All Forum Posts by: David K.

I think the fact that there was about a year between posts on this answers the question for thoughts about Ashtabula County for investment...

All zip code / home specific of course, but in my experience premiums on duplexes in the Cleveland area tend to run in the $900 range for the year.

Limited experience compared to the rest on here, but I inherited one tenant that was month to month when I took over a property. I was extremely nervous with the question of "why aren't they on a lease?" in the back of my mind. Going on two years later, they are one of my best tenants. I finally got them under lease recently, but it was a low pressure situation. Frankly, I've had a worse experience with tenants who were under lease when I took over other properties. It can obviously be a risk taking over existing tenants (whether on lease or month to month), though the benefit is obvious of immediate cash flow without the need for additional expense of getting units rent ready and then getting tenants placed. 

All things considered, I would probably prefer taking over vacant units at the time of acquisition. But based on my experience so far, I don't make a point to avoid properties with tenants in place like some investors do. Maybe I'll have a bad experience some day that will change my mind, but just my two cents based on my experiences so far. Good luck!

@Alex DeNigris thanks for the comment. Yes, I went back over recent bills and no mention of potential issue, but after reading comments and looking into it more it has to be something like that. Good thought on faulty meter reading as well. Will do a complete inspection and them reach out to CLE water if needed.

Thanks for the thoughts so far, and @Don Petrasek, particular thanks to you for recommending the water usage section of CLE--I've seen that before but honestly didn't know we could really run reports. I ran a report two weeks before repairs and through now (and have a comparison with two similar duplexes). Unfortunately, it doesn't look like it really had much of an impact.

The above is a smaller timeframe just around the repairs. I also ran a longer report from when I acquired the property and earlier usage is even further out of whack.

I'm thinking there has to be some kind of other leak going on as it almost doesn't seem possible for people to actually use that much water. The above are in MCF, but in gallons my two other like duplexes are averaging 85-190 gallons / day whereas this property is averaging 716 gallons / day. 

So, even if the prior leaks were adding a little bit, it practically seems like there HAS to be another leak that isn't detected? 

So far, I have not had any problems with tenant placement / contract renewals. However, I elected not to increase rents this year given COVID. I thought it would be a win-win for both tenants and myself--trying to help out a little in times of uncertainty for tenants, while also mitigating risk myself of turnover and a potentially prolonged vacancy from when the lockdown was going on (particularly when a few tenants came up for renewal during the lockdown and I was very concerned about new placements). I do have one tenant who is on COVID deferment for payments, but the rest have not had any issues with payments.  

Ultimately, my question is how much a running toilet / leaking kitchen sink could reasonably impact average water bills. But first please let me provide a little specific background and why I am crunched for time to figure this out. I purchased a duplex on west side of Cleveland (44111) a few months ago and have inherited tenants. Generally for a standard duplex (2 BD / 1 BTH each), I budget $150 month / $1,800 year for water/sewer. My other properties generally perform in that range, give or take. However, my water/sewer bills on this new duplex for the past two months are just off the charts excessive, averaging almost $485 per month. And if that holds, it would come out to just under $5,900 for a year.

Now, from reading/research I understand that water leaks, and particularly a running toilet, are often the culprits for excessive water bills. And last month we DID do repairs on both a leaking kitchen faucet and a running toilet. So, I have no doubt that these are a part of the problem. But for others who have had similar problems, does the water bill still seem excessively high for a running toilet / leaking sink? (I know I'm asking a broad question given that size of leaks will have a big impact, but in general.) Or are the current bills more likely to be a combination of the prior leaks and just high tenant usage?

Normally, I would let a month go by to see what the new water/sewer bill is a full cycle after the repairs. But the time crunch is that both tenants' leases expire at the end of the month, so I quickly need to figure out rent for next year for trying to get them under contract. While I don't like being in a position where I'm increasing rent too much and may create turnover, I feel like I'm taking a gamble assuming the excessive bills were all created by the leaks. Even if the leaks were only half the problem for the high bills, and the other half is tenant usage, then I still need to make a bigger rent adjustment than I had planned. (In theory a larger increase shouldn't be a problem because the current rents are well below market, but still...)

Again, I know it's likely impossible to get a definitive answer absent letting another billing cycle go through, but any general comments or insight from others who have had similar problems would be greatly appreciated. Thanks!

@Lenza M., except for taxes (which are actual), I believe James uses estimates and not actual historical numbers when displaying operating expenses in videos. In the example you post above, repairs, vacancy, and capex are all 5% of gross revenue. PM is 10% of gross, but I suppose that also counts as "actual" to the extent HW was the PM. He uses $1,800 for water/sewer as a default estimate for 2BD duplexes, and usually lists in insurance in the 900-range as well. 

So I can't comment on why it wasn't in that particular video you are referencing (modified from normal numbers on water/sewer and insurance to reflect additional units), but I am relatively certain almost all operating expenses in HW videos are estimates and not historical. If you scour a number of the videos, you should see that pattern hold up throughout. 

I agree with Bob's comment. I've purchased with cash before so not inherently opposed to it, but you need to research more on "next steps" and have a game plan before dropping that much cash. When I've purchased in cash, it was for the purpose of making a competitive bid, and then (after some fixes) refinancing on the back end to get some money back. But at least in the areas I focus on, that probably wouldn't make sense when the initial purchase is over 100k cash. 

For that matter, do you have any insight on why this must be a cash only sale? Sometimes a sale will be cash only because there may be some issue with the house that will stop traditional lenders from financing (e.g., crack in foundation). But in that case, you'd have to fix whatever issue there is before you could refinance (in addition to probably wanting to fix whatever it is in the first place). On top of it all and circling back to Bob's comment above, the numbers don't seem to make sense for that transaction too. 

Assume you get the high end of rent at $1,200 / month, which comes out to $14,400 / year. For purposes of a quick analysis, just apply the 50% rule to expected expenses, leaving you with a net $7,200. (This also hypothetically assumes you instantly place a tenant upon closing for the sake of illustration.) With the impending capital expenditures, let's assume you are all in for about 120k. Your return is only 6%. And again, that is probably giving some unrealistic benefit of the doubt to you between rent, tenant placement, management, etc. if this is your first step in.

There is likely more information that maybe could alter my view. But overall based on the info provided and using some general rules of thumb to fill in the gaps, I agree with Bob's comment and the numbers don't seem to make sense for that deal.

I started using Stessa to manage a new duplex I acquired and have an issue I was hoping others using Stessa or similar PM software may know how to address. I use a PM to manage the duplex. I have linked Stessa to both my PM statements and also my bank account to autofill transactions as they occur. However, when the PM makes disbursements, it sends it to my bank account. This is resulting in an "expense" of the disbursement showing up on my records and additional "income" coming into my bank account.

Does anyone have any recommendation on how to address? I realize that the dual marking of the expense/income comes out even, but it nonetheless will throw off the actual accuracy of my tracking numbers at year end. I also recognize I can manually delete the transactions myself when they occur, but my goal is to move more properties over to Stessa, so it will end up multiplying the monthly corrective efforts needed. True, deleting two transactions per month is still easier than manually logging all the other transactions, but was hoping someone else may have insight on how to truly automate the process.

Any insight is appreciated. Thank you.