All Forum Posts by: Jim Hartmann

Hello all.  I wanted to get feedback from those more experienced about a 4 plex that I visited on Friday here in central Indiana (about 40 miles south of Indy).  The house is listed with a realtor and is being sold by another landlord who is getting older and seems to be selling due to just wearing down after years in the business.  I currently have a mix of 13 different units in 5 different houses in the local area.  I bought the majority of them on contract right before the 2008 crash, so I paid too much for them, but it has worked out over time and I have come out fairly even on profit vs expenses.  I am increasing rents on those and so I am starting to see things turn to the better.  Hoping to run the info I have by everyone and hopefully start to get back into analyzing properties for purchase.  With the forums, I have noticed so much knowledge here that I want to make sure to get feedback before making a decision as I jump back in again to the market.

House has four 1BR/1Ba units in them.  It is on a crawl space and was built in 1920, so it does have some age to the house even though the outside of the house looks good with fairly new vinyl siding and some of the roof has been replaced with the other portion of the roof still in acceptable condition.  House just dropped in price from $99,900 to $94,500.  House has been on the market for almost 120 days.  The owner vacated all the units in order to make it easier for the realtor to show the property (not having to schedule showings with tenants).  

The house is already separately metered for gas and electric, but the owner currently pays for water/sewage/trash as it is not separately metered.  I did notice that it has old electrical panels with round glass fuses rather than the breakers used now days.  Also during my walk through I noticed what looked like knob and tube wiring in the attic, so I am assuming this same wiring runs through the rest of the house as well, but have not checked into this.  I did not get into the crawl space to check it out as of yet, but would do this myself and have an inspector check it over before buying also.

The current owner states that he was getting on average $450/month per unit which is quite low for the area.  I have another 6 unit house around the corner from this one and I am getting $520/month for just a sleeping room (shared bath).  I am expecting that for a larger 1 BR, I should be able to get $600-$650/month from each unit.  

Running the numbers using the BP rental calculator, I am using some conservative numbers. Income: $2500/mo ($625/unit). Expenses: Water/Sewer: $80/mo.; Insurance: $175/mo.; Taxes: $180.25 (based upon current annual taxes); 10% vacancy: $255/mo; 3% Repairs/maintenance: $76.50; 5% CapEx: $127.50; 10% mgmt fees: $255 (would likely self manage as on other properties).

With running these numbers, it shows the following summary:  Income: $2500/mo;  Expenses: $1673/mo;  CashFlow/mo: $826.  

From my point of view the numbers look good.  The apartments were clean and were very functional.  It does not have a lot of new flooring, but what was there was all clean and not damaged.  Each unit has a separate gas furnace in each apartment.  

Wanted to get the opinions of others on the forums here to see what I am missing.  I like the house and the neighborhood.  I already have another house in the area, I am familiar with the type of tenants I would be getting.  Also it is two blocks from a major factory in town (which is where I work during the day.  I am sorry for the long post, but welcome your thoughts on whether this would be a good deal if all checks out during the inspections.  

Thanks in advance for your feedback.

I charge $5/day starting the day after it is due from the tenant's lease.  This can be quite a challenge to keep up with over time.  I have some that pay weekly (sleeping rooms) and the daily late fees for these seem to be a headache at times.  I like the idea of a flat fee or % of the rent.  For the weekly rentals, I would likely make it a lower value for the flat fee, but probably need to make it significant enough to make it be painful or it does not make a difference for them.  As mentioned already, it does provide some extra income at time due to late fees.

Another struggle that I have had with the daily late fee is that it seems to be more difficult to calculate over time when I file for eviction - especially on the weekly rentals.  I present the numbers at the eviction hearing and have never had anyone question them, but always wonder if all the numbers are correct in the final tally.

Thanks @Max T., @Chris Mason, @Adam Barr, @Bob Born, @Peter Tverdov  I appreciate the different perspectives.  With the interest rates being so low I agree that it is better to use the money for other investments.  I also like the fact that adding a little extra to the monthly payment or once a year payment can knock off years of the length of the loan.  I will likely use a combination of the two as I still see lots of opportunities out there for investing as well.

@Brent Coombs thank you for the feedback and for the words needed when paying extra.  We have not decided yet whether to put more towards the principle, but I am intrigued by the idea of paying extra up front and reaping the benefits later with paying less overall interest.

Hello all. We are in the process of purchasing another personal home and turning our current home in to a rental.  I have heard in the past about a strategy where you send in a separate monthly payment for principle only after you send in the scheduled payment. This process helps to save interest in the longer term of the loan by having less principle that will be accruing interest as time goes on. My question is, has anyone used this practice in the past? If so, how successful was it? How much extra did you pay towards the principle each month? I understand that you want to use particular wording to specify where this extra principle payment goes to. What particular wording and steps need to be taken to make sure that this extra principle payment is applied properly?

From my understanding, if you overbid on the lien, the county keeps the overbid for a period of time until the lien is redeemed or defaults to the person who bid on it.  It ends up being an interest free loan to the county for this time period.  After the property is redeemed or defaults, the overbid comes back to the bidder (they must put in a request to have it returned) and the bidder either gets the redemption monies plus interest or gets the property.  

Someone correct me if I am wrong in this as I have yet to purchase a property lien in this manner, but have listened to several people explain the process recently.

Dave - do you record these and post them?  I will be traveling during the call Tuesday night and not sure I will be able to hear all of it.

Thanks

Jim

Welcome to BP. You can learn all you need and more right on this site and in the few books sold on the site from Brandon and J Scott. Listen to the podcasts- especially the latest one #155. These will give you a sense of how many others there are out there doing this business who have never bought a course and have done very well for themselves. Regards Jim

Thanks everyone.  I am hoping to get the windows replaced in the next couple years as I believe this is best in the long run.  Hoping this will get it through this winter for now.  I agree that it would also look better as well.

Having older rental houses in Indiana, I have several houses with drafty windows. I pay utilities on several of the multi units and over the last couple years have placed plastic sheeting on the outside of the windows during the winter months to help with heating and lower costs. Talking to a relative recently it was mentioned that this could be a safety issue if someone were to have a fire. I can see the potential, but also see that since it is plastic, it could easily be cut or ripped off in the event of an emergency. Wanted to get everyone's thoughts on this. Thanks