All Forum Posts by: James Mc Ree

@Matthew Paul Good point. In my area, U&O inspections are done on every sale and varying rentals from annual to just on turnover.

There is a nuance here: building code versus maintenance code. It seems that all posters above are focusing on building code which is irrelevant decades later.

Municipalities enforce the maintenance code in the present for preexistent structures. They usually cherry-pick fire and safety related items from new editions of the building code that just can't wait, in their opinion. This is where smoke/CO detectors, grounding, electric garage door reversers, and other goodies came from.

If the municipality performing the U&O calls out an item, Seller is stuck with resolving it either by fixing it or negotiating it with the buyer. A clean U&O means the Seller doesn't have to do anything.

The home inspector is a different issue. It doesn't matter if there is no home inspection contingency, but if there is, Buyer and Seller negotiate the items. Buyer can request Seller to fix stuff. Seller can say "No" or negotiate with Buyer. In the end, the entire deal can fall through if there is no agreement. In no way is Seller forced to fix it just because a home inspector calls it out. The finding can be quashed if the U&O is clean and the municipality doesn't support the inspector's finding, but that might require some court action.

In an oversimplified view, revenue of $1,000 and expenses of $1,000 offset to $0 and you made no profit...yet. Calling this cash flow is correct, but also causes confusion when you shift to a tax discussion. Taxable income is not cash flow.

There are a myriad possibilities for taxes. I will give you just one: same example as above, but with $1,000 depreciation. You now have a $1,000 loss and can use that in your taxes.

I start with market rent or a little less to reduce vacancy. For example, if market rent was $2,000, I might offer $1,900 and $1,950 for a 2-year lease to start.

My leases convert to month-to-month at the end of the term. I let them run to the end of the year as m-t-m, then send a rent raise letter, usually for $25 or $50, on or about Nov 1, effective Jan 1. Rents that are significantly lagging market go up $75.

I chose the Winter timeframe because no one wants to pack and move during the holidays and cold. By the time Spring comes around, they are used to the new rent.

I have low turnover in part because my rents lag the market. The downside of that is I am leaving money on the table. I would rather do that and never have rent be a reason for a landlord's #1 expense: turnover.

You are writing this as if it is your first rodeo. You have 5 rentals already. Tell us what you really think of the opportunity and ask more specific questions. No one can helpfully answer the questions you pose without more specific information.

Have you walked through the property? What maintenance is needed? Does it have shared systems you have to manage or separate utilities for everyone? Model the performance of the property. Does it cash flow? Do you expect it to appreciate? Are the tenants paying market rents? Do they intend to stay there or are you going to get hit with remodelling expenses? I can probably give you another dozen questions.

Is 75 days a long time for a quad in your area to be on the market? Keep in mind they might have sold it a month ago and are working through contingencies, so they haven't made it pending yet. What does your agent say about it?

A risk with lowballing is another investor comes in with a reasonable offer around the same time and Seller doesn't even want to ask you for another offer. You can have some success if there is no interest in a property, especially this time of year. It doesn't hurt if you don't care if you get the property or not.

My leases say Tenant is responsible for pest control if not reported within 10 days of move-in. The answer to your question may be in your lease. If not...

This could be a relationship-building opportunity with your tenant. You might not be obligated to do anything, but could offer an inspection with the recognition there were no bed bugs when they moved in if you can assert that. If so, you might also be able to assert they are responsible for remediation.

Waiting gives you 0 traffic, which is worse than low traffic. The only reason I can see to wait is you have some upgrades to do for a higher rent.

I am doing this now and included Seller's transfer tax. You can deduct it as a business expense, but it is depreciated over 27.5 years.

You are allowed to ask the applicant questions. Ask how they intend to pay for a year or two of rent.

I ask for a statement of assets and discuss any red flags or ambiguities with them. You could ask that they put a year or so of savings into a separate account on which you have view access or receive a monthly statement so you can see they have the ability to pay future rent.

They aren't going to last without other income or savings with income at 1.25x rent. I would decline if they have trouble answering the longer term question and it would probably be for their own good.

My guess is this is a short term passion that will fade. It might not go away, but probably won't be able to compete with friends, sports, girls, etc. My kids went through this around the same age and still have an interest.

Teach him financial literacy and include him in what you are normally doing. Explain to him what is happening and your options in whatever you are dealing with. Initially, tell him the considerations with the options and later ask him what he thinks of the options, then explain the considerations. His interest will evolve over the next several years and you can see where it goes.