All Forum Posts by: Daniel O.

I would send a certified letter explaining that you were not aware that the security deposit cannot be used as they would like. Include the relevant portion of the law. Tell them they need to send March's rent immediately and April rent on time because that is what the lease and the law require of them. Be polite but firm. Do not tell them you will file for eviction unless that is what you intend to do. 

@Pete Paniccia One of the risks of the BRRR strategy is that it leaves you very leveraged, particularly if the properties you are holding do not have strong cash flow. It works so long as property values (or rents) are increasing, but becomes much riskier if markets or rents decline. You are smart to identify this as a problem. You can mitigate this risk by either buying in a market that is not declining, or getting such a killer deal that you have a considerable margin of error / safety. You would have to buy for far below market value and do the repairs in such a way that you still had a good difference between what you had into the place and what it appraises for.

BUT: Given how the economy has been going for the past several years, you really need to ask yourself whether the place you are thinking about will ever appreciate. If the economy hits another rough patch, will values decline even more rapidly?  If so, I would avoid the area because of that risk. You could get good cash flow, but take a real hit when you go to sell the place.

@Doug Vigliano please take your antisemitism and bigotry elsewhere. Nobody needs or wants it here.

In some jurisdictions, it is not legal to use the security deposit to cover the last month's rent. What security are you left with if the tenant does that? The fact that they have been good tenants is not relevant to this situation because you need to treat all tenants the same.  What recourse do you have if they overflow the bathtub and let it keep running because they fell asleep? You can hope it will end well, but hope is not a strategy.

File the quit or pay notice on April 1 if rent is not received by then. This keeps everyone honest.

Equity, healthy reserves to cover the unexpected, some cash to take advantage of unexpected and outstanding opportunities, and perhaps as important as these things, a steady hand and a healthy longer-term perspective. Those who bought in 2010-2012 are now sitting on some great gains as prices have bounced back and then some in many markets. Those who bought in 2007 and didn't freak out and panic are also doing fine. Are they killing it?  Maybe, maybe not. But they are doing fine. Most of us know people who sold for a loss because they were underwater in 2009-2013. Gone was their downpayment and any equity they had built. Gone was their credit rating if they had to declare bankruptcy. The crazy thing is that many of them sold even though they were covering their payments without difficulty. It was just the thought of being underwater that caused them to panic and sell. 

When the zombie apocalypse does come, keep a cool head and keep the longer term view of things firmly in mind. When that place you are watching drops 20%, it might be a good time to pick it up. Could it go lower?  Sure. Maybe. But will it come back? Yes. Unless it is in a place you shouldn't be investing to begin with, it will come back and it will continue to appreciate. There is more and more discussion here of how expensive some markets and asset classes are becoming. To me, that says it is time to start keeping the money in the mattress instead of overpaying. Remember, you make money when you buy, but only if you buy smart.

Mikey,

I think the numbers look good, but it is hard to really understand them without knowing a little more about the place. The big question is whether you are likely to be looking at any major cap ex in the next couple of years. A new roof?  Heating system(s)? Water heaters, etc.

Keep in mind also that some jurisdictions have multiple taxes. In NY for example, there are property taxes and there are school taxes. Make sure you are accounting for both if the property is in NY.

It would be with phoning the individual utilities just to confirm the numbers the owner is giving you. $1010 seems like a nice round per unit cost. Maybe too nice and round.  Ditto your insurance. Your mgmt numbers look a little low. Figure 10%. If they come in lower than that, you get a pleasant surprise.

Don't forget your closing costs. Transfer taxes, recording fees, etc. 

Congrats on finding a good deal on a multi!

The question of whether an email constitutes notice to leave probably depends to some degree on what jurisdiction you are in and the laws of that place. That said, you got the email and you responded, so the tenant has a reasonable right to think you have been notified. I suspect a judge would see it that way as well. If the tenant was on a month to month, he probably does not need to give you 60, even if the lease requires it. But again, this depends on jurisdiction.

My advice is that you ask the tenant to work with you as you try to find another tenant by making the place available to show before he leaves.

Great question and a great set of responses. I remember listening to my parents who bought a small farm in 1967. They had a 30 year mortgage at, I think, 2% or thereabouts. I remember in the late 70s and 80s when the bank would call periodically, almost pleading with them to take a discount on what was owed and pay off the balance. Imagine how glad you will be to not have sunk your money into paying off your 4.5% mortgage if rates climb back to where you can earn 3 times that just by putting your money in a CD.  Not saying that is going to happen. But also not saying it won't.

In the long run, gas is likely to be less expensive and more reliable. You need to figure out what has changed to make the bill sky rocket. Could a pipe have come loose so that warm air isn't getting to the thermostat area? Could the thermostat be defective? Is it one of those programmable digital thermostats? If so, check to make sure it isn't scheduled to warm the place up to occupation temps when nobody is living there.  Oh, and I'm sure you are already on this, but make sure you don't have a window open somewhere.  HVAC = heating, ventilation, air conditioning.

How complicated is your business? How many properties?  And how conversant are you with programs like quick books or excel?

If it were me, I'd probably set it up myself. And unless I am missing something, you don't need a CPA to write a bill of sale. Talk to your real estate agent about this, as it may vary from state to state.