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lampey posted:It is a relatively low bar to become a license real estate agent in most states. Yeah, it's a bit less than community college associate's degree level, you just need the time and minimal amount of money to be an agent unless you have mental deficiencies. The cartel then requires servitude before you can get to the fully autonomous level though.
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Jan 3, 2019 01:34
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Howdy folks. Long time no talk! I'm looking to buy my first investment house. Probably something ~1000 sq ft, sfh, $80-100k, and hopefully work out all the kinks and buy more of the same type of house. I like this route because if required I could float the mortgage indefinitely. I'll be using a 92% occupied rate, and 150% mortgage numbers to build a slush fund and shoot for ~$200-300 monthly cash flow after those modifiers. I will probably use my old realtor, and a structural engineer as the inspector. I have some questions that hopefully y'all can answer: 1. Is the 150% mortgage rate and 92% occupied rate realistic, as a general rule of thumb? I'm sure it heavily depends on location and the state of the house but I need to start somewhere. 2. Anyone have any good calculators / spreadsheets for investment houses? No need to reinvent the wheel if it's available and free. 3. What am I forgetting and what's probably gonna bite me in the rear end? Thanks moneyfriends! e: this is in Richmond, VA if it matters.
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Jan 7, 2019 17:32
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Adiabatic posted:Howdy folks. Long time no talk! Hello future river city landlord! I have a home in the chamberlain estates area that has been continuously occupied for about three years now. ~2400 sqft, 5 beds, rents for $1650. Mortgage payment is around $1200. I pay Dodson 8% to manage it and they’ve been fantastic. Both tenants I’ve had have been great. No damage, no late payments, submit regular maintenance requests so I know they aren’t making GBS threads the place up. Both times it took less than a week to fill, which tells me I’m still charging too little. What location are you considering? For that price range it’s gotta be south side I assume.
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Jan 7, 2019 17:42
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Adiabatic posted:Howdy folks. Long time no talk! What do you mean by "150% mortgage rate"? Vacancy is very dependent upon the type of property and nature of the location. For example in college towns and attractive rental properties there can be virtually zero vacancy on the right properties.
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Jan 7, 2019 18:03
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Jealous Cow posted:Hello future river city landlord! Howdy! I'm looking just West of Manchester, or along Chippenham near Hull/Midlo. I admittedly need to do more research into the areas, but I've lived here for a few decades and currently I'm in Stratford Hills. Thanks for the Dodson tip! I definitely need to use a property management service, as I'm doing a bunch of other stuff currently. BEHOLD: MY CAPE posted:What do you mean by "150% mortgage rate"? Vacancy is very dependent upon the type of property and nature of the location. For example in college towns and attractive rental properties there can be virtually zero vacancy on the right properties. Whatever the mortgage for the property entails, I'll be halving that number and sending it to a savings account just for this property. If PITI is $500 my monthly costs would be $750, with $250 of that going to a savings account just for this house for maintenance purposes. I'm unsure if this is too conservative, but I'd at least like to start out very conservative and see if I can still get a positive cash flow out of a property. Adiabatic fucked around with this message at 18:49 on Jan 7, 2019 |
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Jan 7, 2019 18:46
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I see, what you are saying is kind of an unusual way to word the 50% expenses rule. In my opinion these robotic rules are kind of unhelpful because they make it more difficult for you to understand your business. How much money you will need to set in reserves really depends upon your overall rental business cash flow and the specific needs of the property, particularly anticipated midterm capital expenditures. If I were you I would make decisions really based on individual properties and your assessment thereof. I would treat a rental property that is going to require a new roof at some point differently than I would for example a freshly renovated property with new systems. If I had a comfortable portfolio of established cash flowing properties I wouldn't be that worried about reserves on one particular $100k property. $300 a month free cash flow is probably going to be on the high end of what is possible for a $100,000 property with a 30 year 20% down investment rate mortgage; assuming your mortgage payment with insurance and property taxes is going to be about $700 a month you will need to be collecting at minimum ~$1200 a month in rent to take that much free cash flow without thinking twice about it. Be sure you accurately calculate your mortgage payment and research rental comps before you make assumptions about how much cash flow you are going to get.
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Jan 7, 2019 19:04
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BEHOLD: MY CAPE posted:What do you mean by "150% mortgage rate"? Vacancy is very dependent upon the type of property and nature of the location. For example in college towns and attractive rental properties there can be virtually zero vacancy on the right properties. Yeah, all these figures I always see thrown about for occupancy rates are way too general. "Expect an occupancy rate of X%" is going to be just bullshit 95% of the time.
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Jan 7, 2019 20:20
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BEHOLD: MY CAPE posted:I see, what you are saying is kind of an unusual way to word the 50% expenses rule. In my opinion these robotic rules are kind of unhelpful because they make it more difficult for you to understand your business. How much money you will need to set in reserves really depends upon your overall rental business cash flow and the specific needs of the property, particularly anticipated midterm capital expenditures. If I were you I would make decisions really based on individual properties and your assessment thereof. I would treat a rental property that is going to require a new roof at some point differently than I would for example a freshly renovated property with new systems. If I had a comfortable portfolio of established cash flowing properties I wouldn't be that worried about reserves on one particular $100k property. Thanks! You're right. I will assess each one individually and break out some estimates of stuff it may need soon. Do you (or does anyone) have a good check-off list for major expenditures requiring inspection? I know a good inspector will go over this, but I'd like to grab information on them myself before it gets to that point. Off the top of my head: roof - new or old / patches present hvac system (both cold & hot if separate) - performance and age soft areas in walls or water spots on ceiling showing roof neglect and water intrusion water heater age obvious foundational issues - horizontal cracks, major settling, etc obvious electrical issues - old wiring, bad wiring, state of breaker panel obvious plumbing issues - smells, water pressure, clogging, slow drains appliances staying with property - age and performance Thermopyle posted:Yeah, all these figures I always see thrown about for occupancy rates are way too general. "Expect an occupancy rate of X%" is going to be just bullshit 95% of the time. In my mind this was just a starting point for me to spot houses that could potentially work. For the occupancy rate I really just wanted to have a more conservative number than 100% occupied for the initial SWAG.
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Jan 7, 2019 20:51
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One other thing— I didn’t think it was even possible to still find houses for $100k in richmond, even in the area you described. You should probably assume you’re going to have some...challenging tenants. Also, now that I think about it, that 8% figure from Dodson probably goes up as the rent goes down. I could see it being 10-12% on $1000 rent.
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Jan 7, 2019 21:28
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That is a good starter list but also look at stuff not simply from the perspective of maintenance needs but opportunity for inexpensive rental value added property improvement. For example spending $1,000 on a fresh coat of interior paint and $2,000 on laminate flooring and $200 to get the lawn fixed up and all the trees and bushes trimmed can instantly pop your monthly rent on a dumpy looking house by a hundred bucks or something like that. So let the actual property inspector do the hard work of finding problems and turn your eye towards the opportunity for improvements.
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Jan 7, 2019 21:29
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Jealous Cow posted:One other thing— One other thing to really look at is that if you are not willing to do any of the property management yourself, it is very hard to get meaningful cash flow from a rental property with an 80% LTV mortgage after the property manager gets their hooks into you for 10 to 12% of your gross rent.
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Jan 7, 2019 21:31
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RoflcopterPilot posted:Thinking about buying my first rental property out of state (I know) am looking for additional research to be done or like a checklist of sorts. I've looked into this a lot and have spoken with several people doing something similar, as well as have access to a lot of real estate professionals, but I guess I'm looking for unbiased opinion to make sure my people aren't just "yes-man"-ing me hoping to get a piece. Hey fellow NYC person. I've also been looking for investment properties in the area. I would also suggest looking at properties in "upstate NY," (read: north of Westchester/Rockland counties) or even NJ/PA that would still be under ~2 hour drive. I think you'd be able to find something decent that you'd still be able to drive to in a day trip (assuming you have access to a car, if not you could do a zipcar and expense, etc). Being near a commuter rail might also be possible, but would likely be in a more expensive area. Since you have the cash on hand, you could also attend foreclosure auctions, and I'm confident you could find something at auction in that price range. PM me because I'd be happy to discuss in more detail.
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Jan 7, 2019 21:56
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BEHOLD: MY CAPE posted:One other thing to really look at is that if you are not willing to do any of the property management yourself, it is very hard to get meaningful cash flow from a rental property with an 80% LTV mortgage after the property manager gets their hooks into you for 10 to 12% of your gross rent. Agreed. I ended up with a higher priced rental due to a relocation. If I were to start buying 100k homes to rent I’d manage them myself. That being said, my property management company has been awesome. They get repairs done crazy fast for amounts that are always significantly less than I think they’ll be. They like me too as I always approve repairs quickly because I’m not a piece of poo poo. They are so good at getting repairs done fast that I kind of want to use them for repairs on my primary home lol
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Jan 7, 2019 23:41
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I'd also get the sewer mains scoped on any older investment property. A collapsed sewer line could cause a lot of damage from backups, cost tens of thousands to repair, and leave your tenants without sewer service for an extended period.
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Jan 8, 2019 01:44
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Jealous Cow posted:One other thing— I've seen quite a few for $80k-$100k but they look pretty trashed. I am totally willing to up the limit on the price of the first house if I can't find anything that works. However, I would like to get into something small and cheap at first to get all of the "first time investment property" kinks out without being beholden to a lot of cash every month. Any other spots you'd suggest? BEHOLD: MY CAPE posted:That is a good starter list but also look at stuff not simply from the perspective of maintenance needs but opportunity for inexpensive rental value added property improvement. For example spending $1,000 on a fresh coat of interior paint and $2,000 on laminate flooring and $200 to get the lawn fixed up and all the trees and bushes trimmed can instantly pop your monthly rent on a dumpy looking house by a hundred bucks or something like that. So let the actual property inspector do the hard work of finding problems and turn your eye towards the opportunity for improvements. You're right! I'm in a maintenance hole because that's the part I care about and am good at. I have blinders on about the importance of aesthetics and seem to have completely written off the actual "tenant as a human" bit by hand waving the idea of using property management. I need to look into both those areas way more. Konstantin posted:I'd also get the sewer mains scoped on any older investment property. A collapsed sewer line could cause a lot of damage from backups, cost tens of thousands to repair, and leave your tenants without sewer service for an extended period. Definitely. Added. Thanks again for everyone's answers. Y'all have any spreadsheets or programs you use to make the search easier?
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Jan 8, 2019 20:57
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Help me understand why this isn't a no brainer? https://www.zillow.com/homedetails/2437-Petsel-Pl-Iowa-City-IA-52246/2107599497_zpid/?fullpage=true
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Jan 10, 2019 21:12
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EAT FASTER!!!!!! posted:Help me understand why this isn't a no brainer? Why was it listed and pending in 2017 for half the current asking? What did they plaster over that doubled the value?
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Jan 10, 2019 21:18
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Jealous Cow posted:Why was it listed and pending in 2017 for half the current asking? What did they plaster over that doubled the value? My friend is a RE agent and says it was completely renovated.
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Jan 10, 2019 21:26
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EAT FASTER!!!!!! posted:Help me understand why this isn't a no brainer? You have to run the full numbers on it including the mortgage payment, property taxes, landlord licensing, vacancy and capital reserves for building like that but it could be a reasonable deal. $1100 per unit fully rented on long-term leases sounds like high rent for old 3/1 apartment units in Middle America but I don't know the area. I would ask for the rent rolls and a P&L and figure out what fully renovated really means like for example what's the condition of the roof and major systems. Oftentimes "fully renovated"means they went in and put down laminate and new countertops and painted the cabinet doors. If everything checks out and you come up with a cap rate of like 6 or 7% and you are willing to manage an 8 unit property it could be a fine deal.
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Jan 10, 2019 21:34
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Just another 11 hours left owning a rental! It's like selling a boat, except you actually make money! 
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Jan 11, 2019 04:22
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BEHOLD: MY CAPE posted:You have to run the full numbers on it including the mortgage payment, property taxes, landlord licensing, vacancy and capital reserves for building like that but it could be a reasonable deal. $1100 per unit fully rented on long-term leases sounds like high rent for old 3/1 apartment units in Middle America but I don't know the area. I would ask for the rent rolls and a P&L and figure out what fully renovated really means like for example what's the condition of the roof and major systems. Oftentimes "fully renovated"means they went in and put down laminate and new countertops and painted the cabinet doors. If everything checks out and you come up with a cap rate of like 6 or 7% and you are willing to manage an 8 unit property it could be a fine deal. It happens to be < 10 minutes from the academic medical center, dental school and law school. I’ll request the rolls and also an account of what was spent renovating.
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Jan 11, 2019 22:29
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How long have they been running it? Do they have P&Ls that they can give you as well? You may have to price in a reassessment in your cap rate if the assessment is lagging the renovations.
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Jan 11, 2019 22:51
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crazypeltast52 posted:How long have they been running it? Do they have P&Ls that they can give you as well? You may have to price in a reassessment in your cap rate if the assessment is lagging the renovations. I'll have to look into all of this. I was just using numbers I know for the property taxes based on the sale price, estimating some of the other numbers and tying it all together with this spreadsheet. https://www.calculator.net/rental-property-calculator.html I have the assets on hand to put 20% down on a 30 year note (although would probably attempt to do this in a partnership with a couple I know - I went to business school with the husband and the wife is a RE agent). I figured property taxes as 15k (estimated based on sale price), insurance as 8k, maintenance as 10k, other costs as 2k and treated the net revenue from laundry services as 0. I also gave a vacancy rate of 12.5% This prompted a cap rate of 5.22%
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Jan 11, 2019 23:06
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12.5% vacancy is super high, but you also don't have anything figured for cap ex so it's probably a wash. I guess overall I would say it's a little bit weird for a rehabber to like do a total renovation and then go through all the work of stabilizing the property to 100% occupied market rents just to immediately sell, but it is possible they want to just want to take the cash and don't want to deal with refinancing their hard money. Talk to a commercial lender about what you are going to need to get the best loan terms, probably is going to make them a little skittish if you tell them you are a first-time investor but if this is a truly turn-key deal and you have plenty of cash I'm sure you can make it happen. Think really hard about getting into a partnership on a huge deal like this where you are going to tie up $200k cash and make sure you have a very thorough written operating agreement that addresses what you're going to do with reserves and cash flow, disputes in management decisions and very clearly gives exit routes when one of you wants out. It could be interesting but honestly I'd start with something a little smaller before doing a JV. Edit: also I see you're in the "one of the partners is a real estate agent" situation, make sure you talk about that $30,000 commission check before she pockets it at closing BEHOLD: MY CAPE fucked around with this message at 23:49 on Jan 11, 2019 |
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Jan 11, 2019 23:46
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It might not be quite big enough to finance with an agency SBL program, but if you find something bigger you could get agency debt from Freddie. The underwriting can be slower than a bank and they want more disclosure, but you will have trouble beating agency financing on stabilized multifamily. https://mf.freddiemac.com/docs/product/small_balance_loan.pdf The typical process will check a bunch of boxes from this document, but the multifamily side of the agencies have really low loss rates: https://www.fanniemae.com/content/guide/multifamily-selling-servicing-guide.pdf Also take a look at how your proposed pricing compares to the last few years of multifamily sales in Johnson County: https://www.johnson-county.com/dept_jc_assessor.aspx?id=7337 Iowa has good public assessor databases in most counties, so you should be able to compare these sales to this one and see how it looks relative to the market.
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Jan 12, 2019 01:34
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BEHOLD: MY CAPE posted:12.5% vacancy is super high, but you also don't have anything figured for cap ex so it's probably a wash. I guess overall I would say it's a little bit weird for a rehabber to like do a total renovation and then go through all the work of stabilizing the property to 100% occupied market rents just to immediately sell, but it is possible they want to just want to take the cash and don't want to deal with refinancing their hard money. She knows that's (discounted) a portion of her initial capital in the JV so I don't think that situation is unclear. Just considering it. I know it's a big play.
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Jan 12, 2019 07:36
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Thesaurus posted:I just learned that you have to be a licensed real estate broker to perform property management duties in most states. This blows my mind, because it sounds so common for someone to pay a friend or family member to be their property manager for their house etc (which I was looking into). In Texas, property owners are excepted from these laws. I would bet this is the case in most states. If someone is acting as an agent for the owner in managing or marketing a property, then yes, they need to be licensed.
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Jan 22, 2019 22:37
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GEEKABALL posted:In Texas, property owners are excepted from these laws. I would bet this is the case in most states. There's a variety of loopholes on a state-by-state basis but yes in general this is a big nuisance for people who are gathering enough rental properties that it becomes difficult to personally manage them and they do not want to cough up 10% of their gross rent plus a leasing fee to somebody just because they have a real estate license
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Jan 22, 2019 23:21
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Anyone dealt with tenants getting locked up? One just hit with a couple first degree murder charges so I don't think they're making rent.
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Jan 24, 2019 15:42
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baquerd posted:Anyone dealt with tenants getting locked up? One just hit with a couple first degree murder charges so I don't think they're making rent. As soon as they miss rent, proceed with a full, by the books formal legal eviction. No other answer to it. Just because they went to jail is not grounds for you to perform a self-help eviction and going through the full eviction process will protect you against future claims against missing property et cetera.
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Jan 24, 2019 16:06
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BEHOLD: MY CAPE posted:As soon as they miss rent, proceed with a full, by the books formal legal eviction. No other answer to it. Just because they went to jail is not grounds for you to perform a self-help eviction and going through the full eviction process will protect you against future claims against missing property et cetera. Yeah this is right. Them getting locked up is immaterial (surprisingly, i do not know the law in every jurisdiction in the world), you just treat them like anyone else who isn't paying their rent.
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Jan 25, 2019 01:38
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Thermopyle posted:Yeah this is right. Depending upon the circumstances, your lease, and state law, if the crime were committed on the property it could be a breach of the lease, but as a general rule it is much easier and more expedient to evict for non-payment than for other breaches of lease. You could also offer a mutual severance if you are able to communicate with someone in jail but legally the safest option with respect to protections for the landlord is usually to evict and have possession rendered by the sheriff.
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Jan 25, 2019 03:26
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Lawyer saying formal eviction via door posting and storage unit for 3 months for all their junk before it can be disposed if not legally claimed. Police won't let people in yet though.
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Jan 25, 2019 15:04
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Got a call from my property manager. The two car garage door needs to be replaced. “Something” happened that caused it to get tweaked and out of square so it won’t open anymore. I talked to the contractor who said the door has a slide lock on it, which they always remove when installing an opener, and it’s likely that the tenant tried to open the door with the opener while the slide lock was engaged, but can’t prove it. This is my first big tenant-caused repair since being a landlord for about 3 years. $1700. The new door won’t have a slide lock, so there isn’t really even anything to say to the tenant. The garage door guy said he’s seen this litigated before and courts have found for the tenant, saying the landlord should have removed the lock if they didn’t want this to happen. Unfortunately I didn’t even realize the lock was there.
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Feb 7, 2019 21:42
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Jealous Cow posted:Got a call from my property manager. The two car garage door needs to be replaced. “Something” happened that caused it to get tweaked and out of square so it won’t open anymore. Sorry, I guess that's why you have a maintenance accrual account. Any problems with the tenant otherwise?
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Feb 8, 2019 16:18
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EAT FASTER!!!!!! posted:Sorry, I guess that's why you have a maintenance accrual account. Any problems with the tenant otherwise? They were a day late paying once, but so far no. They renewed and I guess I’ll see how they’ve kept the interior during the renewal walkthrough. They did put a huge trampoline in the backyard which I’m not thrilled about.
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Feb 8, 2019 16:20
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Jealous Cow posted:They were a day late paying once, but so far no. They renewed and I guess I’ll see how they’ve kept the interior during the renewal walkthrough. Doesn't that absolutely, catastrophically gently caress up your insurance rates? People break their necks on those all the time.
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Feb 8, 2019 16:20
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EAT FASTER!!!!!! posted:Doesn't that absolutely, catastrophically gently caress up your insurance rates? People break their necks on those all the time. How would my insurance know about it? I only know because I drove by and spotted it.
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Feb 8, 2019 16:22
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Jealous Cow posted:How would my insurance know about it? I only know because I drove by and spotted it. When your tenant breaks their neck, sues you and thirty other entities, and your insurance refuses to defend you or settle because trampolines are excluded from your insurance
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Feb 8, 2019 16:24
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Devor posted:When your tenant breaks their neck, sues you and thirty other entities, and your insurance refuses to defend you or settle because trampolines are excluded from your insurance My policy makes no reference to trampolines. Just read through it and searched for the word just to make sure. Is there any other way such an exclusion could be worded? Also the lease I use holds me blameless for anything that wasn’t gross negligence on my part and it’s an agreement that’s already been litigated in VA.
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Feb 8, 2019 16:34
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