All Forum Posts by: Michael Smythe

@Lynnette Pombo check around and see if you can get a LIABILITY policy only, without fire coverage.

We helped a client do that and the premiums went from $1200 annually to only $200.

@Dayana García recommend you investigate the tax increase.

It's standard practice in Michigan when the taxable value is uncapped.

What I'm referring to is the increase in your mortgage payment.

Property taxes in Michigan are paid in advance and your lender has to contractually pay them when due. So, this results in the lender having to actually "lend" owners money to pay the taxes. The lender then raises your PITI payment to accommodate the new tax amount, but ALSO charges you that same increase to pay back the "loan" they gave you to cover the taxes.

EXAMPLE: property taxes increase by $1200 annually, or $100/month. 
Lender will raise your PITI payment by $100 for future taxes.
Lender has to "loan" you $1200 to pay the current taxes. So, they TEMPORARILY raise your PITI payment by another $100/month to pay themselves back. After 12 months, this 4100 drops off your PITI.

NOTE: after the initial uncapping of the taxable value that causes all this, Michigan property taxes can only increase by the lesser of the state's COLA or 5%. So, you shouldn't have any more high-cost surprises going forward.

Why is Cleveland housing more at risk than housing in the suburbs built before 1978?

We're trying to manage our first MTR and finding it challenging.

https://www.furnishedfinder.com/property/725267_1

Right off the bat, we had a booking for 8 months via Furnished Finders. Now, crickets.

We obviously have it on Furnished Finder, as well as VRBO (Prop ID:4151130) and Airbnb (https://www.airbnb.com/rooms/23590996?guests=1&adults=1&...)

Have never gotten anything from VRBO:(

Where else should we post it?

Would appreciate any input more experienced hosts have about what we can do to generate more leads.

@Tyren Robinson many of the best contractors are so busy, they have no time/need to advertise.

So, the only way you find them is by networking your way to them.

Then you want to learn from them instead of trying to force them to follow your mentor-recommended process.

@Brian Dvorak lease option has 3 components:

1) A Lease: you should already be familiar with

2) Option Agreement: you could charge the tenant the $3k "down payment" as an Option Fee instead. The Option Agreement (contract) should have:
--- A time limit to execute the option
--- A purchase price (can get creative and increase over time)
--- You can also add a pre-negotiated extension fee if you want

3) A Purchase Agreement (contract): this document is triggered by the execution of the Option. It sets the purchase terms and is used like any other purchase agreement to facilitate the transaction.

Be careful of putting all 3 of these components on the SAME document. They should all be separate documents.

DM us the address of your Detroit rental as we always seem to have buyers.

@Shaun Ortiz

Recommend exploring as many sources as possible to get referrals AND cross-reference them to get as much accurate information as possible.

Check out NARPM.com, BP’s Property Manager Finder (BiggerPockets: The Real Estate Investing Social Network), etc.

Also, encourage you to learn from the mistakes of others - by reading posts here on BiggerPockets about owners not having their expectations met by their current Property Management Company.

To avoid going through the same poor experience, keep reading.

Even if someone gives you a referral here, do NOT make the mistake of assuming that the PMC will meet your expectations, just because they met the expectations of the referral source.

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator – so, they often select the first PMC they call or that calls them back!

So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.

EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!

This also leads owners to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

A well written management contract should clearly spell out what is expected of both the PMC and the owner, to PROTECT both and avoid misunderstandings. Why do you think purchase contracts are so long and have such small print?

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊

https://www.biggerpockets.com/member-blogs/3094/91878-how-to-screen-a-pmc-better-than-a-tenant-part-2-communication-and-docum

https://www.biggerpockets.com/member-blogs/3094/91879-how-to-screen-a-pmc-better-than-a-tenant-part-3-the-management-contr

Lenders know that when the going gets tough, investors will sacrifice their rental properties before their primary homes.

So, there's more risk for lenders on rentals, that's why interest rates for rentals are higher.

A cashout refinance is a higher risk than just a refinance to a lower interest rate. 

Any type of 2nd mortgage is a higher risk than a 1st mortgage. If you stop paying on the 2nd mortgage, that lender must payoff the 1st mortgage if they want to foreclose.

A cashout, 2nd mortgage, on a rental property is about as high of a risk as you can go, ignoring credit scores, so many lenders do NOT want to do them. Those that do them will charge a pretty high interest rate to compensate for the higher risk.

Parents usually cosign.

Just be sure they are liable for unpaid rent AND damages!

Of course, if parents are out of state, actually chasing them for collections is often prohibitively expensive:(

Sounds good, but how about some more details?