Bruce Norris is joined once again this week by California investor and property manager expert, Mike Cantu.
Bruce asks about how Mike feels about the use of leverage in this market. Mike says leverage when buying at the right price is fine. Finding the long term leverage is the issue. It’s a challenge because banks want fully qualified and documented loans and stated income is out for investors. Bruce thinks this will change because they’ll have no choice but to open up to investors. It getting over the issue of investors being considered the “speculator” and everyone realizes we’re part of the solution.
Bruce asks Mike what his long term rental would look like. Mike goes into details exactly what he looks for in long term holds including structure and neighborhood. Mike and Bruce also talks about paying a little more for property that is premium. Both talk about neighborhoods and why he likes certain types.
Mike goes into a little more detail about renters and what he looks for when considering renting to a consumer. Mike goes over his job description concept. It’s truly unusual for the renters to hear what Mike has as expectations. Mike says a few people get offended by his direct questions but he ends up with some of the lowest turnover in the business.
If he and the renter make it to signing the rental agreement, he hopes that the renter forgets what he looks like because he never has to hear from them and visa versa. He rarely sees many of his tenants because of correct tenant selection.
Mike talks about liking to rent to blue collar workers. He loves tenants that fix things along the way and then sends him a receipt. Better to solve problems as they come up instead of letting them turn into big problems.
Bruce talks about questions Mike asks that are legal on the first meeting. He says humor and personality are important. Mike talks about things you can’t talk about as outlined in the Fair Housing Guidelines. You can’t not rent to people because of moral issues so be careful and understand what you’re getting into.
Bruce asks what the biggest surprise was that a renter ever gave Mike. Mike talks about a few good surprises and some bad experiences.
Bruce asks Mike about Section 8. Mike says he has mixed feelings about Section 8. Mike likes to be a little more independent. He has seen good and bad. The biggest issue comes with inspections. In his experience, houses don’t break themselves. People break houses and inspectors expect you to fix what renters break.
Bruce asks about rents and if he expects them to go down. Mike has seen his rental market get stronger as people move back to his area that had once gone to the high desert but have now foreclosed. He had a few vacancies but once they were fixed they were rented within 30 days. He says he’s even done a round of rent raises this year and no one has moved.
The biggest mistakes are buying the wrong house and overestimating rent. You can’t be way over on rent. Investors have to do their homework on the tenant and accepting a person check for deposit and first months rent is a huge mistake.
Bruce asks about who handles evictions. He’s been very unhappy with services and luckily he doesn’t have very many. He’s seriously thinking about taking them on himself again.
Mike does not use a property manager and he urges people to learn what it is that an investor is about to pay somebody else to do.
Mike talks to Bruce about the time it takes from an REO purchase to rehab to rental. Mike would like people to start doing houses one at a time and not try too many at once.
Mike is teaching his “Rental Properties and Management” seminar live for the first time February 21st in Riverside. This course is being presented by The Norris Group. Visit thenorrisgroup.com for more information. Next week, Ward Hanigan!
Mike Cantu is undoubtedly one of Southern California’s best real estate investors and a long-time friend of The Norris Group.
Mike Cantu has been a full time real estate investor for over 25 years. This is round three of a down market for Mike. He runs a buy/sell operation, wholesales, and manages a rental property portfolio.