All Forum Posts by: Joe Trometer

With 40 years experience as a small time landlord, I’ve heard an abundance of stories , true or false, not to pay the rent.

I’m up front and honest with renters, I tell them before we sign a lease, “if you’re 7 days late on the rent, my Attorney automatically sends you a 7-day notice to Quit.”  They can always pay the rent and fees to stay, or proceed to eviction.

I forget who taught me this, I thank them, and now I’m sharing their advice with you.

Only once I pursued a Court money judgment, turned it over to a collection agency, the renter left the State and never collected.

 I moved on, focus on providing a great value for my Tenants, follow the rules, and steadily grow.

Real estate is business, “we win some, lose some, the name of the game is to win more than we lose”.

That has been a most helpful quote for me.

I wish you the best on making things right.  I wish everyone the best on finding that next home-run of a real estate deal:-)

Hey Mark,

Rentals for retirement works for me.

I’m active, my rentals give me something to do, and keeps me being useful:-)

My thought is I can add value to my rental investments, on occasion, with periodic improvements, thus increasing rents.  Yep, using my tools, something to do during downtime and between vacation outings.

I also enjoy the exercise working on my Properties.  

I learned this from an 80 year old guy, 40 years ago, who was still working on his Properties.  Also a lesson learned from my neighbor in his 40s, working on his Properties with a family and a job, when I was just 5 years old.  They always had an impressive and productive project to work on when everyone else was watching Television.

Since this is a real estate forum, real estate is my product, my interest, and provides the activities I enjoy.  Not too many Rentals, not too few, and I’m always looking for a fixer upper close to me.

I have friends that use this similar philosophy keeping active and invested in their work like Rehabbing cars, and another guy enthralled with sail boats.

For me; if it’s fun, makes me Useful, has financial upside possibilities, keeps me active and sharp, maybe adding to my life’s longevity... Well, Rentals for Retirement is the game I play.

I’m 60, sometimes semi-retired, but never, ever, plan to retire completely:-)

Hope this helps you some Mark.  I wish you the best!

Hello All,

As it turns out, selling residential multi-family rental units is quite difficult I'm finding out.

The cash-flow value is not reflecting a price via a cap-rate in my case.

Property value; considering current assessed value may be closer.

After discussions with my Broker friends, (it's what they're doing) is to just keep the property.

The question was, if it is positive cash flow, why sell it?

If I'm tired of managing it, hire a management company.

Now, single family homes as rentals will sell most easily.  Either as a rental, or clean it up and sell it to a home owner.  Not the case on these 5-units (3-buildings on one lot).

I also found out multi-family apartment complexes are selling quite inexpensively.

Fixing them up to flip, is doable, but in my S.E. Michigan, I'm hearing that investors to turn / flip complexes are ready and willing... However, few buyers for buy-and-hold are not so plentiful.

This is what I've found out with much research in my local market.

It looks like, if I were to sell my 5-units at $20,000 per year positive cash-flow, I would be lucky to break even at net-zero after taxes, depreciation, and closing costs.

So why throw away $20k yearly income?  Good question I guess, nearing retirement and exploring some options.

Another 5 years the tenants will pay these units off completely to net $42000.00 yearly income.  Not a bad retirement fund actually.  Better than many pensions I hear of.

That's what I've found out so far,

I'll keep you posted.

Cheers:-)

For Sale: 5-Unit rentals after 12 years of nurturing and rehabbing.

Gross income from rents: $4050.00 monthly, $48,600.00 annually.

Its 2-duplexes - (two 1-Bdrm and two 2-Bdrm) on a 3/4 acre lot,

With an adjoining 1/4 acre lot with a 3-Bdrm 1-1/2 bath single family house.

Its a pleasant spacious rural type Country lot about 2-Blocks from the town of Flat Rock, MI, and 1-Block Telegraph.

Rents:

Two - 1-Bdrm rent for $600 each ($1,200 total)

One - 2-Bdrm rents for $725

One - 2-Bdrm rents for $975

3-Bdrm house rents for $1150

Total: $4050 monthly - $48,600 yearly

All utilities are paid by the tenants.

All are rented with 1-year leases.

I cut the lawns, plow the snow, and pay $33 monthly for garbage pick up ($400 yearly).

In the lease, tenants shovel their own entrances and walkways.

All units are rehabbed inside and out with minimum deferred maintenance.

All rents are collected with online payments and invoicing.

Current property taxes are $3,500 and Insurance is $3,200, both are yearly.

I read the good and bad about Cap-rates, so how would you price this property.

(I'm flexible for a fair win/win deal)

$48,600 yearly minus taxes, insurance, and trash pickup: ($3,500, $3,200, $400 totals $7,100)

Less $7,100 equals $41,500 cash flow for this property.

These 5-units are bundled into a commercial mortgage. 

$41,500 yearly is $3,458 monthly cash flow.

((At an 8% cap-rate on $41,500 net cash flow, $518,750.00 if I figured this right.))

I'd be happy to discuss offers at a price that will work for both of us:-)

Best regards,

Joe Trometer

@Tom Mole Thank you very much Tom!

2-duplexes are on 1 lot, the single family is on the adjoining lot, they are tied together with a shared driveway, parking, and a single water main where I installed 5-submeters to bill tenants independently.  

However, yes it could be possible to install 2 additional water mains, and cut in additional driveways.  I'll keep that in mind over the next couple weeks as this selling process unfolds.

You've reopened my thoughts about a lease option with seller financing...

... My fear is after 12 years of establishing this property to the best quality of materials and tenants this area supported, would be if my successor could maintain the value and integrity of what I developed.  Not that I'm anyone special, just nurtured our investment whole heartedly, I was all in on this one.

Great if all went well, but I would not be able to afford the costs of recovery if I had to reclaim the property with extensive damages and vacancies.

I could be wrong, (again), for me to carry the financing, how would I assure the success of the buyer?  I would think the big-league investors would not mess with this small portfolio.  I'll keep an open mind in this area for sure.

Thanks for bringing my attention to Bigger Pockets market place.  I've been off line for some time rehabbing away and too tired to surf the web.

Cheers Tom, I appreciate your time and help on this one!

@Wayne Brooks, Cool, thanks for the details.  Yes I do have an emergency fund for expensive  replacements.  I guess I'm fortunate to replace expensive mechanicals at 1/3 the price; cost with no labor.  DIY is how I ended up in the business to begin with:-)

I like the plan for the interior inspection clause Wayne, thanks a million!

@Wayne Brooks Thank you Wayne.  I usually cut the grass myself because I live close yet have a guy to back me up at $25 per cut.  I guess I'd have to figure in snow removal too even though I plow and each tenant agreed in the lease to shovel their own entrance area.

What would you say ongoing repairs are?  I screen thoroughly and have been fortunate not have have damage on turnovers.  I do some painting on turnovers and complete cleanings.

I install all 3/4" hardwood floors and porcelain tile floors so carpeting is never an issue.

Everything is newer; furnaces and central air units, plumbing, electrical, and inside and outside structure are all updated.  Guess I'll be open minded to a buyer's concern for ongoing repairs and maintenance.

I do not know what capex means... little help please?

I only had one (1) month vacancy on one unit this year.  Apparently I have a nicer than most rentals in the area for those not wanting to live in the big complexes.  

There probably is a flat rate figure for vacancy factor, I recall 20%.  Yet that hasn't been my experience.  My tenants say they like my 15 page addendum with a bunch of rules to follow as I explain what they can expect from their neighbors.  That's been working for me, so far so good.

Thanks for your help Wayne, now I can be prepared to discuss repairs and maintenance better.  As a do-it-yourselfer, I've always done the work.  Probably not so for a straight up investor - right?

@Chris Allard Thank you Chris. I am a long time member at our local REIA group. I haven't said anything to anyone yet. Guess I'll have to break out of my quiet comfort zone and speak up.

My observation in our small group, is a lot of looking for distressed properties, way below market values, and very inexpensive helpers.  

I have learned tremendously from the guest speakers on operating a rental business, tax tips, and abiding the rules (and laws).

I'll be sure to speak up on this at next months meeting.

Thanks for the reminder Chris.

Hello all,

A little help on setting a price to sell.  Should I use a cap-rate?

It's not for sale yet.  Considering a 1031 exchange for tax savings...

I'm nearing retirement and frankly, if I'm cut short on life, I don't want to leave my wife Lori handling apartments she's doesn't participate in - she's a wonderful nurse.

It's time to sell my 5-Unit rentals after 12 years of nurturing and rehabbing.

It's 2-duplexes - (two 1-Bdrm and two 2-Bdrm) on a 3/4 acre lot

with an adjoining 1/4 acre lot and a 3-Bdrm 1-1/2 bath single family house.

It's a pleasant spacious Country lot about 2 block from the town of Flat Rock, MI.

Rents:

Two - 1-Bdrm rent for $600 each ($1,200 total)

One - 2-Bdrm rents for $725

One - 2-Bdrm rents for $975

3-Bdrm house rents for $1150

Total:  $4050 monthly - $46,600 yearly

All utilities are paid by the tenants.

All are rented with 1-year leases.

I cut the lawns and pay $33 monthly for garbage pick up ($400 yearly)

All units are rehabbed inside and out with minimum deferred maintenance.

All rents are collected with online payments and invoicing.

Current property taxes are $3,500 and Insurance is $3,200 both are yearly.

Zillow estimates on each building totals $317,000, enough said about Zillow:-)

I read the good and bad about Cap-rates, so how would you price this property.

$48,600 yearly minus ($3,500, $3,200, $400 totals $7,100) 

Less $7,100 equals $41,500 cash flow for my scenario.

A buyer would have to consider debt load and increase of property taxes.

These 5-units are bundled into a commercial mortgage - it was an advantage for me anyway.

How's the cap-rate work?  $41,500 at a 10% cap, does that mean $410,000???

An 8% cap-rate would mean a higher selling price or a 15% cap rate a lower selling price, right?

And of course: "What a Buyer is will to pay and a Seller willing to sell at" :-)

Okay, I'm a die-hard do-it-myself rehabber and held onto this project because my bank suggested I have some holdings for future deals, and that panned out okay.

Plus, I always had something to work on between rehab-flips.

I have a real estate license in referral and haven't been active with it in over 15 years, so my real estate professional sales statice are very weak.

Help please... 

How to set a fair value to sell? 

I don't want to carry back a note, and considering to look for a smaller 1031 exchange property.

Can I FSBO with my license or would I have to list it (in Michigan)?

Are social sites and sites like Zillow and Trulia the way to go?

I have little to no familiarity with the "secrete", off-market real estate trading sites.

I'm out of my comfort zone on this one!  

Selling and maintaining privacy for the Tenants about my wanting to sell makes me nervous.  

Please, no offers.  I don't want to break Bigger-Pocket rules.

I do need help and guidance on how to sell my 12-year project and figure out the next leap of faith.  I do love real estate and need to find my next step after the time comes to sell.

Doc says I have to slow down on rehabbing cuz of my joints wearing out... Just when I have every tool I need to rehab entire homes by myself.  

I'm at a crossroad here...

I would love to hear from you and not go through this alone.

Thanks for reading:-)

What a great question @Beth Blank.

Okay fellow investors, this is only my opinion from my experience:-)

I chose HVAC and got the accompanying licenses for:

 - Furnace

 - Air Conditioning

 - Gas Piping

 - Duct work

I also have the refrigeration license but never use that one.

Why? It was the only trade (in my state) I couldn't do as a homeowner without a license.

I install a new high efficiency furnace and a/c in all my properties, make sure I point out the value, worry free, energy savings, and benefits when selling or renting.  Average cost is about $1,700 versus $7,000 to $9,000 or more to hire that out.  Adding ductwork to that project for a couple hundred dollars could cost an additional $2k to $3k from a contractor.

Another big savings, I got an estimate for a backup generator needing an added 20-foot gas line run.  Contractor cost = $800.  My cost was less than $100. 

When getting that license I had to learn Industrial, Commercial, and Residential applications.  While Industrial and Commercial require several tradesmen and huge equipment, residential is smaller, weighs much less than a refrigerator, so it can easily be a 1-person project.

As for repairs, my neighbor just paid $700 for a fan motor replacement.  That motor costs about $110. He was stuck without heat in the winter - he had to pay!

Another great benefit available with the HVAC license is the ability to run a small local business to friends and neighbors - bigger if you want, but, in my opinion, heating and cooling are emergency needs when they fail.

Note: Pluming: a sewer back up is an emergency need, but many times a rented snake can clear that.  Leaks, well, many a handy-person can fix those.  To be cautious, inspect main drains with a camera-snake before you buy and save or negotiate usually about $10k for a replacement or less for sleeving.

Electrical would be my second choice.  I do more electrical to update old houses, replacement for circuits without grounding wires, and added circuits for convenience.

I just paid $1,000 for an electrical service upgrade from screw in fuses to a breaker panel.  Since it was a rental, I wasn't allowed to pull my own permit like I could if it was my primary residence...  From there, if I needed to add a circuit or 2, well, I don't need a license to buy everything I needed from the home improvement stores (unlike buying a furnace or a/c unit).

A long time ago before I new how-to, I hired an electrician to add one circuit; it cost $175 for about $15 in parts, and he left me with drywall repairs where he opened up the walls for access.  What if I needed several new circuits?

Similar to the HVAC license, a Plumbing or Electrical contractors licensing course will be teaching the Industrial and Commercial applications, plus the theory, including the entire electrical grid and the origination in history for power creation for electrical, and similar history and infrastructure for plumbing.

Requirements:  8000 hours of on the job training, or 6000 hours with a 2 year degree, and if I recall correctly, a Bachelors degree in the chosen field allows you to write for the license without the 4-years of on the job training... that was 25 years ago in Michigan for HAVC, not sure what the requirements are today.

Now then, this is because I enjoy do-it-myself home rehabbing and investing.

I can usually get the job done faster than I can get 3 estimates and wait to be scheduled by a contractor to show up and do the work.

Do-it-myself investing has allowed me to reduce risk of cost over-runs, weather the real estate crashes, reduce debt, but mostly because I enjoy the work.  

My feeling is, when I take all the effort to find a great home investment deal close to my home, why give away the work I enjoy doing.  This way I don't have to run a business, do free estimates, try to collect and please customers, have a full scale marketing system, or employees.  All my work is in one place!  - that's just me though:-)

Okay, hope this helps you out some Beth.

An Aside:

Not to be compared with investors who hire everything out that don't enjoy the do-it-yourself style of investing.

There's no right or wrong way investing in real estate as long as you're profitable, right?

For me, (I tried it), as an off sight real estate investor; it was more about managing and scheduling contractors, a marketing program for a continued supply of investment properties, raising additional working capitol, and lots of office work.  As I get older, to stay in the game, I'll probably have to go back to that method.

- Cheers to All here on BP!