All Forum Posts by: Michele G.

March 2017 he got a 5% rent increase March 2018 he got a 7% rent increase June 2018 he will get a 9% rent increase I can see why he’s upset. I would be complaining too. Actually, I would just give my notice and find someone who won’t be raising my rents like that. Not many renters (especially in school) can afford a 25% increase over 15 months. You inherited a tenant at well below market rates and have mishandled his MTM lease which happens (I’m in a similar situation due to lack of oversight from me & my PM). In hindsight you should have evaluated the lease upon purchase and discussed it with him back in Mar 2017. It sounds like he’s a good, reasonable tenant. Not all tenants are like that so you might have been able to explain your situation and create a schedule to bring rents closer to market value over time in a way that works for both of you. Lesson learned. Your problem right now really is the negative cash flow. Do you want to keep this tenant? Are you able/willing to make concessions on any of the reserve amounts for the next year? If you can (& want to) work this out with him you could have the unit filled for the next 3 years with a good tenant bringing your vacancy risk to zero until his residency is over. If this were my property & I wanted him to stay I would: - Explain the rising costs from the purchase (adjusted property taxes) is barely making ends meet on the unit. - Tell him you’d like to work out an agreement so he can stay since he’s been such a good tenant, but that you need to cover your expenses on the unit. - Stop paying for lawn care to save the $60 which is the amount of the tax increase. Your expenses stay the same then. - Set up a schedule to adjust rent on a semi-annual basis to bring his rent closer to market. Perhaps: $40 in Sep ‘18 to 725 $40 in Mar ‘19 to 765 $40 in Sep ‘19 to 805 Mar ‘20 it will stay at 805 or adjust to market rates if they have increased. - Consider having him sign a 3 year lease so you have that guaranteed rent increase. I think it comes down to what kind of landlord you are/want to be. You can approach this in a purely business fashion and bring it to market rents now so you aren’t losing any money. Or you can bring a more personal approach. Acknowledge and accept that your lack of attention to the property made the problem bigger and try to work out a deal with the tenant. Either solution works IMO. It just depends on what you want and the type of business person you are. Good luck!

Michael Anspach Thank you. I am trying to find the properties to identify first. We are looking at a six figure tax bill from the sale of our property if we don’t do this right and on time. That’s why I want to build my team now so I can start the process with all of the players involved. I will add attorney to my team. I know some expenses can’t be covered by the 1031 funds, but I will need to review those. Are you saying the attorney, CPA, etc fees are allowed expenses, but not certain fees related to the closing? Katie Lepore I will talk to my CPA later this week or next week.

Katie Lepore So I need a Ca CPA and a MI CPA? Or can my MI CPA suffice? Lane Kawaoka How did the 1031 negatively affect you? Was it due to what you exchanged the property for? I am looking at exchanging a SFH into a small apartment complex (10-20 units depending on where I find property). From my understanding that would be a like kind exchange. Would my income level have any impact on my exchange?

Cade Roden Would you recommend Cincy over Northern KY? I am currently looking for small apartment complexes. Ashish Brar I am in the same situation. I have found little in CA that cash flow like the Midwest. You have to be very careful which area of Detroit you go into. For $100k in the Midwest you could buy a 1-4 unit outright or close to it that cash flows or use it for a down payment on a slightly bigger place. Courtney Jones I’d like to talk about what area of Dayton you looked at/decided to stay away from. I’ve recently been looking around for properties there.

Is it cost prohibitive to add a second kitchen and separate the property into 2 units? Would that bring you into compliance since then you would have no more than 4 in one unit?

I have been reading, researching, & looking at properties for a few months now, but I need to get serious and start building my team to help me through my first 1031. My property is in SoCal, but I live in Michigan. I know CA has a law that if I reinvest out of state then upon sale of the acquired property I would have to pay the CG taxes on the relinquished property. I’m willing to look in CA, but I’m not sure I can find the same cash flow that I can in other parts of the country. I am looking at small apartment buildings for my new investment. 

To build my team I am thinking I need the following:

- 1031 intermediary

- residential agent to sell current property

- commercial broker to find new property 

- tax accountant (My current CPA is in MI) 

Am I missing anyone? Does it matter where the QI & accountant are based out of? Should I find an area of the country to invest in or find a broker who can find properties that meet my criteria and then decide if that area fits my investing needs?

Any advice or recommendations would be greatly appreciated! If all goes well I may consider doing the same with another Ca property I have that has also appreciated very nicely. 

Thanks Peter Moser My contractor is recommending Republic Flooring. He said he feels it is a better product than what Home Depot or Lowe’s sells. Good point on buying extra at the time of purchase. I didn’t think of that.

@Peter M. What brand do you put in your high end units? Our rental flooded today and I had to make an on the spot decision. I chose the Pergo TimberCraft. It currently rents for $2200, but we’re hoping to sell it in the near future for high $500k. I don’t want to put a ton of money into it, but I don’t want to put in cheap stuff if we end up selling it. 

Jonathan Streufert Thanks! I was talking to a friend last night who lives in Redford and she said the same thing.

John Clark We are looking at a couple of properties in Westland. Are there any areas that we should stay away from (higher crime, etc)?