All Forum Posts by: Alex L.

Hi Alex, 

You and I share a similar philosophy, which is always nice to come across in a fellow landlord and RE investor. It's unfortunate some of the less-than-amiable responses you've received, but unfortunately that's just how most people are in this "line of business." A landlord friend of mine is raising one tenant's rent from $1500 to $1800 at the end of their lease next month simply because other rentals in the area are going for between $1800 and $2000. To me, that's an absolutely insane hike all at once. I raised one of my tenant's rent by $50 with a 90 day notice ahead of time and still felt a bit bad about it since I had no need to actually raise rent outside of simply just increasing rent a little to keep up with inflation a bit and in case rent control is ever enacted and whatnot.

While the security deposit might be sizeable and surely may put a strain on a tenant's finances, I wouldn't recommend ever skipping out on having the security deposit and first month's rent paid in full prior to move in. This is the only guaranteed money that you'll have in your hand from the tenant, and you may need this to cover unpaid rent, utilities, or tenant-induced damages. Further, you don't want to waste your time with a potential tenant who can't put in the effort to save up the money necessary for the security deposit; a lack of this ability is a huge red flag in appropriate planning and financial skills, and that may become a problem that ultimately falls onto you as the landlord and property owner. Depending on the property's finances and neighborhood class, it may be helpful to only charge first month's rent and a security deposit upon move-in, rather than first, last, and deposit. This is what I typically do and haven't had any issues arise.

Also, just to expand on your example for potential rent prices: I hope you're not just going off the mortgage alone. I would recommend to include something for future maintenance and repairs into the cost as well. For example, your mortgage (PITI) might be $1,000... consider also $150 on top of that, set aside, for repairs/maintenance. That way, anything you charge for rent above the $1,150 would be pure cash flow, that you ideally shouldn't have to dip into for any fixes or maintenance. This is a practice I've done from the beginning, and has never done me wrong. It might eat into my cash flow numbers, but I sleep very comfortably knowing that I have maintenance and repairs accounted for if something should arise.

With that said, whether you're charging $1500, $1750, or $1900, it doesn't matter in the grand scheme of things as long as (1) you've got a positive cash flow with decent padding, and; (2) you're comfortable and happy with that cash flow number. Not everyone invests the same, after all. 

Best!

Is that $100-$150 cash flow considering money put aside for maintenance/repairs? If not, I personally wouldn't touch that.

Jumping ship would be a moot point. Pretty much any insurance company that you go with is going to do an inspection of the property. Most of the times, these are just "drive-by" inspections, sometimes the inspector might get out and walk around the property, but not always. If the roof doesn't leak, worst I imagine happening is them requesting for the roof to be inspected by a roofing contractor and write up a report showing that the roof does not, in fact, leak. I had this happen with a property I bought where the basement got wet -- insurance had me call a structural engineer out to take a look and provide an inspection report showing that everything was structurally sound. 

Like Mike said -- efficiency and exit. Also, a lot of the apartment complexes in the area are quite overvalued at the moment. So, that's probably affecting the % return you're seeing. They're still trying to cash in on 2022 prices but they're late lol.

On the other hand, a lot of the time, the SFH's in Youngstown are in desperate need of major updates or repairs, which is part of the reason they're so cheap yet bringing in a good monthly return... even more so in the more "bad" neighborhoods. I've been watching a lot of out of state investors get in too deep, though, thinking they were getting slam dunk deals and then ending up selling 6 months later or their rental sitting on the market for months and decreasing in rental price week after week. There's one in particular that paid $65k for a house that shouldn't have sold for more than $50k, and it's been sitting vacant because (1) the rent was originally way too high, and (2) the "remodel" was an absolute botch job. But I digress.

I recently bought two properties on the east side which I'm remodeling at the moment. I solely invest in SFHs in Youngstown and surrounding neighborhoods, and I'm local to the area with lots of connections so I've got a finger on the pulse of anything that happens property-wise. I'm also finishing up my real estate license next month so that I'll have easier access to MLS properties rather than waiting for an agent to let me in. If there's anything you need assistance with, or perhaps want to offload a property in the future, feel free to reach out.

 Be careful. Insurance claims don't "fall off" after 3 years. Each insurance company has their own timeframe for how long they'll consider prior claims in calculating your premium, but it's typically more like 7 years. 

Like Bud already said, insurance is a "scam." Well, not literally, but there's no point in filing a claim unless it's for massive amounts or a total loss. And remember -- even just calling to report an incident can result in a "claim," even if it's not active, never investigated, or never paid out. Basically, just don't call your insurance company unless it's a last resort. They're NOT your friends. 

Sincerely, a prior insurance professional.

My first property was a quarter mile from my house, a bank foreclosure. Bought it in cash and BRRRR using a personal loan from Discover. I was early 20s and working at a call center at the time and didn't have the capital, but I had the credit and knew that after all costs and expenses I'd be pocketing an extra $250/mo. Now with inflation and whatnot, it's more like an extra $600/mo. Learned a lot from just jumping in head first and not sitting on the sidelines or looking for a "mentor." Google exists and pretty much every question someone new to the game might have has already been asked.

The goal for me is to be able to retire early by 35, so that's my hard and fast "when is enough, enough?" rule. I'm thankfully ahead of schedule, so another 4-5 properties will probably put me where I want to be. 

I probably won't really "retire" though. I'll leave my W2 job most likely, but I love real estate and will likely either self-manage because I enjoy it (otherwise I'll pass them off to a PM), or probably still continue to pick up 1 or 2 properties here and there because I look at my properties almost the same way I look at trading cards. Sounds silly, but it's true. Also, as long as houses keep popping up for sale in a specific neighborhood, I'll be buying them if I'm in the position to do so. Kind of have a funny little "goal" of owning most of the neighborhood. I know it's not good to put all your eggs in one basket, but oh well. I can do what I want with my FU money lol. My spouse has little interest in retiring early, so I'll ride their health insurance to the grave.

Do you ever put in recessed medicine cabinets when one isn't already there? Currently undergoing two complete bathroom remodels, they're on the smaller side, and are limited for space. Thinking about putting in a recessed medicine cabinet for the storage, but also wondering if it's worth the extra $100-$150. Business minded side of me says it's unnecessary, but the logistical side of me -- and I guess my previous experience as a tenant and also a homeowner with a smaller bathroom -- thinks that it's worth the trouble, if for not other reason to give tenants a place to keep their things. 

Is this including labor, or doing the labor yourself? I'm in the process of remodeling two 1k sq ft SFH's and all interior materials are only running me about $8k-10k for brand new stuff throughout, for mid-tier stuff. I thought about going the second hand route, but FB market place in my area is a bit lackluster. Glad to know it's working well for you though.