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rental homes

Discussion in 'Business Operations' started by cutbetterthanyou, Feb 24, 2013.

  1. Greyst1

    Greyst1 LawnSite Senior Member
    Messages: 897

    I do, i have several rentals and it's actually how i got started in landscaping. Vertical integration. It's a great way to get new customers but i'm guessing thats not what you posted for.

    I will say this, rentals are great when you gave a great paying tenant, but they are miserable when you have the opposite. All your payoff is in choosing the right tenant after you buy the right property. Lots of variables go into that statement but thats what it boils down to.

    If your not paying cash, our socialist bank ran government will only allow you to own 4 parcels, maybe it's changed recently but please pay attention to your debt to income ratio. It can potential freeze you out of borrowing and miss some deals.

    Good luck and choose wisely
  2. dvaughn

    dvaughn LawnSite Member
    from indiana
    Messages: 16

    I have several rental properties as well. Do a lot of research on where to buy, contracts, and landlord law. I am sure your library has a lot of good choices. Get legal advise from an attorney on contracts and talk to your cpa about taxes.

    I highly recommend it as well. I believe it is the safest investment choice but it is not always easy money. I have not done section 8 but I was close to trying it when I found a package of rentals (15 properties) that was for sale that was all section 8 housing. I decided it was not right for me. My business plan is for newer middle class homes.

    Financing has gotten tougher. Only 4 mortgages allowed now, 6 months of reserves for every property, a min loan of 40,000, higher credit scores required, income verification of income for business owners is getting tougher and watch your debt/income ratio. Stay away from commercial loans right now. Everyone that has them that I have talked to is having trouble refinancing them after 5 years. Life is about managing risk.

    I have tough standards. I do background checks and credit checks as well. I make sure the Net (take home pay) is 3 times the rent amount. These are very hard qualifications to meet but because of this I have less risk of a non payment.

    What background and credit check companies are you guys using? I have yet to find one I am happy with.
  3. Holleywood

    Holleywood LawnSite Member
    Messages: 59

    The one I've been using is nationwide background checks. Has nothing to do with nationwide insurance. They have a pretty comprehensive report. Dvaughn I'm kinda in the same boat as you in regards to getting loans. I have 4 properties now and only one of them have a note but the say my debt to income ratio is to high to get the loan. It's weird. I even tried to take an equity loan out on one of the three homes ( worth 45-60 k) and im still running into problems. Anyone know of any ofther legit means of financing?
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  4. cutbetterthanyou

    cutbetterthanyou LawnSite Bronze Member
    Messages: 1,178

    How are you guys going about the monthly money earned off each one? Do you pay the monthly bill and keep as much as possible other than maintenance cost, or do you throw as much as you can at them to pay them off? Do you set it up as a bussiness that owns all the propertys or a seperate bussiness for each home ex: #1 property "water st llc", property #2 "south st llc", etc. I have a guy i cut grass for that does that with vacation rentals. I assume he does it so if it doesn't work out #1 "bussiness" can close without them taking the others.
  5. newguy123

    newguy123 LawnSite Bronze Member
    Messages: 1,096

    Exactly...having an LLC for each one is the desired method. As you stated, they can't take the others then.
  6. Holleywood

    Holleywood LawnSite Member
    Messages: 59

    I pay more than the monthly on the one house. The rest I just save to buy the next house. I do have them in an llc. I do not have each in its own though. i was told to do them in groups of five. i know the benefits of doing each one seperate and i most likely would if the properties value was higher. Either way the money made it taxed at your income rate . So keep as much of it as you want!
  7. southern79

    southern79 LawnSite Member
    Messages: 91

    Chances are real good that "if" the bank will loan money, it will be amortized over 15 years due in 5. Not many banks doing 30's on anything other than primary. Also be prepared to have 20% down plus closing cost. If you can swing it it is a great way to go.
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  8. BLC1

    BLC1 LawnSite Senior Member
    from Ohio
    Messages: 718


    Your first comment about bringing in 900-1100 sounds good from the outside but there is more to it. You have your 200 monthly payment, which is going to be higher, like others said, banks aren't going to loan 30 years on rental properties. You could actually run through a dozen banks and find that most wont touch investment property anyway. You also need to come up with a down payment on these properties. Most likely 20%, assuming you find a bank to deal in investment properties.

    Now you need to add in taxes, insurance, any utilities you may have to pay (a lot of places around here the owner pays water and sewer), maintenance and be sure to use a vacancy rate around 75-80% to keep on the safe side of things. If a tenant moves out you may need to go in and paint and replace carpet (if you're lucky, that's all you will have to do).

    I think it's a great idea, I just don't want you going in blind. I have about 20 properties with 2 friends of mine. We have a lot of them that are free and clear and we can't even get a bank to give us equity on those properties. We are starting to look for private money now. If we could raise another 250k we would double our houses and have about 40 units by the end of the year.
  9. BLC1

    BLC1 LawnSite Senior Member
    from Ohio
    Messages: 718

    Oh yeah,

    on the paying extra on the mortgage questions.

    If you are able to find a loan I'm guessing the rate is going to be dirt cheap right now. Why pay down something you are paying 4-5% on? Take that extra money and go buy another one or invest in something paying more than 4-5%. We pay our investors anywhere from 5-9% so I'm sure you can find something to make money on that money opposed to paying down the cheap money.
  10. newguy123

    newguy123 LawnSite Bronze Member
    Messages: 1,096

    I believe you mean occupancy rate correct?

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