All Forum Posts by: Bill B.

There’s probably a big difference between starting (1-3 rentals) and once you get 6-10 or more. I’ve personally never faced an invoice over $10k (massive turnover expense plus took the opportunity to replace all appliance and install grainier to raise rents.) I collect quite a bit more than that monthly in rent so even in that case I still cash flowed. 

That being said, obviously I have liquid funds of $10-$20k because property taxes and insurance are bunched pretty close together. But I’ve been a long time credit card user and love getting the free cash. So I have one $75k limit credit card I use for EVERYTHING. As long as you can earn 4% I have no problem with you just calling that investment funds you can use in case of an emergency. (I’m at the point in my life where I have a pretty large investment in CDs and Bonds yielding 4-5% that I consider “investments” rather than reserves. The day you see a 6 figure stock market loss in one day you start to value to “stability”. 

Ps. LMK what the insurance company says/does about reimbursing you and if you think it was worth making the claim. Is your deductible under $2,500? If so, have you asked your agent what the saving would be for a higher deductible? Going form $1,000-$2,500 saved me $400/yr per property. Easily paid for it self in a year. 

It probably depends on the market and the property type/age. 

I don’t pay markups on service/repairs and in fact I usually see a discount on the vendors invoice. But…

I usually have 1 or less service calls per year per property. It’s almost always a plumbing, an appliance or hvac.There’s no remodeling or “major” building repairs.

They don’t front or risk any money as I have a few hundred dollars in reserves per property and they just move the money around, plus they have all the incoming rent,what risk could they really face? 

Everything is close to automated already and that’s before AI makes it even more automated. The tenant makes an online request. It’s forwarded to the vendor. They make the arrangements and go out. If it’s less than $250 it’s just done with before and after pictures sent to the automated system. If it’s more they send pictures with an estimate that gets sent directly to me. I hit approve or not. And works done. 

MAYBE they spend 30 minutes per year per property on maintenance. MAYBE. I love that the tenant has their problem fixed within hours 90% of the time. I feel like I’m getting a good deal. Win win. I do occasionally skip their appliance vendor when the unit needs to be replaced. They might only be $100 high on the unit. But then they want $50 to deliver, $50 to install, and $50 to remove the old unit. Too many big shops around here do that for free. So if I’m bored, want to feel like I’m involved, or want to save a quick $250 I’ll stop by and pick one out. The shop does all the coordination with the tenant. But that might be 2 days instead of same day. So it depends on the situation. 

I’m certainly not saying they aren’t doing a hard job or I want to do it. But the part they’re doing I hate is the Tennant screening, keeping up with market rent rent rates, and keeping me legal with changing laws. With my properties the repairs pretty darn basic. It’s not rotted out floors, basement water issues, leaking roofs and the such. 90% of the time the technician knows the problem and the solution before he leaves his truck. 

Sorry to ramble. Just thought you might want to hear the thought process from the customer side. Have a good day. :-)

If you did that much work yourself I wonder why you made an insurance claim? I run $2,500-$5,000 deductibles so $8k is on the cusp on what I was claim, depending on the policy. 

If you planned to make a claim, why do any work yourself? I’ve had 2 slab leaks and 2 toilet supply lines explode in 25 years. All 4 times allstate had Servpro there within an hour. They did everything you mentioned except they went up 4 feet to make even drywall segments. They managed the whole deal and covered everything. I fear doing the work yourself that labor won’t be reimbursed. 

Ps. Allstate actually sued the toilet supply line makers both times and refunded my deductibles. 

Pps. To answer your original question. This shouldn’t have required any reserves outside of the insurance deductible and that wouldn’t be needed for weeks. But I simply have a high limit credit card as you should never need more than $5-$10k. Money is just too valuable to have it sitting around in reserves. Probably the most expensive repair most people will have is HVAC and capex has to be a roof in areas where that’s a thing. HVAC guys love credit cards, roofers probably do too. As I don’t see most landlords having a $20k reserve for a new roof aging out that isn’t covered by insurance. 

I do appreciate that you and your family were handy enough to lend a hand though. I’d be the guy that wants to help but ends up just carrying stuff to the trash or grabbing lunch. :-)

1) what’s the property worth? Are you saying they have zero equity? (You’re only offering what they owe.) is this a bad market with no appreciation/falling prices?

2) What’s your plan if you can’t refinance in 2 years? Just walk away? If the property finally starts to appreciate the seller will have zero motivation to work with instead of taking the property back and selling again. 

3) don’t forget your payment will increase as taxes and insurance will increase. 

4) do you have a plan if the bank calls the loan due? Walk away?

5) this is an investment property not a primary home right? (Otherwise I don’t think the2 year balloon is legal.) so you’re going to call the bank and say randomly you want a landlord  insurance policy in your name for some other persons loan/property. Not because you bought it, because that would call the loan due. 

6) ZERO chance I would do this as a seller. You’re basically putting down 1% after selling costs. How much will they lose if you just stop making payments and make them evict you? Heck. Even after 2 years when they won’t refinance you and you fail to leave they’ll be upside down. How about 20 months from now when you figure out you can’t refinance and they won’t extend you. So you do a lease to your mom for 20 years at $200/mo the seller has to honor after you’re foreclosed on?

7) You understand you’re going to have to come up with 20-25% in 2 years to refinance right? (Unless you’re hosing the seller and paying 20-25% under market.)

Anyway. Diffent strokes for different folks. Good luck. Just don’t screw yourself or the seller if you can avoid it. 

Ps.  Could you just do a rent with the option to purchase? Pay $2,500/mo rent with a 2 year, $5,000 option payment and you’re about in the same situation a little more legally. 

I literally asked my agent about this last Friday. I have a studs in townhome policy. I asked if the “building coverage” covered clean out after something like a fire. And, do I need enough coverage to cover that as well. He said there’s a 10% “overage” for clean out in my policy. ($18k on top of $179k in my case.) Check with your insurance agent. 

You won’t be able to 1031 in to another property unless you have that much cash sitting on the sidelines. 

Imagine you are selling for $500k and owe $350k. To do a 1031 you must purchase at least a $500k property and put at least $150k in cash down. Anything less will be taxable. 

Ps. In this example Don’t forget to keep $350k more in cash on hand incase the lender calls the loan on property 1 due on sale. 

TLDR: if you’re willing to pass on doing a 1031. The buyer is offering at least 25% down and paying you 6-8% interest (not your interest rate as you are still legally responsible for paying that debt. You should be ok as long as you have enough cash to pay off the loan if it gets called. 

You forgot to put your location in your post or your profile. Do that and local experts can weigh in. There are places it’s allowed, some where it’s not. There are some where’s there’s a large penalty (call it 3X) if you withhold and the tenant wins in court. 

If it’s only one room here’s your chance to rip it out and replace with LVP from a name brand supplier and seller. Take a picture of the box so you can buy more of the same in the future. 

It looks like people walked on it. That’s every day wear and tear. 

I don't know. I’d never invest in California as a landlord when we have 49 other states and at least 45 of them are better. Hopefully you or your PM know the law if you’re forced to invest there.  I just googled it. It just said adults. Hard to believe they’d let 3 adults and 10 kids live in a 1bedroom. But the first result only said adults. Your OP said 5 adults live there. So I figured I provided enough info to stop that. 

Ps. California has a “2+1 rule” meaning 2 adults per bedroom plus 1 extra adult. I don’t know if they’re breaking the law or you are. But I’m sure you’d be held responsible if something happened because of illegal overcrowding in a property you owned. 

How much more could he sell it for if you backed out and he did those repairs? I assume you’re not saying that $58k will add ZERO value. You can certainly ask but I would assume anything about $20k is hard no. I can’t believe he gave you the $12.5K on top of the $20k closing gift. Add that to $29k in commission and they’re already out $50k. 

I assume it’s renting just fine as is. You aren’t buying a new home. USUALLY, 60-80% of inspection “problems” are things you wouldn’t fix on your own home if you lived there. And you asked for 100% of the items to be fixed?  Safety items sure, but those should be fixed because tenants are currently living there. I understand the world is your oyster when you’re putting $0 down. But I can’t believe they’re even entertaining the offer. The market must be tough for sellers. 

TLDR: if you’re looking for a reason to bail without losing your deposit, bail. I assume it was way overpriced or the area is crashing if you think $50k in repairs will add zero value. Get out now. (All this is assuming for the first time ever, 100% of the inspectors problems were real problems and you’re not over reacting.) 

Good luck.