All Forum Posts by: Michael D.

Brian Hudson, I think your biggest mistake here was not using a solid property manager in the 1st place. You can't go back in time, but even now that seems like it might be your best bet.

Ask around, particularly on this website, and interview a number of managers - then put it on the rental market.

Once you've gotten it stabilized you'll be sleeping better and you can look at it again with clear eyes. Maybe you'll continue holding, or maybe you'll decide to sell then. At least you won't be acting out of desperation.

It sounds like you can afford to sweat the negative a little while longer, so try to distance yourself from this emotionally as much as you can. Don't even go back. Do everything through the manager.

This must have been discussed before, but I couldn't find anything when searching.

In general:
Do any of you rent to Megan's Law offenders? Under what circumstances?

Specifically:
I have a 9-unit low-income (<$500/mo) building, and a ML offender applied recently. We told him no, but it left me thinking whether I should have been open to it, and what to do next time.

Sean H., how do you calculate the billing?

My plan is to essentially replicate how PWSA bills me and pass that along to the tenants.

They'll each pay their share of the flat-rate charges plus their pro-rated amount of usage-based charges based on the meters I install. I'll pay the flat-rate portion for vacant units. Is this what you're doing?

How do you pass the bill to them? Do you mail out something in September for August's bill? Do you call and let them know? Is it just a flat-rate that you establish up-front?

Joel Owens, I'm not too clear on what's customary in those parts. It seems to be a mixed bag. SFD of course always pay their own. The water company said lots of people (landlords) submeter, so I'm sure it's not too uncommon.

More than anything, I just want each tenant to be responsible for their own consumption. We'll all be better off for it.

I plan to pay the water company directly myself so I know it will be paid. I'll just divvy up the bill based on consumption and forward the charge to the tenant.

I don't think I'll get a bunch of deserters over it. I plan to reduce the rent accordingly. This means I won't be saving all that much money, but to me it's still worth it. I pay about $75/unit now,. I think if I reduce the rent maybe $50-60/unit it won't scare anybody off and I'll end up $15-25/unit better. If they reduce their consumption they might end up actually saving money each month, and so will I.

I'm not sure how I ended up back here after 6 weeks, but here I am :-)

Not really - if rates drop the borrower may well refi or otherwise pay you off limiting your upside. Not all bad, but it's not like buying a bond where they have to keep paying you at the agreed rate for the whole term. As noted above, you can try to build in pre-pay penalties and such, but that's not the best solution either.

Your best bet, IMHO, is to just stick a 5-year balloon on it and call it a day. You could always mutually agree to extend the term by a few more years as you approach the deadline.

An adjustable rate was also mentioned which mitigates some of the risk, but your money is still locked up. Who knows how you'll feel about this use of the trust's money in 5 years. Maybe you'll wish you could re-purpose the capital elsewhere. 30 years is a really, really long time to lock up those dollars.

Great link Steve Babiak, thanks.

I just got off the phone with Rick Obermeier over at PWSA and he says that it's perfectly fine to submeter and that a lot of people do just that.

From the other thread, it also looks like it's a good idea, although it's probably going to cost me $6-8k for my 9-unit to split everything out.

Do any of you in the Pittsburgh area know if it is okay to sub-meter a building on PWSA water? Are any of you doing that currently?

Thanks!

Jon Holdman, wouldn't having the 401k "invest" in his new company also be considered self-dealing?

Ben Duq, Steve L., I think ROE is the more important metric than ROI for the purposes of deciding to sell. Your "investment" in the property is something that happened in the past and doesn't have any bearing on what you do today.

Think about it this way: "Equity" is what you're "investing" in that property RIGHT NOW, and every morning when you get up.

What's the best use of that equity? Is it that property? If so, leave it alone. If not, sell it.

ROI tells you how you DID.
ROE tells you how you're DOING.

Both are valuable in their own ways - but for selling ROE is more important.

** Sidenote 1 - another way to improve your ROE is to cash-out refi rather than selling.

** Sidenote 2 - I'm ignoring transaction costs which you obviously should factor in.

I think return on equity is one of the most important things to look at under any circumstance. A lower return on equity points to selling, a higher one to holding.

Assuming that you mean that the market price went down, then your return on equity should now be higher - not lower. (Your income stays the same, but your equity is now lower so your return is higher)
You can't generate cash-flow by selling. You can only hope to generate cash. (Unless they are negative cash-flow now.)
Shouldn't factor into your decision to sell or not.
It's hard for me to see how your financing costs factor into the decision to sell or not. Any points you paid are gone and don't matter. Do you have negative cash-flow?
When the market is going down it will be creating new all-time lows all the way. Why does this particular all-time-low make you think it's going to go back up soon?