All Forum Posts by: Jeremy Horton

I personally don't let tenants even move in without proof of the utilities in their name - they sign a lease that says they must do it by a certain date, provide proof etc. 

A lot of this stuff is simple issues that could be solved with simple solutions. 

Cannot imagine ever giving a tenant my personal cell phone number either - absolutely insane. 

You don't want to hire a PM company...yet the subject of this whole thread is just a reason why you should. Screen them and pick out a good one. 

Couple of things:

You mention that STRs can cashflow well. This is 100% deal dependent. Same goes for LTRs - LTRs can cashflow well too. Most STRs you see for sale aren't going to make $, they're going to lose $. You have utilities, cleaners, HOAs, booking fees. You have to make the right deal and have the right systems in place to do well. 

Markets - any destination market - smokies, beaches, lakes disney etc 

Also a KEY here is going to be successful self management of the property. The thing I don't like about this is that it is not a scale-able method. Sure you can do 1, 2...now try 10, 20. You've just got yourself a full time job. 

As far as cost - it's going to be a minimum of 10% down on a house type property. This is ok - but Freddie mac and Fannie mae are essentially trying to get rid of 2nd home loans so expect to pay 3-4 points in closing costs. Condos - anything non warrantable are going to be 20% down. You're really going to need 20% down to cashflow like you want - but be careful to still calculate your ROI - generally leaving more money in the property is not good in ROI terms. Another thing is the variability in gross revenue - depends on the seasonality, decor, location, competition, pricing, market etc

Let me say this - I like the industry - but I think you hear a lot of hype and inflated type numbers online/social media pumping it up. There are going to be a lot of people taking Ls in the ROI category. Sure you made 10k this year but it cost you 150k - not a good deal. A key was getting in around 2+ years ago - since then the prices have pumped up, it's become a lot more competitive and mainstream. The deals simply are not there like they were.

I'm not trying to discourage - just being realistic. Your wife may be in a great spot to manage since she will be working from home - this is an ideal set up. 

So a few things...

Do you think March will be significantly better than today? Why? My bet is no, that's just a few months away. I don't think next summer will be either. And in that time you will be incurring more holding costs, interest etc. On top of that, your credit is maxed out, so you can't do any other projects. So you're literally frozen, losing $ - this thing needs to be sold with a quickness. 

If the professional says he can rent for $3000-3500, I'd estimate as $2500 in underwriting. He'll make money regardless, you'll still be losing 500-1000 a month minimum.  

Couple things with houses like this - location, something wrong with it, PRICE TOO HIGH (very common these days). And now the house has been sitting on the market for over 2 months, not a good look for retail buyers. 

If it was me, I'd lower the price, get it sold and move on. You may take less of an L doing it now than waiting, incurring more losses, and likely selling for what you would today OR even less. 

Let me ask you this: what is the reason for the improvements?

It sounds like you just want a nicer place. Will it increase rents by at least 20% of the cost of the renovations? If not, I don't do it. I use to want to make my places nicer, starting out, but now I need to have a financial reason to do so. I fix problems, keep the place clean and in good condition...but I generally maintain as opposed to improve unless the improvements will help my bottom line. 

I would put a notice on the door and take a picture

Do you have a property manager?

Excellent neighborhood and safe area and pluses. 

I don't think most people living in MFH care about the yard - on top of that they have nowhere to store yard equipment - so the yard really becomes the landlords responsibility. I have actually converted a few spaces like that to rock, simply so I don't have to deal with the yardwork

Charge them for the full amount of a new one. 

They have moved out though, so likely this will get sent to collections and never paid. 

So you're writing off 10k/year roughly at 62.5c/mile, so 833/month income. DTI at 50% would qualify you for $415/month (if you had the $833/mo as income), so you're losing $415 a month in allowable debt. May make a small difference depending on a lot of other factors

Just another reason why I don't house hack or manage my own properties 

It's funny because I made a very similar post when I first started, "Can't get SFH to cashflow". Ended up buying a duplex (off the MLS that needed a rehab) and it worked out well. I DID do a lot of DIY stuff on it, so I paid a little more to make sure I got it and got started. For reference it pulls 1350/mo ($675) per unit and the PITI is $616. I've done a couple houses since then, and they both needed significant rehabs. Also I ended up paying 12k over ask to get it - I was ok with this since I thought it was priced low initially, the location is awesome and I could still rehab and come in where I needed to be. My fourplex I bought off market for $160k - I did the 25% down and there went 40k. Realized putting 20-25% down can slow your velocity of money quite a bit. Great property though, since they sold for 190-225k (value of buying undervalued properties). Next 2 houses needed rehabs, PITI is ~650 and they rent for ~1200.

Remember, this is a numbers game too. If you go off the MLS look for properties that have been there for awhile 40-60 days plus, give them lower offers. You'll get a lot of "no's" and the occasional "yes", then boom, good to go.

Also, not sure where you live, but starting locally is not a bad move (assuming your market can support rentals that cashflow). Long distance, rehabs, starting out etc is difficult. You have quite a few chips stacked against you before you even start. I'm not trying to discourage, I just want to be realistic. I think success has a lot do do with making things easier on yourself.