All Forum Posts by: Greg M.

You need a survey to confirm the property line.

Mark the property line clearly. If you don't want as fence, use small rocks or flowers to separate your property from his. Send him official notice of trespass. Install a camera. If he trespasses again, go to the police. In some areas, you can get civil damages for trespass. Take him to court. 

Motion activated sprinklers will also work.

As long as it is a legit pest control company that is licensed and insured, give them access. It's free pest control for you. 

Yes, get the condition of the units first. 

Don't be too sure about the tenant moving out over a rent increase. The tenant knows they are getting a good deal. When you raise the rent and they begin looking around, they're going to see there is nothing cheaper and it's still a good deal. If they truly can't afford the new rent, then they needed to leave anyway. 

Except for a few so-called "experts" on these forums, PMs work at the direction of the owner. If your brother didn't want rents raised, that's on him, not the PM. Seems like the fees the PM is charging is fair. If your brother kept him for 19 years, he's probably pretty good at his job. 

Before raising rents you need to find out the condition of the unit. If your brother bought a 10 year old unit and the tenant has been there 15 years, it's safe to assume the unit hasn't been updated in 25 years. That may be part of the reason rents are below market. If it is, it's up to you to decide if it is worth it to have the unit vacated and updated so you can get market rent.

Assuming rent is below market taking into account the condition, your tenants are fully aware of this. Nothing wrong with rewarding a good tenant with a little under market rent. Little being the key word. 5%-10% max.

I would not approach the tenants asking them about increasing the rent. YOU make this decision. It's not a negotiation, it's a seller offering a product for its value. If the current buyer doesn't want it at the new price, someone else will. 

I wouldn't worry too much about the 10K repair to the one unit. Most people view it as an expense, but I view this as an investment. By spending 10K, it allows you to rent the unit. The return on that 10K is going to be spread out over the next 10-15 years. 

When you say Potential Income if Sold, why are you taking the Estimated Equity and deducting the Principal? Equity is exclusive of debt (ex. Place is worth $1M and there is a $400K mortgage balance = $600K in equity). If sold, you get 100% of the equity. The Potential Income if Sold column is meaningless, get rid of it.

Those mortgage payment numbers have to have the property taxes escrowed into them. 

Rent minus mortgage = Gross. But you say that the gross includes the property management fee. Only way that is possible is if the rent is actually higher than what you have listed. Find out what the actual rent is and put PM fees in its own column. 

Let's assume the vacant unit gets rented. You're now cash flowing around $3.3K per month. That's only 3.3% return based on 1.2M in equity. However, unless your brother did something crazy like very large down payments, it appears that these places have seen decent appreciation.

Taking property #1 as an example, I'm curious why rent is showing at $1480. Zillow (😒) estimates rent at $2353. Looks like this long term tenant moved into the place and was paying $1095 in 2011. Why isn't that rent $500 a month higher? Property #6 shows rent at $1550, but Zillow estimates almost $2,300. Also, it appears the rent hasn't been raised since move-in 5.5 years ago. All the while the value of the place has gone up close to $100K. That renter is getting a $100K more expensive item for the same price. 

Confirm all current rents and what they should be at. Get them up even if you plan on selling the places. I'd suggest breaking out all the costs into their own column on the spreadsheet. That way you can easier see what can be addressed and what can't. 

I'd strongly suggest that you spend a few dollars and talk to an attorney. My guess is the bank would like you to refinance so they can adjust the interest rate from around 3% to around 7%. Have you looked into the possibility that you can assume the existing mortgages since it was an inheritance? 

Your numbers cause concern. You list a current net cash flow, but there is no mention of how much the property manager is taking to manage the units. 

You list a 609K mortgage balance, but a $7,500 month payment. At a 4% interest rate, that's about $2900/month. Can we assume that your property taxes are rolled into this payment? What about insurance? 

Have you figured out the return on this investment. You have 1.2M in equity. At a safe 5% ROI you'd get $60K a year. Between principal reduction, appreciation, and actual free cash flow, what are you making?

Quote from @Adam Bartomeo:

Whatever multiple you use, it should not be a hardline yes or no. It should be a gray area or a guideline. Our goal is to find ways to say yes, not try and find reasons to say no. If they are below our 2.5 times rent multiplier we simply ask for advanced rent based on the added risk involved. 

Personally, I would not work with an owner like you due to inflexibility. I have found that ridged owners should not own real estate as they do not understand all of the "what if scenarios". 

It should be a minimum, not a grey area. If you give a number and then accept certain people with a lower number, you're opening yourself up to discrimination claims. You really want to explain to a jury why you ask for 2.5X, but took the white guy with 2.4X, but declined the black guy with the same 2.4X?

I'm kind of stunned by your attitude. You would not work with this person due to their inflexibility, while it is your flexibility that will end up getting them and you sued. If you're willing to set standards and then look for ways to say yes to people who don't meet those standards, I don't think you understand the "what if scenarios" that are going to get you and the property owner sued.

Your goal should not be to find ways to say yes. It should be to find a tenant that meets whatever criteria the property owner (the person paying you) sets. 

When I told the PM, "She makes 2.2X the rent," she said, "They're close to 3X the rent." ...and then I replied "You're fired you math-challenged moron!"?

You haven't told us where in CA the property is. West Los Angeles or Meth Park Fresno makes a big difference in the quality of people you can get.

I require 3X, which puts some well into $100K+ income territory and have no issues with finding qualified tenants. I also require min 670 credit score. I don't think that is unreasonable when I'm turning over a $500K-$1MM property to a person on a promise. This is especially true when the state hates me as a landlord and is 100% pro-tenant.

Based on what is in the One Beautiful Bill working its way through Congress:

The federal government would get out of the S8 business and instead provide state-administered block grants, allowing states to set their own eligibility rules and benefit levels.

The budget for these block grants would be slashed by around 40% from current levels.

Able-bodied adults without disabilities would be limited to two years of assistance.

If this passes as is, I'd expect local governments to guarantee a smaller portion of the rent as they try to spread their money out over more people. Poor old people would probably fall under the 2 year rule, so expect them to vacate units. 

If you're in places that have harsh rental controls, this may be good as units will voluntarily  free up and you'll be able to be set to market rent without any relocation/non-renewal costs.

The biggest unknown is how the block grants will be provided. What criteria do they use? I can see this administration punishing states like CA & NY. Places outside the main cities are cheap and I could see this factored into the grants. 

Expensive areas may see reduced demand while cheaper areas see more demand.

Does your state have a department that deals with these issues? If so, contact them first.