All Forum Posts by: James Mc Ree

I have 4 SFR 3 bedroom rowhomes in southeastern PA. Their full replacement cost is around $130k - $135k. I insure them with State Farm for 95% of replacement cost with a $5000 deductible for $550 - $600 each per year.

Jim.

Repairs could have been made raising the property value.

I recommend first looking in the mirror and stopping there.  What are you interested in and prepared for?  Don't worry about the hottest trend.  It might be something you know nothing about.  You could spend time learning the new hottest trend, but it might not be the hottest trend once you learned it.  What then?  I find people do best with what they are passionate about and what they know or want to learn.

Focus on your financial goals and your portfolio. If real estate has a place in your portfolio, think about how you want to engage in it: passive as in a REIT, passive as in buying property and engaging a property manager, active as in buying and actively managing property. Do you want to buy and hold, flip, etc? Commercial or residential? How much do you plan to invest? Do you have time for it? Are you prepared for it (educated, funded, etc)?

Jim.

Your federal taxes will likely be approximately the % of tax you paid last year for this year's total income if you are in the same tax bracket.  This tax is applied to your profit which will be revenue less expenses less depreciation.

My "Year 1" for a property is almost always a tax loss due to closing/finance and repair costs to prep the property with only a partial year of rent.  You might not owe anything year 1 and can project year 2+ based on stable operation of the property once it is rented.

Jim.

I agree with @Todd Plambeck.  It's not like it won't rent, but families with young children will be more inclined to pass on your offering.

Jim.

I have 3 Section 8 tenants and screen them the same as my other tenants.

One technique I use is completing the lease paperwork at the tenant's current residence.  I pitch it as, "The new place is empty - not even a table or chairs.  I can just come over to your current home to fill out the paperwork if that is OK with you?"  It gives me an opportunity to see how they live.  Your place might look exactly like it in a couple years.  You may be able to get some information from the applicant's case worker about their past too.  I don't know if the case workers are allowed to disclose past issues, but you might be able to social engineer it out of them.

For Section 8, you can ask for first month's rent and security deposit up front, but not the last month's rent.  The security deposit can be up to 2x month's rent in year 1 in PA, but drops to 1 month's rent with year 2.

My tenants pay anywhere from 15% to 70% of their rent with the Section 8 subsidy covering the rest.

In Delaware County, PA, the housing authority is severely budget crunched.  They have pressed the rents they approve down below market and announced they will not accept any rent increases.  The is my only current complaint with Section 8.  I think it is temporary until they get a new budget in place.

Jim.

I do 1/2 month's rent for SFRs in the Southeastern PA that rent for around $1,200.  I make it more appealing by offering a refund at the end of the lease if there is no detectable pet-related wear and tear, including that which might be considered normal pet-related wear and tear.  No complaints yet and I haven't lost anyone who inquired.

Jim.

I loan covering multiple properties is usually a blanket mortgage or commercial loan.  You can get them, but usually not from your neighborhood residential mortgage broker.

For your second question: Loan-To-Value ratios cap out for ordinary loans around the 75% - 80% range. You can get a little higher with HELOCS or by paying higher fees and rates. The days of 125% LTV loans are long gone, at least as ordinary mortgages. You might find a private lender, hard money lender or commercial lender to lend to you, but they are likely going to want collateral beyond just the property being mortgaged. It will be an unsecured loan otherwise and cost you dearly.

Jim.

@Javier Fernandez

I spend no more time managing my Section 8 properties than I do my other properties.  Overall, my Section 8 tenants have been better than my other tenants, but that is a small sample size.  Tenant personal wealth does not equate to living habits.  You always have to screen your tenants well.

A typical month for me is housing authority rent arrives consistently on the first of the month by direct deposit (no work at all for me!) and a personal check or money order arrives over the next few days.  No other work for the month.  If something breaks, it's like any other property - fix it.

Jim.

It looks like you need to learn the basics before building a team so you will have credibility.  Consider reading the BP books on this site about investing in and managing rental properties and flipping properties.  They will give you a good education on what matters.  The podcasts are also great resources to get you started.

Jim.