All Forum Posts by: Matt Leber

@Derek Hedgespeth we saw the exact scenario with ours. When we bought, the inherited rents were $550/unit but market rent was closer to $725/unit. I believe you have to let them run the course of their current lease before you raise it. The reality is, you will probably lose those inherited tenants either when you raise the rent or when switch them over to a property management system. We lost all four of ours in the first year and it was painful at times. In the end, it was well worth it because we raised all the units up to $725 and got the management in place. And the tenants expected to deal with management, not ‘direct to owner’.

The way our prop manager works - the rents get paid the first of the month and that is your balance. They will draw from that balance for needed repairs and maintenance, management expenses etc. If you have a vacancy, they will send in a technician to create an itemized list of the work that needs to be done to get it re-rented and require that if your current balance doesn’t cover the amount, you deposit the required funds into the account balance before they start the work.

@Kris Russell we just acquired a property and opened the application pool to section 8 voucher holders. Section 8 is a program where low income tenants receive government assistance for paying their rent. This means I get a guaranteed direct deposit each month no matter if the tenant has a job or not. In fact, if she loses her job, section 8 covers an even greater portion of her rent! Recession resistant!

There are a shortage of properties who will consider section 8 tenants in my area, so I had quite a few applicants wanting to move in. You should check it out in your area! Great to have a guaranteed rent payment coming in with the covid 19 economic concerns.

@Derek Hedgespeth congrats on finding the duplex! My wife and I have 2 duplexes in Jacksonville. My advice - Don't forget to include vacancy expenses (we factor in 8% for multi family). You will undoubtedly have more transient tenants in your units due to the nature of multifamily so you should account for higher vacancy due to move outs. Also, if you didn't factor in property management, you may want to. We self manage our SFH portfolio but our duplexes are on property management (thank goodness since there's 4x the toilets). Even if you plan to self manage you don't want to be trapped into it. We set aside 12% for the PM.

We just keep a “rental” bank account and everything goes in and out of there. It naturally grows a lot faster than our cash flow projections bc it has all our reserves in there too. But we have decided to keep the balance at 6 month’s portfolio expenses before thinking about reinvesting. Good luck and congrats again!

@Donnie Martens Nice! Love base hits! My brother lives out in Owasso! Cool to see it mentioned on here. Congrats.

Enough rents to cover all our portfolio's monthly PITI expenses. In Brevard County, one SFH paid a week early like clockwork. One SFH is on guaranteed section 8, got the direct deposit on 4/2. Third SFH is a restaurant household and both husband and wife are out of jobs plus 3 kids at home. Been in contact with them and I'm going to give them a few weeks to figure things out as stimulus payments come in. In Jacksonville, my four unit has had only 1 pay out of 4 (ouch!). But luckily one unit's rent covers 75% of the PITI. And I know at least 1 other unit should pay on Monday as they are on fixed income. We'll be OK. Ready to kick in reserves as needed.

An update for you all regarding this rental property in the Brevard County - Melbourne, Florida area. Had a section 8 tenant lined up since early March for April 1 move in through the Cocoa housing authority. Housing authority advised the tenant not to pay a deposit until the house passed the section 8 inspection. Was a bit annoyed with that but I understood. Passed the required section 8 inspection and went to meet the tenant same day to sign lease and get deposit (and give her the keys a week early bc Covid was starting to ramp up). She dodged me all day and ended up backing out of the move in. Sigh...

Started calling my other applicants that day and got another applicant’s paperwork. Was able to fill it all out, visit the office to turn it in, and get a re-inspection scheduled within 3 days. Yes, unfortunately a re-inspect was required bc the applicant had a voucher through a different county housing office and they are not all affiliated. Passed inspection (again!) on 3/22 which was apparently early enough to be on the payroll for rent to drop for April 1. I thought I was going to get 2 rent payments on May 1 to catch me up - but was pleasantly surprised when I saw the tenants full $1375 rent direct deposit to my account on 4/2!

All in all - the process was a bit cumbersome to get through, and tenant #1 totally wasted a ton of my time and the housing authority’s time. But very thankful to have gotten tenant #2 under lease and deposit so quickly and glad to have a guaranteed rent payment going into this time of covid-19. Both the Cocoa section 8 and Brevard County section 8 offices were a pleasure to work with, would recommend the program to other landlords based on our experience so far.

@Ondrej Brown Duval County (Jacksonville) is an affordable market, we closed a couple duplexes at $80k per building a little over a year ago with rents at $1450 ($725 per door). Also, Brevard County (Melbourne, Cocoa, Palm Bay, Titusville) can be an affordable market. Just closed a SFH for $95k in Melbourne that will rent for $1375. I would think markets to the south & southeast of Orlando (Lakeland, Avon Park, Vero, Port St Lucie) might have some affordable options as well if you're selective. Same goes for the panhandle towns but I'm not as familiar with that area.

@James Stovall not sure, never done a cash out refinance with mid FL. You should give them a call and ask.

@Adam Frocione I used to think 75-85% sale price assessed value until I realized in Brevard County most of my property assessments have climbed up close to 100% of my purchase price within 2 years after purchase. So, that’s why i start with millage times full sale price in thousands to project what my taxes will be a few years down the line. From there I suppose I could model it forward by assuming 2% assessment increases per year going forward. I think that would be the same as 2% millage increases which you are doing. Either way, I feel the tax increases and non-ad valorem are pretty much in the noise when spread over 12 months, taxes paid in November, and assuming 2-5% rent increases year over year.

My primary in Lake Nona falls in line with the 75-85% assessment to sales price value. But that one has homestead exemption so not sure its quite apples to apples.

@Kiera Underwood yes, for Brevard County most of the millage rates seem to be between 15-22 so your general estimate of 2% would fall within the 1.5%-2.2% bracket. At 2% in general, you may be a little light on properties that have millage codes above 20 especially if you have non-ad valorem taxes like storm water and solid waste tax. That’s why I’ve been looking up the exact millage for each property I plan to offer on and adding a buffer on top to be safe. There’s a millage chart by municipality on the county assessors site.

That being said, taxes in OKC might be a 35 millage for all I know (haven’t researched it), and in that case 2% would definitely be too light.

Are you investing out in OK? I have a brother living in Owasso, near Tulsa.