Reply #17

#1. We worked 20 years in construction and remodeling and are able to do all renovations and repairs ourselves. This helps a lot.
#2. Buy distressed properties that no bank would finance and that would cost the current owners many thousands of dollars to bring to lendable condition.
#3. Have the owner carry the note. Pay nothing down and defer payments for 6 months while you get some unit ready to rent and begin cash flow. Because you're buying as-is, the only fee you'll pay is for the lawyer to draw up the note and file it with the country, in our case, about $425 total.
#4. Pick the best unit first, get it ready and rent it. We have our own rental agreement and have a long talk with each applicant about our expectations: pay the rent on time (that's why we don't have a late fee); take care of the property, and get along with your neighbors. We do no credit checks, only a phone call to verify employment. We have no pet deposit, but all animals must be pre-approved (no mastiffs in the one bedroom apartments!). We feel that people who like animals are nicer than those who don't. Our application includes a limited power of attorney that allows us to give a 3 day notice without further procedures to vacate the property. We rent everything month to month, no leases.
#5. The cash flow from rentals must equal at least double all expenses, including taxes and the note payment. If the note must be longer to reduce the payment to increase cash flow, that's fine. We offer 7% interest, and we feel that's a great rate for the seller in this economy.
#6. Emphasize community and looking out for each other. At one small 10 unit complex, one of the retired tenants tends the flower beds. We pay for any supplies, but she volunteers her labor. One of the other renters takes her to her medical appointments, because she has no car and taxis are expensive here. And so on.

Hard numbers? Our first complex, the 10 unit, is a great example.
Note payment: $500 per month.
Rent for each 1 bedroom unit = $500 per month.
Expenses: annual taxes are around $2000. We pay the electricity and water, and that amounts to about $1000 per month. We spend $100 or so per month on maintenance.

Income: $60,000 per year less $2000 for taxes, less $12,000 for utilities, less $1200 for maintenance, or about $44,800 before income taxes, about $40,000 after. That's a 66% net on income, or about 80% on the total purchase price of the complex, $50,000, financed for 20 years for $500 per month.

I collect all rents in person, in cash or money order. I spend about 20 hours a month total on maintenance and tenant visits. It works because it's cooperative. We have had 100% occupancy for the last 7 years there, and haven't had a change in tenants for 6 of those years. One man passed away, creating a vacancy. We have a waiting list of 20 people wanting to get in there.

Repeat this every 2 or 3 years for 3 decades, and you'll find yourself living comfortably working about 40-45 hours a week, mostly collecting cash, drinking some coffee, having a snack while you visit with people you like. Remember: positive cash flow with the rental of the first unit, or it's a no-go. As long as one unit at each property is rented, we can make the payments with that.

This sounds somewhat boastful in review, it's not intended to be. It's supposed to be practical - a good deal is a good deal for everyone - the seller, us, the tenants, If it's not, long-term, it can't work.