All Forum Posts by: Liam Goble

Landlording on Autopilot by Mike Butler and Duplexes, Triplexes and Quads by Larry Loftis. Both books are easy reads.

My construction company builds with SIPs all the time. There is some hesitation for other contractors to jump in the game (unsure why). Because of this, our crew has traveled 1.5 hours to build SIP packages (we normally don't travel more than 30 mins from the office). There are a few tricky details that the contractor HAS to get correct to make sure moisture does not become a problem:

1) If used for a roof, make sure the roof is built with a cold roof to allow for ventillation. If the roofing is applied right on top of the SIP panel, moisture will destroy the panel quickly. We just reroofed a house that did not use a cold roof. The roof was less than 10 years old. The roof didn't leak, but air escaping from inside the house condensed on the underside of the roof and rotted the SIP. All the SIP panels and metal roofing had to be replaced at a cost of approximately $45,000.

2) To reduce moisture entering roof panels, use the spray foam the panel provider provides with the SIP package BUT ALSO use permanently flexible tape to cover any joints between panels.

3) Make sure there is an adequate drainage plane behind the siding. We typically use 3/4" furring strips applied vertically (for horizontal siding) to provide an air space behind the siding. Any moisture that gets through the siding is able to drain away from the house.

Other than that, SIPs offer significantly reduced energy bills for your residents, which is becoming more and more of an issue.

Welcome @Ollie Gray IV. I would very strongly encourage you to consider a 2-4 unit building to start with. Live in one unit and rent the rest. That will give you a taste to see if you enjoy being a landlord. In addition, you will either learn skills while fixing the unit you're living in, or you will work on your network of professionals to work in your units. That will pay dividends in the future. If I could go back to when I was 23 and bought my first house, I would not buy a house, but rather buy a multiunit.

Cash is important, but it's certainly not a stumbling block. There is more cash floating around in the world than you know. I own three buildings, and I have not put $1 of my own money into the units. (I've put a lot of time and shoe leather) My first purchase was 100% financed through some personal loans from friends; second and third purchases were from my HELOC. My residents are paying all of those loans and leaving cash flow for me.

I've been discussing this exact issue with my mentor. Both my mentor and I invest in a university market. He invests in the university town; I invest just outside of town, where the many of the service employees live. I have not conducted any inspections, but my mentor conducts a walk through inspection three times per year. Normal wear and tear is covered by the lease, however excessive damage is not. If the damage is beyond the security deposit, my mentor will inform the residents that he is going to have a handy-man come fix the damages and send the bill to the residents.

Knowing how much damage can happen inside a unit, I plan to start inspecting the units in the New Year.

@Stephen_Marcil, I live in State College PA, home of PSU. For me, the properties have been too expensive because the student population drives rent rates through the roof. The 1% rule doesn't hold here in State College. A lot of properties sell at the 0.5% rule! PSU is the economic engine for the area and so the immediate areas surrounding the university are usually well-rented.

My wife and I have been interested in the Portland, ME area for a while. We were actually up in October looking at a few neighborhoods for potential rentals at some point in the future. Would this be your first rental property?

The cost for repairs can vary significantly, depending on the 'quality' of the improvement. I'm a contractor, so I generally complete most of my repairs and upgrades myself. As a contractor, I provide estimates to potential future clients. However, just because I am able to provide estimates doesn't mean I am right 100% of the time.

In Pennsylvania, contractors are required to provide clients a fixed bid cost at the outset of the job. These can be developed in one of two ways: 1) a straight fixed bid, or 2) a Time and Materials contract (T&M) with a "cost not to exceed" clause.
For some of the work I complete, I use a fixed bid. This is beneficial to my clients because they know there will be no surprises throughout the job. This is generally beneficial to me, because I know exactly what I am going to run into on the job and my crew knows exactly how to handle the improvements.

For other work, such as window replacement, kitchen gut-rehabs, etc. I generally use a T&M with the "Cost not to Exceed" about 30% above my anticipated costs. This provides me (as the contractor) with peace of mind that if I find I somehow grossly underestimated labor or materials, I'm partially covered. This also gives the client some peace of mind because they know there is a 'worst case scenario'.

I purchased a duplex in similar condition. I needed to rewire, replace subfloor, patch holes, install a kitchen and bathroom (that's why the subfloor needed to be replaced!). I did the math, to see what could be financed and what the property would be worth when it was fixed up. I gave myself a reasonable margin of error on the final valuation, and the property still made sense, so I submitted my low offer. Initially, the seller didn't want to entertain my offer, but the day after they had been back to the duplex, they accepted my offer.

I would caution you with the ductless units. They have no back up heat and their capacity drops SIGNIFICANTLY when the weather hits about 20degF. If you do install ductless units, you should seriously consider installing electric baseboard heat as a backup.

If I were considering this property, I would get a quote to zone the existing system by unit and switch to gas. Spend the extra cash for a condensing boiler (can be as low as $500 more).

I'm a relative newbie as well, only been investing for a little over a year. My most difficult situation so far isn't a horror story, but a major annoyance, which could have (and may still) lead to an eviction:

I purchased a duplex earlier this year that was half rented. The tenants had been in the duplex since 2008 with no increases in rent...ever. The current market trends in my area are to have the tenants pay their own water bills; in addition, the tenants should have been paying almost 5% more for rent alone. This represents roughly a 20% increase in their rent since 2008. I'm in shale gas country, so rentals are expensive and rent quickly.

When I purchased the duplex, I gave the tenants a letter outlining the changes to the lease and included a copy of the new lease to be signed. The tenants initially refused to sign the lease, but were paying the new rate, excluding the water bills. I decided that I would continue to pay the water bills, but kept asking for money.

I was finally able to get one of the adults to sign the lease (there are 5 adults living in the house, gram, mom, son, 2x daughters). The adult that did sign only wanted a three month lease, so I acquiesced, but explained that they would be responsible for the water. Initially, they agreed. Five days later, the adult that signed, told me that she was "tired of paying bills, so wouldn't pay the water bill". I told them plainly "Well, water is not included in the lease."

When it came time for the lease to be renewed (only 3 months later), I hand delivered a 'nice' letter with the lease, again plainly stating that the water bill is the tenant's responsibility, and that simply not wanting to pay the water bill was not good enough to not pay; they owed for the back water bills. In the 'nice' letter, I asked that they suggest a payment schedule to pay back the bills.

Well, that letter got the tenants upset, and they brought me over to show me the 'cheap' cabinets that all had broken doors. The cabinets weren't cheap, the tenants simply live like...well, don't live like normal people; they had broken the doors. They also never suggested any payment terms.

I then drafted a 'stern' letter which dictated the repayment terms, laid out the costs for the cabinet repairs, indicated that only the adults listed on the lease were to live in the unit (all others would be removed) and said that if these terms were not met, the property was to be vacant by October 31. About one day later, I got a call requesting a meeting to discuss the payment terms and to give me the fully executed lease agreement (with all adults listed).

Through some additional negotiation (no new cabinets, but new cabinet doors), we came to an understanding. We will see what happens next month when the water bill comes.

While I should have addressed the issue months earlier, I'm proud of how the situation has so far resolved itself. I feel I'm on better terms with the tenants and that they are understanding the ramifications of the tenant/landlord relationship.

When you say a questionable area, what makes the area questionable? For a while, I considered purchasing run down properties in questionable areas, the potential headache was not worth the effort, especially for only $100/unit cashflow. $250/unit...maybe, but again, is the potential headache worth it?

@Jose Vazquez , I spent the better part of two years reading and learning about real estate. I was surprised at how many people were willing to sit with me and answer my questions. There is a wealth of information on BiggerPockets. Check your local library to see what kinds of investment books they have to borrow.

I didn't see it mentioned above, but finding a mentor, either here on BiggerPockets, or in the physical world. My brother pointed out that I've usually been the 'lone wolf' in life. Recently however, I've learned the value of networking and learning from your elders.