All Forum Posts by: Joe P.

Got it, very cool @Tyler Munroe, keep us posted! Have you had enough months of operation to estimate your monthly CF?

@Tyler Munroe the point we're making is you put down 25% cash for your down payment, right? That means its $112,500 cash, plus your closing costs, plus your 10,000 furnishings, correct?

Wouldn't your cash-in whatever 25% is, plus your closing costs? You listed 10k; just seeing if I missed something. Congrats on your investment!

Pat, I'm not trying to interject in your business/life, but if you've purchased the property an investment, but are not using it as an investment...is it just a vacant property that's going to drag you down?

What is this property costing you per month in holding costs? Did you buy it outright with cash or do you have a mortgage? How about taxes, insurance, water, electric...all things you're paying out of pocket right now for because no one else is doing.

The point of becoming a RE investor has multiple facets, but the avenue you've selected is having a property that will appreciate over time, a property that will cash flow positive monthly, etc. Right now...none of those things are being achieved.

You can do what you want, but based on some of the things you've said, I think you're overlooking some of the critical aspects of being a true investor. These are the types of aspects that overwork and over-inundate newbie investors, so they end up selling their property or properties for pennies on the dollar, because they can't operate and execute when rubber hits the road.

Allright, taking a closer look and pointing out some more issues:

• Have you confirmed the closing costs with a realtor? I'm willing to bet 5k is too low. Your half of the transfer taxes will be about $4800.
• Your repair costs of $1000 is going to get you killed. You say its turn-key, so that tells me one of two things - you're paying for the property to be "rent ready" which means low margin, and/or the aforementioned and stuff isn't quite rent ready, which you'll pay for on top.
• Have you confirmed rate/points with an actual mortgage person? I have perfect credit and when I bought my duplex last year, my rate was 5.625%
• Your vacancy will cover only 2 units for a month. That might be low...up to you to decide.
• I don't know if you updated the report, but I'd venture to say you're probably paying $50 per unit for water every month.

I really like the 50% rule which is your P&I + 50% of rent as expenses, its a decent barometer of how things will actually go. It says your cash flow will be closer to $377 a month, which I don't necessarily disagree with.

I would seriously...very seriously...consider confirming the numbers above. And all are easily found. Check in with the current owner on their water costs per month, have them send you bills. You can then check the rates with several mortgage people. You can speak to a realtor who can pull up a general closing statement for you at $320k.

A lot of people get paralysis by analysis, and that's a shame...but what's more of a shame is not doing enough due diligence. So I recommend confirming some of these items which don't pass the smell test. 

Allright, where to begin......

The city requires a rental license which is good for a year. The certificate of rental sustainability should be enacted NO MORE THAN 60 days before a lease is signed.

The rental license, if I recall correctly, is more so that you're operating a business in the city and you're allowed to do so.

I don't recall ever, in renting my home out for 4 years, having an inspection, but I no longer have property in the city as of 2017, so it could be different now. Assume you'll have an inspection and follow the guidelines. But the city doesn't have people walking around checking for rental sustainability, they do have people walking around (L&I) for building code violations, which is far more dangerous to the city. So your plan seems to work, and I doubt you get inspected if at all, but if you do assume its going to be after the sustainability license comes into play.

Also, glad you're doing the work yourself, but color me confused. You got a property that only needs minor work, and you're going to do it yourself. But you don't know how long its going to take. Aren't you paying money right now to have a vacant property?

The biggest expense to a landlord/investor is vacancy -- it is an expense because it kills income you aren't getting, that you were expecting.

I don't know what you paid for the property, but even if its 40,000 cash for example, I want to start getting a return NOW on that.

STOP hankerin' around with this "I'm going to do the work myself" stuff. 3 months!? Get a crew in there to get the work done so you can live your live, and get a tenant paying YOU. 

I know this sounds crazy, and there is some great advice here, but talk to each tenant individually if you can and find out the deal.

If the units are in terrible shape, you're not going to be able to raise the rent much or get someone in, now you have vacancy and rehab to contend with.

If the units are pristine, maybe the tenants know they're paying under market value. So, let them know you're thinking of raising the rent, not because of them, but because of the market. Vacancy is the one of the worst expenses you can deal with, so the point is to keep the tenant, keep them content, and extract the rent needed.

Since they're also month-to-month, I would only do introductions to start. You need to establish a relationship with these folks in my opinion -- they need to pay you on-time and with the full balance, and may need you to help with maintenance items. If you're able to get onto an operating schedule with these folks for a couple of months, I suggest you do so before offering up a year lease and/or a rent increase.

Also, finally, now that you've closed and they have your info, do not be surprised if you start to hear about a significant amount of deferred maintenance. I hope you have some reserves ready to handle it because it is coming. The previous owner, no doubt, get putting off minor (and maybe some major) items so it comes out of your pocket, not his. This is one of the most important aspects for any new investor that I share with them -- if you don't have a reserve amount baked into your purchase ($5k to $10k depending on age) you will get hammered the first few months. It should be a line item outside your spreadsheet called deferred maintenance, and the budget should last for the first year.

Hi @Abhishek Kumar, gosh your name looks so familiar. I'm not sure but we might work for the same company. PM me if you think so, starts with the letter "i" ;)

You're on the right track with this, and if you're near @Brett Baginski's locale, which wouldn't surprise me, you might be able to find something.

One thing to consider, you might live in a SFH right now and you are considering moving to something that is no doubt smaller, and with people on top of you. The way you conduct your business in this situation becomes crucial -- operating a househack sounds great when you run the numbers, but when rubber hits the road, you need to be ready for what the living situation may be like.

Lets find out more about the specifics of your house hack, and I'm sure we'll be able to help!

Check your taxes and water, both seem incredibly low.

I'd be down, personally, but I think people are worried about trusting others in general. I've met plenty of investors and have thought of it, but I think a general lack of trust and inexperience prevents it.

Could be smaller items, like not thinking it's worth it if it's a small deal, but I have to assume most are just gunshy about getting into a deal with a stranger, or even someone you know.