All Forum Posts by: Lana Lee

Sewer and Trash for me is Landlord responsibility, water, is split evenly irrespective of usage.  One bill, comes to landlord, I split it up between units and add to the ledger and then send to tenants with copy of the utility bill. I suppose you could pay for it and find a way to factor it into the rents.

I just started investing in real estate. This is my first out of state property that I am looking to buy. I find this condo house in philadelphia, purchase price is 173,000 all cash payment. Rent in the area is 1200 a month. Need to replace the floor and some minor touch ups and a fresh coat of paint, would probably cost around 5000. After I included all the vacancy rates and expenses per month, there is $560 per month cash flow. The purchase cap rate is 3.89% and cash on cash ROI is 3.67%. I am not sure whether this is a good deal or not. (If I put 40%down, I will have a negative cash flow on this property (-$20)) I feel the numbers are not very promising, but yet I also want to take a step forward. Thank you in advance for your thoughts.

@Lana Lee - Ratio Utility Billing System is basically a legal way, supported by state statutes where you can bill back the tenant for their portion of utility usage based on # of bathrooms, occupants, etc. Great for master metered properties but need to ensure the state where your rental property is located, supports it. 

 Lana - checkout implementing RUBS in your situation.

@Lana Lee I agree that it's worth it to find out what the cost is to sub meter a property. However, given how few are sub metered, I imagine the cost far outweighs the value. 

There should be a quick saying surrounding this idea, but I'm not familiar with one yet, so I'll try to be as succinct as possible. Don't pinch pennies, make millions. You'll have expenses here and there and it's important to run accurate numbers, but if the pennies are weighing you down, maybe that property isn't quite the right fit for you. There are some costs that you can forward onto the tenants, water and trash isn't typically one of them. In single family homes or condos it's a lot easier to forward on those costs. Maybe this is the property that works for now, but the target is getting into something where you can forward on those costs if they are concerning to you. There is more than one way to skin a cat (got one in there!)

Hi @Lana Lee. I can't speak for PA. However, in California it is impossible to try to subdivide and to determine who is using how much water especially when some tenants travel for work and others work from home and have pets that they bathe in showers. We just assume that it is included in the rent, pending it is for a multi unit. In order to reduce the water bill, we use airaters (? dunno how to spell it), bleach down some of the drains on a yearly basis and or a mainline cleanout depending on the level of trees on the property. This seems to help us reduce the number of plumbing related calls as well as reduce the water bill as most tenants use water as a way to force things down a drain that is not perfectly clear. It's not proven, but logistically it makes sense.

@Lana Lee I'll do a similar analysis for Philly and will post it on this forum for you.

Hi BP! 

My wife and I are looking for some advice from the real estate community! My apologies if this is not the right place to ask (this is my first post). I'll start with our goal, which is to free up or access about 200k of cash for primary residence improvements and emergency savings. Here is the background:

• We own 3 homes in the SF Bay Area - our primary residence and 2 rental properties that were both former primary residences. 
• Rental A is worth about 550k and we owe 210k at ~3.6% for about 25 more years. It has about $600/month positive cash flow today.
• Rental B is worth about 1.4MM and we owe 550k at ~3.8% for about 27 more years. It has about $300/month positive cash flow. We have a 150k HELOC available to us, at about 5.2%, which we have not drawn on yet.
• We are in our early 30s and have solid jobs/incomes and retirement plans. We only have about 3-4 months of emergency savings at this time

Options we are evaluating: 

1. Continue as-is and use the HELOC to fund our primary residence improvements and any emergencies we have
2. Sell Rental B and collect about 700-800k in cash after taxes/fees. Keep 200-300k in cash and invest the rest in the market or other diversified areas. We are eligible for the 500k capital gains exclusion in this scenario. 
3. Cash-out refi on Rental B and access 150k cash, which would make cash flow go negative, about -$200/month. The reason to do this would be expectation of long term appreciation in the home and higher future rents that would hopefully cover the negative.

Perhaps there are other options we should consider too, but i'm curious to hear thoughts from the community specifically on option 1 vs 2. If I do an annual ROI calculation on our rental income against the equity in the house, it is extremely small (ie. 3600/750000=0.0048). Am I thinking about this the right way? Option 2 would easily give us everything we need and more, but we would lose out on future passive income of course, and a huge nest egg. We are also concerned that all 3 of our properties are in the Bay Area, and a huge natural disaster like an earthquake could wipe us out financially. Selling 1 would allow us to diversify our investments a bit more.

Thanks in advance for your opinions!

-Chris

Hey fellow Philly area investors, Happy New Year! With 2017 coming to a close I took a look at market data on Multiunit transactions in Delco for the year and also previous years for reference. I originally started to look at just the past 10 years but things got interesting in the data in 2007 (surprise surprise) so I went back a few years farther.

I analyzed Units (Transaction Units), Median Sale Price, Total Volume each year and Median Days on Market. This was strictly for multiunit properties in Delaware County. As you can see, there was quite a bit of activity leading up to 2007/2008 in terms of Units and Volume and DOM was at its lowest. All data came straight from our local MLS. I chose to limit the data to Delaware county to keep my data relatively tight and similar.

In graphic form

# of Units Settled was at its lowest point in 2011, at 102 total units settled. To clarify, this is 102 multiunit properties transacted, not 51 duplexes for example. 2017 showed over twice the number of transactions as the 2011 low point and the trendline suggests that we will see a steady increase in 2018 units compared to 2017.

Median sale price peaked in 2007 at 167k, and decreased gradually for the next 7 years before reversing itself back in the upward direction slowly.

Volume is the total sum of transacted unit purchase prices. in 2005 nearly 54 million dollars in multifamily property was transacted, compared to just 33 million in 2017. Volume tracks # of Units settled closely due to the similarity (low standard deviation) between Median Sale Price and Average Sale Price. In a market where median and average sale price are identical, # of Units * Median Sale Price = Volume. If my analysis looked at a larger and more numerically diverse dataset (such as Delaware, Chester, Montgomery, Philly and Bucks counties combined) Volume and # of Units may not correlate as closely due to outliers. Philadelphia county had an almost 90k difference in median sale price and average sale price for 2017 multiunits. A much higher standard deviation in comparison.

Last but not least, Days on Market (DOM) shows how quickly inventory is "flying off the shelf" and is usually a good indicator of how hot the market is. Note how the low data point for this was in 2005 at 18 DOM, and a sharp spike in 2008 up to 58 DOM. We are trending back down towards 2007 levels for median DOM, suggesting that the market is heating up again!

Its interesting to see the trends in the data and try to draw conclusions about what 2018 will bring. Everyone loves to ask the question about when the "next crash" will occur or if it is a "good time to invest". My question for the forum: What do you see in store for 2018 and beyond in our local market? Are you making any strategic changes in your investing strategies based on these data trends? 
Would love to hear everyone's thoughts!