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Ashley:
This is Real Estate Rookie, episode 184. My name is Ashley Kehr, and I am here with my co-host Tony Robinson.<\/p>\n
Tony:
And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we give you the stories, the information, the inspiration you need to kickstart your real estate investing journey. So my wonderful co-host Ashley Kehr, what\u2019s new? What\u2019s going on?<\/p>\n
Ashley:
Not much. We\u2019re supposed to have great weather here in Buffalo this weekend, so that\u2019s exciting. And then I think it\u2019ll probably go back to another snowfall or something. But I had put an offer in on a campground last week and didn\u2019t hear anything back from the people, they followed up, or I followed up with them, had my business partner follow up with them and then it ended up, they didn\u2019t even see our offer. So they actually looked at it called us back a couple hours later, no, we\u2019re not going to do it. So we went back, reran numbers and what, we submitted our second offer was, there was a lot of land with this property and we don\u2019t need all of the land. So we actually submitted our next offer with less of the land where they can actually parcel off some of the land, sell that separately, or keep it for themselves. So hopefully that\u2019s a big enough incentive for them to accept the offer. So we sent that second offer last night and hopefully\u2026<\/p>\n
Tony:
Fingers crossed.<\/p>\n
Ashley:
It just gets accepted.<\/p>\n
Tony:
Wait, so how many acres will it end up being if you, for what you submitted on this last offer?<\/p>\n
Ashley:
So it was all together, total is 211 and we\u2019d get about 107, I\u2019d say.<\/p>\n
Tony:
Oh, that\u2019s awesome.<\/p>\n
Ashley:
It\u2019s kind of like a creek ravine that kind of makes a separation between where the campground is and the, some vacant land. And there\u2019s still plenty of room to expand with that 100 acres too, if we ever wanted to.<\/p>\n
Tony:
It\u2019s so mind blowing to me, like how big these properties are that you\u2019re looking at, because I always make fun, right? Because, in California where I live, it\u2019s a new development. It was built in 2018 and literally every house that\u2019s on an eighth of an acre, something stupid like that. So to hear 200 acres, it\u2019s like my mind doesn\u2019t, can\u2019t compute.<\/p>\n
Ashley:
Yeah.<\/p>\n
Tony:
Well, fingers crossed, you guys get that one. That should be an exciting project for you.<\/p>\n
Ashley:
Thank you very much, I\u2019m excited for this one. So what\u2019s new with you?<\/p>\n
Tony:
Same, we\u2019re chugging along on this resort and in Big Bear Lake. So me and the Alpha Geek Capital team, we\u2019re doing all of our due diligence. So we had our first meeting with the attorneys yesterday to get the syndication paperwork kind of in place. And met with the CPA, who\u2019s going to help us get that piece dialed in. So I\u2019m hoping that by I like, or there\u2019s some time travel happening now, but by second week of May, we should be able to actually open up the syndication and start doing the whole shebang. So it\u2019ll be fun, it\u2019ll be a really good learning experience for us. And, we\u2019re excited and what\u2019s even crazier Ashley, kind of funny, but kind of not. So, as we were kind of going through our due diligence and we were rerunning our financial model, we realized that there was a broken sale in the model.
So it was double charging, one of the expense line items. And it was a pretty big expense line item. And so when we caught that, we fixed it and the returns just went way up from what we originally expected. So it\u2019s like, we did all this negotiating with this kind of broken financial model. Got it under contract at this price and now we fix it and the returns look even better. So it was, me and my partner were laughing about it, but it was, I guess, a lucky break for us.<\/p>\n
Ashley:
Right, that you found it too and didn\u2019t\u2026<\/p>\n
Tony:
Right.<\/p>\n
Ashley:
Give on the deal, cool. Well, that\u2019s really exciting. And I can\u2019t wait to kind of follow you along on this journey and it\u2019s definitely going to be a great opportunity for anyone that invests in your syndication. I mean, you have more than enough experience and knowledge in the short term rental space, so.<\/p>\n
Tony:
Oh, well, thank you, Ash. I appreciate that, and hopefully it all turns out well, so we\u2019ll see. Well, cool. Well, we got a good question for today. This one came from the Real Estate Rookie Facebook Group. So if you guys are not in the Real Estate Rookie Facebook Group, it is literally one of the most active, the most engaging Facebook Groups out there for real estate investors, especially for the new ones. Every time I go in there and I try and answer a question I can\u2019t, because someone\u2019s already jumped in and answered it with probably just as good as I would\u2019ve answered it. So if you\u2019re looking for a community, the Real Estate Rookie Facebook Group is the place to be. But today\u2019s question comes from Andrew Threatt. So I\u2019m going to go ahead and read off Andrew\u2019s question. And Andrew says, \u201chow would you handle a prospective tenant that has a bankruptcy on their record?\u201d
\u201cI know it sounds obvious, but for context, I recently had a potential tenant reach out to me. He checks off all of the boxes so far based on his word\u201d. And then he put in quotes, \u201cI haven\u2019t done the official background check yet, still in the pre-screening phase\u201d. And Andrew goes on to say, \u201che\u2019s a recent, divorc\u00e9 and said, the bankruptcy is from his wife, taking out a couple of credit cards in his name without him knowing\u201d. Any thoughts or input on how you would move forward with this? I plan to let him apply so I can conduct an official background check, but just want to see anyone else\u2019s initial thoughts. So Ash, what are you thinking? Are you letting the recently divorced bankrupt tenant get the spot or how do you feel about that?<\/p>\n
Ashley:
I don\u2019t know. I mean, that\u2019s so tricky because to have to say like, oh yeah, that\u2019s not a big deal. I think the first thing is, do you think he\u2019s being genuine and do you think that\u2019s actually the reason? And that\u2019s the hardest part is telling if, what somebody is saying is actually true. So, but also if you think about it, somebody who has gone through bankruptcy or foreclosure, their option is to rent. They\u2019re not getting a bank loan, they\u2019re not getting a mortgage on a new property to live. So going, they have to go and rent. So after, that they have no other option. So I would think that because they can, they have no other place to live. They don\u2019t have an option to go buy a house or anything, that maybe as a rental, they\u2019re going to be a renter and hopefully pay because they don\u2019t have any other options at the point.
And then there\u2019s also some, I think RentRedi, maybe does this. There are a couple property management software platforms that you can actually offer your tenants that when they pay rent, it reports it to their credit. So that way, they can establish better credit by making those rent payments on time. So maybe looking into something like that, and if the guy really is looking to rebuild his financial history, put a system like that in place so that if he does default, it\u2019s just going to hurt his credit history even more.<\/p>\n
Tony:
Yeah. And those are really good points, Ash. You\u2019re right, if you almost have a guaranteed long term tenant, at least for a little while, right? While, that\u2019s, this person\u2019s kind of working up to rebuild their credit profile. So, really good points. I think the only thing I\u2019d add to that is that Andrew, there are other things you can look out outside of just the bankruptcy to see if this person is potentially good tenant or not, right. So I think the first thing I would look at is their DTI. If they\u2019re sitting like a 70% DTI, then maybe it\u2019s not really the, those credit cards that were driving everything, right? If he filed this bankruptcy then went out and got a whole bunch of new debt, then it\u2019s like, okay, maybe this person just isn\u2019t great with their finances. But if they\u2019ve got a really big salary and relatively no debt after this bankruptcy then maybe, what they\u2019re saying is correct.
So other thing you can do, Andrew and I actually used to work as a leasing agent when I graduated from college. And this is what we would do at that company is we would charge different deposits based on that potential tenants risk profile. So if this guy recently had a bankruptcy, maybe instead of charging him, first and last, maybe it\u2019s first and last plus something else. So that way, if there is some kind of issue where he\u2019s not paying, at least you\u2019ve got a bigger security deposit to hold onto. And the last thing I might look at is just his employment history. If he\u2019s been bounced around from a different job, every 90 days, maybe he\u2019s not the most stable person. But if he\u2019s been at that same job for the last decade, I think that\u2019s another just kind of thing to show that he\u2019s a steady stable person. So even outside of this bankruptcy, I think there is some data points you can look at, to kind of assess whether or not there\u2019s some risk with this guy maybe moving in and then not paying.<\/p>\n
Ashley:
Tony, just to add on to the point, the second point that you made. I wouldn\u2019t know this unless the law changed in New York state, but in some states in New York, including there is actually a limit on how much you can charge for a security deposit. Or if you can even charge the last month\u2019s rent. So the security deposit has to equal the first month\u2019s rent. So in New York, that\u2019s not even an option anymore that you can actually charge an additional security deposit or more money down on the apartment. So really the only way I guess, to get around that is to increase the rent\u2026<\/p>\n
Tony:
The rent.<\/p>\n
Ashley:
Or charge some fees for, a higher pet fee every month or something like that. But, so that\u2019s just one thing to be careful for. And like we\u2019ve talked about before is make sure if you are going to self-manage and be a landlord that you know, what your local and state laws are and what the fair housing compliancies too.<\/p>\n
Tony:
That\u2019s a good point. And I guess I should preface that by saying that neither Ash or I are attorneys, nor do we pretend to play one on podcast. So talk to your\u2026<\/p>\n
Ashley:
And neither of us are self-managing rental folks right now.<\/p>\n
Tony:
Right.<\/p>\n
Ashley:
Like a couple years ago when I was self-managing I could very confidently roll off what the list estate laws are for New York and what good has to do, but I don\u2019t think they\u2019ve changed since then. But there could be that chance that they have, or that I don\u2019t remember them correctly, but I do know that you can\u2019t charge more than the security person less. And a great resource to go and look for this information is to Google your local housing authority. So in New York, so I live in Buffalo, the closest one in the Buffalo area is Belmont Housing and homesnewyork.org or.gov. And they\u2019re the two local housing authorities. Belmont gives out the section 8 vouchers and they do tons of free or low cost landlord classes.
And then the same with the homesny.gov or.org website too. And they even publish a book every couple years with tenant landlord laws that they give out to one that\u2019s for tenants and one that\u2019s for landlords too. So definitely a great resource, if you guys want to check that out. And I think Tony, touching on your point, how to look at different things, that\u2019s so important because I remember when people would ask me, well, what, what\u2019s the income I need to make to get this? Or my, the biggest one was my credit score. Is this, is that going to be okay? Am I going to be able to rent? And you\u2019re right, it\u2019s like a majority of factors. It\u2019s not just one thing that you should be looking at, like this guy\u2019s bankruptcy. For example, if somebody had medical bills that they didn\u2019t pay, we never even took that into account.
We didn\u2019t even factor that. But if they have an auto loan, they\u2019re not paying, we definitely take a look at that. And the software out there today, too, that you can use. So whether it\u2019s through a property management website or not, it will account for all of those factors and you can go in, you can set your criteria and then they will tell you yep, this person passes your criteria or no, it doesn\u2019t, based on the factors. So I think kind of taking out that personal opinion can definitely help you stay in compliance with fair housing laws by using these softwares, by setting your criteria like, okay, this is the minimum credit score. This is the minimum DTI, they have to have, this is what their income has to be, two and a half times what the rent is, things like that.
And then kind of the decision is out of your hands. Once in a while, I remember the software would be like, it needs review. Like it\u2019s not a pass or a fail, but so check out property management software or different credit screening and background screening software too, you guys can use. Okay. Anything else Tony, to add to that?<\/p>\n
Tony:
No, I think we hit everything, Ash.<\/p>\n
Ashley:
Okay. Well, thank you guys so much for joining us on this week\u2019s Rookie reply. If you guys have a success story or this podcast has made an impact on your life, and maybe you just got your first deal or your next deal, we would love to hear about it. So please leave us a review on your favorite podcast platform and also send us a DM with any questions you have or leave us a voicemail at 1-888-5-ROOKIE. I\u2019m Ashley at @wealthfromrentals, and he\u2019s Tony @tonyjrobinson. Thank you guys, and we\u2019ll be back on Wednesday with a guest.<\/p>\n
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