All Forum Posts by: David Kenny

@Marc Jolicoeur How do you like smartmove? I am in the process of getting my basic tenant requirements drafted and was also looking around at a lot of different screening companies. I like that smartmove will charge the applicant directly. I am mainly looking for a credit report, and a reliable, comprehensive background check (for felonies and/or sexual offenses). 

Since were on the topic, I was thinking I would require the standard, 

1. 3x Gross Monthly Income

2. proof of employment (most recent w-2), previous 2 years of tax returns if self employed

3. Minimum credit score of 650

4. No felonies or evictions

5. Prior and current address with landlord contact information

Am I missing anything major?

Also I am a little worried about smartmove because they require a SSN which could violate fair housing laws. I would need to have a backup screening process in place as well because we  have a  large minority population.

 Great point on finding tenants on their phones! I will be posting on Postlets for sure.

I did check with the HOA and they confirmed (although not in writing) that there were no rental restrictions. This is kind of a side question but has anyone dealt with property management companies who also run the HOA? That is the case for this property, and my realtor said a lot of neighborhoods are going this route.

I am having a good bit of trouble with the insurance side of things. Allstate got back to me and said they recently updated there requirements and if I dont have an auto policy with them, my deductible would be $5k AND the property had to be less than 5 years old. This seems a little ridiculous. I am trying Liberty Mutual and Metlife tomorrow, but am getting a little worried. I didnt really think this would be such a tough thing to accomplish. 

Do you charge that $35 application fee to your applicants? A buddy of mine swears people wont pay an application fee, however I have always done this when applying to rent an apartment. I dont really want to eat that cost for everyone that applies.

That is another great point, I wasnt sure where the credit score cutoff should be. Most of my friends/family are well over 700 so I wasnt sure just how low I could go and still get quality tenants.

Thank you!

Wow, so much good advice in here! Thank you all for the detailed responses, I am taking them all to heart! 

Its going to be hard to not over improve I think, only because I have so much pride in this one (since its my first and only). Luckily I have a more level headed girlfriend who will keep me balanced. Again thank you all for your advice!

 Good call! I will keep that in mind during the rehab. I seem to lead towards "over building" when I was getting some quotes for flooring and appliances...

Do you know if most banks will refi 80% LTV? I assumed they would, but the other day I thought I came across an article saying 70% is typically what they do. If thats the case I wont be able to pull anything out initially :/ Maybe I will look into a portfolio lender once we reach that point.

 Wow!!! Thank you so much for this information! I will try Allstate next, I havent had much luck with a few other companies. Mr Landlord sounds perfect! I have not heard of that one. I see you're pretty close to me, have you had any leases end during the holidays? 

Wow, thank you everyone for the quick and in depth responses!

@Tim Puffer, My inputs well undoubtedly get more detailed and "accurate" as I get better at this, but as a practical expediant, I used some percentages of revenue and purchase price to estimate certain costs. Dollar amounts bellow are annual...

Rev: $10,800

Vacancy (8%)

Cap ex estimated at 1% of the purchase price or $770

Maintenance estimated at 5% of gross rental revenue or $540

Property taxes (last few yrs were $400s) estimated conservatively at $700

Insurance est $1000, this feels like the biggest guess to me...

Property Mgmt at 8% rent revenue or $864

HOA $900

NOI = $5,126

Debt service at 4.625% interest (30yr Am Fixed Rate, 20% down) $3,801

Free cash flow $1,325

Depreciation ($2,852)

After Tax Total Return $1,707

As for the insurance, I am in the process of getting quotes now. Actually just spent the last 3 hours on the phone with not much progress. Getting "landlord" insurance is more difficult than I first thought.

Hi everybody,

I have listened to almost all of the podcasts and have wanted to invest in a rental property for the past year.. I have been patiently waiting for a property to fit my criteria, which has been difficult in this market. I am located about an hour north of Atlanta, GA. Some details about my first deal...

1. 3br 2bth townhome, 1500 sq ft, built in 2005.

2. Asking price was $100k, first offer was $70k, and we settled at $77k and seller pays $1.5k closing costs.

3. It needs about $10k of work, and renovated comps are around $95-105k.

4. Rents in the area are about $900 a month, and the neighborhood has a $75 a mth HOA.

5. The area is probably a B-B+, however with a university expanding to about a mile away, and some relatively large businesses coming in about a mile away, I am hoping to see decent appreciation over the long term.

I am hoping to potentially do a little BRRRR action if it appraises high enough after the small reno. After factoring in property mgmt even though I will personally manage, I believe it should cash flow just over $100 a month. We close November 6th, and one of my biggest concerns is trying to find a renter during the holidays. I get a little comfort knowing rentals in the area are tough to come by, and typically 950+.

I have about a month to organize everything. I plan on getting some hard quotes from vendors for new appliances, flooring, fixtures etc to move quick once close is final. I also want to have my minimum tenant requirements, lease, policies, and application fees/process in place before we close. I will be spending a lot of my times on the weekends painting and doing what I can after we close so I wanted to make sure I got the "behind the scenes" work done first. I am also going to transfer it into an llc after we close, and manage it through a separate property mgmt llc. I have some last minute questions, and was hoping you guys could give me any tips you might have to avoid any mistakes/problems I may not have addressed?

1. Do you guys deduct mileage on your taxes/llc P&L every time you visit the property?

2. Should I set up an LLC before close? I am wondering if there are any tax issues I would run into if I buy the house in my name, then transfer it into a business (I know most of you arent tax CPA's but anecdotal stories would be appreciated).

3. I am going to market via flyers at local businesses, zillow, rent.com, all the standard sites, but was wondering if you guys have any creative strategies since it may be more difficult during the holidays...

4. Does anyone recommend a homeowners insurance company? 

5. Am I missing any glaring issues? Sometimes its difficult to see the forest through the trees.

I am so excited, this is really a dream I've had since I graduated college two years ago, I have saved all I could (even with student loans) to pursue my goal of financial independence. Any help would be really appreciated! Thank you in advance!

@Andrew Cordle and @Robert M., I would love to join the next one if you guys have any more room!

Increased land prices?

Demand for rentals on the rise?

I believe @Alexander Loango is correct. I have a similiar decision to make and am leaning towards transferring it to the LLC later.

My rationale is that I cannot see a clear benefit of purchasing the property through the LLC yet, as I will still have to personally guarantee the loan since I have no track record for the bank to examine. I could be missing huge advantages to setting up the LLC first, so I would be interested to hear others opinions as well.