All Forum Posts by: James Mc Ree

I would charge the tenant as it sounds like more than what might be considered normal holes in the walls. As mentioned, there are 2 major approaches: contractor or DIY to resolve.

Contractor: Get bids and charge the tenant what it costs you.

DIY: Tally your materials and labor cost, then charge your tenant. Your labor cost needs to be defined in your lease and can't be more than a reasonable contractor bill. My lease says I get paid $40/hr to do work tenants are supposed to do or fix their damage.

The job sounds easy, especially if you have leftover paint or the paint formula. Spackle the holes. Sand them. Prime the spackle spots. Paint 1 coat of the same color over the walls. This would probably be about $300 in my area to contract out if the walls are otherwise in good shape and there is no trim work.

Focus on bringing your current debt current. Being delinquent on your mortgage tells lenders you can't handle the debt you have now.

Next, get an income and build savings. Buying land and building anything can be a great thing, but it is expensive and you aren't going to get 100% financing. This approach is probably your most expensive path.

Consider buying existing homes and possibly renovating them if you want to be a landlord. Your investment can be a lot less and you will be much closer to rental income.

Fire the property manager.

A tenant who installs bidets already violated my lease. The plumbing bill is the tenants' to pay. Hopefully, your lease says the tenants cannot modify the property without your permission.

Some of the other items could be ordinary maintenance requests or something you are just stuck with. For example, I had a broken window when someone threw a brick through it. My tenant said they didn't break it and don't know who did. I ended up paying for it.

Some things will just break and you have to deal with it. It is important to understand why it broke. For example, were the disposal blades jammed because someone disposed of something they shouldn't have? That would be a maintenance bill for the tenant if they did not use the disposal properly.

Section 8 is a program focused primarily on tenants and not so much on properties. I recommend focusing on getting a great investment property and disregarding Section 8 in that pursuit because any property can be a Section 8 property, but a lousy investment is lousy regardless of having a Section 8 tenant or not.

Section 8 will perform a basic functional and safety inspection for your units after you have an agreement with a Section 8 tenant and your local housing authority. The inspection is very similar to your local U&O inspections. See the PHA HQS Inspection Resource Guide for all the details. The inspection is a 5-10 minute walkthrough by a vendor who will take pictures of every room and identify any issues for you to address.

If there are issues, you typically have a week or two to get them fixed without there being an impact to you. For example, I have an inspection coming up Oct 1. If there are issues, I have the next couple of weeks to get them resolved and have a re-inspection before the end of the month. The risk is a failed inspection blocks Section 8 payments, so I could miss a month's payment if I don't get the issues resolved by the end of the month. They will add the payment to the next month's payment after the issues are resolved which would be November in my case.

Section 8 tenants are poor. So, your location is likely to be a C area. They have changed to try to offer vouchers in all areas, so it may be possible to have a Section 8 tenant in an A area. I am not familiar with that though.

You can call your local housing authority and request their list of available Section 8 homes. It is probably readily available on their web site. I did that years ago and it was very enlightening. It was a list of pits of despair that were deemed habitable, but little else. Most were in risky neighborhoods, but did offer security provided by the corner drug dealers. I hear the list hasn't changed much from that impression, but haven't looked recently.

I have 13 SFRs and 3 are rented through Section 8. The startup process is a little slow. You will probably lose a month of rent if you choose a Section 8 tenant ready to move in now versus a traditional tenant ready to move in now. Section 8 will need to approve your initial rent based on the property and what the tenant can afford. After that, my experience is I can raise the rent as much as I want and they sometimes say the tenant cannot afford that, but it works out. Worst case is the tenant has to move, but that would happen with a traditional tenant anyway.

Introduce yourself to your tenants and tell the tenants in the unit you want to live in that you intend to live there and will be ending their lease. Check Michigan law for the amount of notice you need to give them. It is probably a month or two. Follow-up with a letter informing them of the same so they have it in writing. You can do a certified letter to prove they received it for completeness.

I recommend going the friendly route and being reasonably flexible. They are probably anxious about the new owner and this will rock their world.

It may be common for a home of that age to have a failed sewer lateral, but that doesn't mean you have to accept it. Usual and customary usually refers to outdated but working components, such as old ducts in a house that do not support central air well for lack of returns. That wouldn't be a defect because the house was built before central air existed according to normal and customary designs of the time. The ducts work, they just aren't modern. Your failed sewer is clearly not that.

You discovered a material defect in the property and have an out if you want it. You can take the property with the defect if you have a great deal, but the deal is less great now. You can negotiate with the seller if they are willing. You can walk away. A point of leverage is the seller is now aware of a material defect and must disclose it to future prospects on the seller's disclosure. That will impact any future offer prices.

I bought a townhome with a broken lateral that was a short distance to the main. My seller disagreed with the first scope result and hired 4 more companies to scope it. All reported the same. The seller's basement was dug up, they tunneled under most of the front lawn, the sidewalk, curb and road were partially disturbed. The total cost to the seller was $27,500 in PA 2-3 years ago.

It helped in my case that a U&O certificate required a passing sewer inspection. If that is the case in your town, you will have to fix it if Seller doesn't, so make that a negotiating point since one of you has to fix it.

Interior disturbance is likely from your soil line out to the main. That may cause you some restoration work if it is going through a finished basement. You will want to discuss this with Seller if they are going to fix the lateral.

It would be reasonable for the seller to compromise with you. Seller wasn't offering a property with a new sewer lateral, but you weren't buying one with a failed lateral. You could agree to raise the property price by some percentage of the repair and finance it into your mortgage to avoid taking the financial hit in cash if you are financing the purchase.

What is the floor rate for the ARM?

Your best approach is to model the fixed rate and ARM for 5 years. Be sure to include closing costs, mortgage recording, title insurance, etc. Guess at how much rates might move over the next 5 years. They may go down another point or so in the coming year and they may go up 2 points in the next 2-4 years (who knows).

A model like that will give you an idea of how the ARM will perform against the certainty of the fixed rate. The difference tells you how much you care.

You will definitely have more wear and tear.

Do these applicants pass your screening criteria? If they do, be very careful in denying them because they are too large. That could run afoul of discrimination on family status. If you don't want to accept them, you could tell them you are waiting to see if you have other applications to make a final decision so as not to turn down the only qualified application you have, then risk a lawsuit.

Here are some ideas to check:

- Does the town limit the number of unrelated people living together? Are they unrelated? You could deny based on zoning limitations.

- Can the 10 people reasonably fit into the 4 bedrooms?

- How many cars do they have? Do they fit in available parking? You could have furious neighbors if you need to park 12 cars. This may lead to a lease limitation so you don't have them parking inappropriately.

My guess is you are a victim of analysis paralysis. Keep in mind you are looking for 1 investment property. Any of those places will yield that. It would be different if you were looking to buy 50 and the demographics really mattered.

In terms of the purchase, it's all about location, location, location first. Drive these places and get to know them. You will get comments here that steer you towards A class properties - or C class. What are you looking for? Getting to know the towns, neighborhoods, streets and actual properties is essential and far more important than just one town name versus another.

At this point, you don't know anything about your future tenant, so I wouldn't assume they are trying to get to the city. Closeness to transportation is always better, but that is a tradeoff too. It could mean closer to traffic, noise and crime which is always worse. You may get retirees, tenants who work locally to those towns, airline pilots who are rarely home, etc. Don't focus on that, but rather what would be attractive to generic tenants for those properties.

I have 12 3BR SFRs and 1 2BR SFR in Delaware County, suburbs of Philadelphia. All have worked out well. Some are retirees, some work in Philly and NJ, some work locally and some just don't work. My 3BR rents range from $1,425 to $2,000 which shows why it is almost impossible to give you meaningful rent data without you being more specific.

At this point, I wouldn't discount the online systems such as Zillow so much. Don't focus on the ZEstimate, for example. Focus instead on actual asking prices for sales and rentals. That will give you a good idea of where the market is for the areas you are interested in.

I use HD's Lifeproof LVP for all of my rooms except bathrooms. It is easy to install. Each piece locks together to its neighbors. I refinish steps to get close to the LVP finish. That makes the steps look nice, but they do stand out as different.

I prefer tile for bathrooms since they are more at risk of getting wet and having sitting water. Lifeproof's core is PVC, so it's not going to warp or anything. The plank-to-plank connections are tight and seem to resist liquids well, but I don't want to push it in the bathroom.

Trail Oak has been my favorite of the Lifeproof LVPs. I've used other variations of their wood looks as well. I like the thicker and wider planks that became available in the last year or two.