All Forum Posts by: Jenny Bayless

@Gabriel Smith

Under the Section 121 exclusion, if this is your primary residence, and you have lived there for 2 of the last 5 years, then you can exclude $250k in capital gains and if married, you can exclude $500k.  You don't have to reinvest anything further (you can take the money and do whatever you want with it).  With a 1031 exchange, you are required to reinvest your gain into a like-kind property, but this only applies if the property sold was used as a rental- which it doesn't sound like this is the case.

Hope this helps!

-Jenny

Hi @Account Closed

For the fixes that require the tenants to be inconvenienced (such as the doors and window replacements), to be honest, none of the tenants seemed balked at the idea of it.  In sum, both the windows and doors took one full day of having contractors in the tenants' living space, but with the better energy efficiency that we told them to expect (and which they instantly felt), as well as with the doors being replaced to avoid critters coming in (yes, that was an issue!), the tenants were quite fine, and actually pretty excited about the idea of the repairs :)

We just strived to maintain open communication with them throughout the process, and showed that we respected the property itself, as well as respected the tenant's time and how they have made it their home as well (by showing that we want to fix it up for them to provide a better place for them to live).

Granted, we could have just lucked out an have easy-going (and logical) tenants, but in sum, I think being respectful of the tenant's time and space, and showing objective reasons why the repairs will benefit them goes a long way in rapport building and getting the job accomplished.

@Jiten Patel

I would speak to a structural engineer and get their opinion.  Depending on the severity, prolonging the rehab could cause additional damage to the house, which would increase your overall repair cost (for example, cracking walls, or crooked doorways).

An engineer would be impartial, as they are not the ones doing the work on the property (like a home inspector is impartial).

Hi @Joseph Handy

It depends on how your lease is worded, but hopefully it has something to the effect of tenants are responsible for tenant-caused damages. If so, you absolutely can.  

Just be careful though that they actually let you know about an issue if they are the ones paying for it.  They may avoid letting you know, and it could culminate to something greater.

In future leases, you can add the following clauses:

• Tenants to repair any damages to interior or exterior walls; electrical or plumbing fixtures, screens, doors and other furnishings due to tenants' causing.
• To keep sinks, lavatories, and commodes open; provided they are open when the premises are accepted. (Notice of any malfunction must be reported within 5 days of occupancy. Landlord will pay to remove roots from sewer lines.) 

Hi @Brett Hearn

If the former owner doesn't have rent rolls, I would check her bank statements.  You could also view copies of the cleared checks to see when they were dated (in case she took a while to get to the bank to cash them).

Since you will be doing renovations, I would definitely just communicate that to the tenants.  For the tenants in the latter example of mine, we replaced all the windows and doors as well as did a major furnace clean, so we explained that even though rent was going up, their utility bills would be decreasing.  They have told us that they could instantly feel a difference in the inside temperature.  Just being transparent and working with them is the best thing you can do in this situation, while still making sure you have yourself protected in the event they end up not staying.

@Eric Sender

We started off investing in turn keys.  We have bought a total of 6 of them, but are actually in the process of selling or have sold 4 of those.  

I feel like buying those properties was a great way to get started in real estate investing, and I equate it to 'training wheels' in a sense.  A reputable turnkey provider is going to be supporting you along the way and won't let you fall.  However, you aren't going to be able to ride super fast with training wheels on!  

We started realizing that by buying under market value, rehabbing ourselves (and by that, I mean hiring it out), and then PMing ourselves, that we were able to add value instantly. We jumped into our first local deal as a BRRR. It was successful, but I have to give credit to the fact that the market jumped up while we happened to be doing our rehab!

I personally wouldn't recommend jumping right into a BRRR on your first deal, because I think it is important to get a safe taste for real estate investing. A turnkey rental lets you understand the full process of reviewing a deal, going through the loan process, inspection process, and then seeing month to month how revenues and expenses play out. It is a really safe way to learn (assuming you pick the right provider). However, we would not buy anymore turn keys at this stage, as we prefer the added value of going about it on our own.

Jenny

@Brett Hearn 

Not knowing the specifics for CA state law, you should be able to do your proposed plan so long as you provide each tenant with proper notice of non-renewal if that is what you end up doing.  Then you would be essentially creating a brand new lease, with your terms (with whomever you choose).

Personally, I don't re-screen inherited tenants.  I figure that if I can review the current rent rolls and they are paying timely, then the credit score does not matter to me (even though it does matter to me upon selection of a brand new tenant).  By inheriting a tenant, you get a sneak peek as to how clean they are since you presumably did several walk throughs during the purchase period (being able to see pets, etc), and if they pay in full, on time (viewed during your due diligence period).

Similar to your situation, we have bought 3 SFHs with existing tenants, and within each of which, the rents were significantly under market value.  For the first one, the house was in great condition, but they were month to month.  We gave them notice to vacate in order to start the clock, but also told them if they signed a lease before the notice to vacate period was up, then the lease prevailed.  After shopping around, they decided that staying was the best option (we raised the rent $200/mo, and it is STILL under market value by at least $50-100!).  For the other two cases, the rents were both under market value and houses were in pretty bad shape.  For the latter two, we did raise the rent, but we also put several thousand dollars in rehab in each house and provided superior customer service.  Those tenants could instantly see the value created, and have not complained about the rent increase at all.

Note that in my market, I could get another tenant in any of my properties in a matter of 1-2 weeks, so if vacancy rates are high in your area, that should play into your calculations.

@Robert Shadley

I created my own for our SFHs. This is what we have, assuming it is the same tenants and no turnovers. Note that being in Colorado, none of our rentals have A/C :)

January:

Change furnace filters (we do it- we have learned that tenants will not, it is just easier to do it ourselves)

Test Smoke detectors

Spring:

Yearly sewer rooting service

Summer:

Check on landscaping if anything needs us to attend to

Test Smoke detectors

October:

Change filters in furnace

HVAC cleanout

I wanted to get some opinions from others who invest in buy and holds, in both Colorado Springs, as well as other locations, and what your opinions are from a comparative standpoint between investing in our market and investing out of state, while living in CO.

We are going to purchase Colorado Springs rental property #7 this Friday, but also have 5 properties in other states. We have thoroughly enjoyed the chase to get under-market value properties in Colorado Springs, in addition to watching the values climb steadily over the past 6 months to a year timeframe (providing that security blanket in our minds if we ever needed to sell), and being contacted by a sea of applicants whenever we put a property available to rent- and I have to imagine that everyone investing in Colorado Springs is enjoying the benefits of this! :) . Because the market is so stable, we have been able to pinpoint ARV with accuracy for when it comes time to present the deal to our HMLs or when it is time to refinance, leaving no mysteries or anxiety of whether we analyzed correctly. Basically it makes us feel 'comfortable'... if that word is allowed to be used to describe real estate investing.

However, for out of state, we find ourselves feeling helpless with what we view as unpredictable markets (fluctuating values, and therefore fluctuating equity positions), long vacancy times (in the Springs, our houses get rented in a week or two, max), and of course, not being able to stop in and physically check out the property and talk with the tenants to mitigate any of their concerns (without having to play telephone through the PM).

Basically what I am getting at, is that I am not sure if I just have rose-colored glasses with Colorado Springs due to it being a hot market at this point in time (and when we entered the market), or if others feel the same way in that Colorado Springs has a lot to offer in terms of it having a stable (and foreseeably strong) economy, decent price/rent ratios, and all around good investment potential for a long-term view.  

For other investors that own in both CO Springs and out of state- which do you prefer?

Let me caveat that I just moved to Colorado last summer, so I haven't experienced any downturns in the rental market locally first hand, so I would love to hear some horror stories to put things into perspective if you are willing to share!

Thanks in advance!