All Forum Posts by: Matt Kauffman

Hey BP, I own a duplex next to the Pro Football Hall of Fame. They have announced that they intend to expand their facilities. We are in the process of negotiations and I'm wondering how best to proceed. I'd love to hear from others who have experience in this area. 

The Negotiations so far: My duplex sits on 9K sqft lot - open market is worth $90K, I clear about $8K/yr in net revenues.

• Next door, SFH on 12K sqft sold for $115K
• Across road, SFH on 17.5K sqft sold for $175K
• Buyer asked for a starting place, I told him somewhere in the middle of those 2 properties
• First offer from them $115K - I wasn't happy about this
• Countered them at $175K 
• They countered and said they'd re align at that price - I'm not buying it considering my location. I'm not on the fringe, but in the heart of it all.
• He would like to propose to them $130K
• I'd settle this deal for $150, which is basically right in the middle of these discussions.
• They are currently waiting to hear back from me. 
• Question, how do I negotiate the sale of my duplex as a business against a owner occupied SFH next door with this buyer?

Matt

I'm taking possession of 3 duplexes soon and was wondering if anyone has a letter that they send to the tenants welcoming them and letting them know of any coming changes that will be going into effect? 

 They were below market because the man who built them in the early 70's owned them all this time. He rarely raised rent on anyone. I live in an economically depressed area where even the good rentals don't go for lots of money. These units in another market with a moderately healthy economy would go for much more than what I can get. 

Units are in very good shape. They need the usual paint job and some carpet, but in general have always been taken care of very well. Only 2 of the 6 units needs more than paint and carpet. 

@aaronmontague

I've contemplated doing just what you said to do. Two of the units are $520 & 530, i think i can live with raising their rent $50 this year and $X the next year. That'll get me close to market. The other units would take more time to raise their rents to market at that rate. I can make acceptable numbers at $520 & $530, but not $445, 460, 470, & 500. 

@kathyhenley

Thanks for the advice. I have already begun to format a letter to announce the change. Was planning on having them resign a new m2m lease and raising the rent. 

I noticed there is no pet policy currently in place. I make my other tenants pay a nonrefundable pet deposit and an additional $25/mo in pet fees. I'll need to include that going forward as well.  

Hey all, 

I'll be taking possession of 3 duplexes, next door to each other, in about 10 days. Rents run between $445 - 530 for each unit and are month to month leases as this point. Tenants have been there from 1 year to 16 years. Rents in this same area are going for $600-625/mo.  

My question is, what is the best strategy for getting all units up to current market levels without driving out all my tenants within the first 2-3 months? These units are in a great neighborhood in the best school district in the county and shouldn't be hard to rent.

My first thought is to have them sign a new month 2 month lease and then ask them to check out what they can rent a similar place for in the same school district and come back to me with what that number is and then we'll decide together on a new beginning rent price from there.  I figure the month 2 month lease will let me get a handle on which tenants are a pain in the butt and which ones aren't. Then I can serve them notice and get new tenants in that will pay market rent.

What are your thoughts as to what i should do to get rents up without driving everyone out immediately? Thanks. 

The other reason I like this property is that the building is 4480 sq ft. So the units are larger than most 1 and 2 bdrm apartments available in the area and it's in a desirable area to live.

@Matt P. Seller merged the utilities because he had tenants in the past not pay utilities and in Ohio the utilities don't follow the tenant. the building owner eventually has to pay them to turn them back on. this was to alleviate that issue of tenants opening utilities with their kids SS# and not paying the utilities. The higher rent potential in the vacant unit is because it has been completely redone with new kitchen everything including cabinets and Stainless Steel appliances, faux fireplace, and beautiful trim. It's worth more than the other units that are not rehabbed at all.

@Matt P. i'm considering splitting them out again.

@Albert Bui My "why" is to buy and hold and gain cash flow. Capital gains are a bonus for me. 4plex is located on a nice residential street with lots of owner occupied SFH close to the college. Figure i can rehab the other units when they become available and put better tenants in than what is currently there and would fit the neighborhood better.

Thanks for the input.

Thanks for the reply.

I've factored in landscape/lawn care, vacancy as well as some future money set aside for capital expenditures, but maybe not enough.

With all that said, thoughts on whether it's a good deal or not?

Hey BP folks, I"m a newbie but have been an avid reader but not an avid poster on the forums.

Here's a deal I'm working on right now, my first!!!

Same seller for both properties

4 Plex

Price: $130K

Three 2 bdrm 1bth units, One 1 bdrm 1bth unit

3 occupied, 1 vacant - (2 bdrm unit vacant)

rents are $550, 750, & 750 - potential rent of vacant unit is $850 - 950/mo

Gas and Electric are included in rent price

Utilities are budgeted with clauses in contacts that over a certain usage extra utilities go on the rent

Budgeted Gas & Electric are $130/mo/unit for both utilities

Taxes: $3462/yr

Insurance: $600 - assumed to be going up after appraisal

Water/Sewer/Trash: $137/mo

Steel roof just installed last year, siding have done on property, vacant unit has never been rented since renovation - completely new kitchen with new appliances along with an overhaul of the living room, bedrooms, and bath w/washer & dryer hook ups.

30yr fixed loan @ $566/mo pymt

Duplex

Price: $64900

Two 3 bdrm 1 bth units - small bdrms

Rents: $750/unit - both occupied

Gas & Electric included in rent - same clause in contract as above - $135/mo

Water/Sewer/Trash: $78

Taxes: $970/yr

Insurance: $400

30 yr fixed loan @ $283/mo

I think I can Net Cash flow this place around $200/unit/mo after I've set aside funds for maintenance and replacement reserves at around $300/mo total for both locations. Duplex has more deferred maintenance. Let me know what I'm missing or not figuring. Thanks.

Thanks to everyone who's welcomed me. One of the things I forgot about is the RE investor clubs. I should be able to come to the Akron Canton REI group to hear @Bob Leybovich. Hopefully I can meet some of you along my journey, hopefully sooner rather than later.

@Dell Schlabach As a side note about moving our personal residence, we are looking for a property that has at least 10 acres with a residence and outbuildings on them. So unfortunately I likely won't find any HUD or an opportunity to use an FHA loan. So I'm likely looking at a 250 - 350K place and for that i'm going to need some cash for a down payment. quick question, I'm assuming that i can leverage equity in rental properties for my personal residence's down payment?

Paul Timmins thanks for the heads up on the HUD homes, my buddy specializes in HUD homes in my area so i'll be seeing him tomorrow morning to discuss.

Hi, My name is Matt Kauffman and I live in the Jackson area of Stark Co. I've been reading books, listening to books, reading blogs and generally absorbing everything I can over the last 3 months on REI. I've contacted an attorney, trying to find an accountant, have a buddy selling RE but am looking for more contacts there, and I could really use an adviser to help me along. I currently work in a sales job that is very flexible on time. I have about $40k in the bank for starting out. However we have 4 kids and need to move as well. So originally that was to be my down payment money for our next residence. So now I'm trying to figure out how to work both plans at the same time with the same money. I want to buy and hold rental properties, starting small with 2-4 unit buildings. We live well below our means and so I can save a pretty good chunk of change every year towards new opportunities. However I'd like to not have to use my own money eventually. My goal is to own enough properties (likely apartment bldgs) that I can quit my job in 10 years or sooner. I don't want to be a property manager. I'll take all the help I can get. Thanks.