nationally.
I am studying for my Home Inspector’s License, and have had some inspections done professionally prior to this.
Maybe Colorado is different, but in Illinois a Home Inpection wouldn’t attempt to make an inspection of the main sewer line.
I agree with the point. I did my own informal inspection on the last place I bought.
I figured in the immediate roof repair, and roof replacement in 5-10 years, hot water replacement, and various other things I found into the equation.
Just know you can never find everything. Home inspectors don’t even attempt to find everything. Think of how expensive looking at EVERYTHING would be.