All Forum Posts by: Benjamin Aaker

I bought a condo in Treasure Island last year. Paid an obscene amount for it. Yet, I'm still making money on the short term rentals and the property value continues to go up. Remorse? Wish I bought 10 more of 'em.

Agree with @Malcomb Stapel. In my area, the appraiser will compare like-properties based on bedrooms/bathrooms before looking at square footage. I can also see where the value of adding a totally new bedroom with the square footage would be more than taking area from another room and converting it into a bedroom.

The key is in the comparables in the hyper-local area. If your as-rehabbed property has a similar number of beds/baths, your move should increase the value. If it puts you above the market - say you now have 5 bedrooms when other houses have 3, the added value won't be as much. In that case, the appraiser will fall back on square footage. That might have been what happened. You'll need to find comps (again, hyper-local) that show you are right in your valuation and politely present them to your appraiser and banker.

Contact your local multifamily housing association and ask what the vacancy rate for your area was in the last year. In my area, I budget 8%. The vacancy isn't an expense; it comes off the gross rents.

Repair depends on your property. I budget 5% of the gross rents as an expense on properties > 10 years old, more if they are really old.

Don't forget about capital expenditure. These are the big ticket items. A rule of thumb is if it is something you can depreciate on your tax return it is probably cap ex. This item comes in after expenses are subtracted from income (to arrive at the net operating income). I budget 5% of the NOI as cap ex annually and this should be kept in a separate account.

I have a motel in South Dakota that is exclusively listed through AirBnB. It is near a nursing home and I managed to get on some traveling nurse lists. 75% of our guests are nurses now and we have over 70% occupancy. We provide a television and wifi. We don't provide a telephone hookup. It's been great income in our small town.

How bad do you want this property? You might consider putting in a backup offer.

I realize your question was more about the agent. You might not be a good fit for each other. You may also need to prove you are willing to put up some money - by putting in an offer. If you plan to do many of these you'll need a system in place that has a template for offers on this type of property. Show whatever new agent you interview that you mean business. Get one deal done with that agent and things will change.

This depends on your locality so I can't give specifics. You should set up your criteria now if you haven't done that yet. For instance, many won't take on tenants unless their income is 3x the rent or more, have never had an eviction or a foreclosure, and have no violent felony (also locality specific). Collections are a concern and is evidence that the prospective tenant has not paid their bills on time. This may be an indicator that they won't pay you either, but not for certain. It needs to come down your pre-arranged criteria from which you don't deviate. You might have something like no more than 15 derogatories (missed payments, etc.) on the background check. Don't design this on the fly, else you could be accused of discriminatory tactics.

There is no set time that you need to work prior to approval. Everyone's situation is different though, so you should contact local commercial bankers in your area (residential bankers if you plan to live in the duplex) first. They will be able to give you great advice. Remember, different banks will have different criteria, so you should shop around and look for a bank you feel comfortable with a long term relationship with.

Hi Dominique and welcome to BP!

My advice is to start by reading. Take a look at The Millionaire Real Estate Investor by Gary Keller first. This site is a great place to find more recommendations for books. Join some real estate interest groups in your area and network. Best of luck!

$400 cash flow per month on $273,990 with 25% down is a cash on cash return of 7%. Fairly nice. The education you will get by landlording this will be valuable. You might consider keeping it and taking a line of credit on it. The bank may want you to season it first, meaning to own and rent it for 6 or more months before writing the line of credit.

8% cash-on-cash still can be a good deal. You might consider asking the buyer to drop the price by half of the 15k and you'll have to cover the other half with cash. This crazy market has appraisals all over the place. I sold one recently where the buyer offered a crazy high price and I was sure it wouldn't appraise but it did. On the other hand, many buyers have the same experience you did, where the appraiser inexplicably came in low. You could consider going through the appraisal in detail (should the lender allow this) and politely talking to the appraiser while showing comparables that support your case for a higher value.