All Forum Posts by: Nathan McDonald

They have been good tenants in the short time I've owned the place and dealt with the request to vacate pretty well. However, the timing of all this couldn't have been worse as I even contemplated giving them another month residence to see how all of this pans out, but they were out before the stay at home order. I figured morally, to live with myself a bit, to do what most people said and return the majority of the deposit. Going forward I'll be sure to have my bases covered.

 I did see the inside of their unit and it was clear to me that the kitchen and bathroom would need to be redone, but with a family of 6 living there it was hard to get a clear view of everything, so there are bound to be a few things missed.In this case I don't think they are too awful, but hey its a learned lesson.

Thanks for the advice everyone! I was kind of expecting this answer, but wanted to make sure. I understand that there isn't really anyway for me to prove the condition from before making it hard to charge for fixes. I do plan to redo the bathroom and kitchen and had that budgeted in, so I'm not really worried about those areas. Overall I rather not have this become a problem or court case, so I will be returning most of the deposit. Thanks again for the responses.

I recently bought a duplex (my first property) late Jan. 2020 and inherited tenants for one of the units. The tenants had a lease from September 2018 - August 2019 and were on a month to month after that. I gave them a 60-day notice after closing, to get into the property to fix it and bring up to market rents. These tenants specifically had lived there for 8 years and gone through a couple of different landlords, but this most recent lease had the deposit I received at closing. 

To layout the problem, the property was built in 1961, and as far as I can see, wasn't updated a whole lot in the unit they were living in. The tenants themselves had been living there for 8 years, but the deposit was from the last lease about 1.5 years ago. This is my first time dealing with deposits. After the tenants moved out I realized how dirty it truly was. It seems they neglected cleaning altogether. There are cobwebs all around the ceiling in every room, the wood floors have various amounts of "wear and tear" some look burnt, most of the blinds are either broken, missing, or bent. There is a skinny wall at the end of the one hallway that has a hole and seems to be "soft" (you can push it in with little resistance). The kitchen has grease stains on the ceiling, blinds, and the countertop looks ruined. I had to remove a piece of their furniture myself. The list goes on.

I guess my question is what can I even charge for or take out of the deposit. Since the property seems to have had deferred maintenance what can I attribute to that?  Do I charge for what looks like 8 years of "wear and tear" or 1.5years (the lease term of the deposit in question)? I don't have an idea of what it looked like prior to the beginning of this recent lease nor the beginning of the tenants' residency, but with people living in the unit, it is hard to assess the condition. I've tried my best to educate myself on Minnesota law around this subject. I even have the "Landlord's guide to Minnesota Law" by HOME Line book, but everything I read seems so vague. It seems even less straight forward with inherited tenants. I've seen things state $40/hr for cleaning is reasonable, other things state anything over $126 of cleaning needs to be documented.

In the end, to be honest, the deposit will not make or break me, but as someone who is new to this, I want to not be naive and do my due diligence. Pictures added for visuals. The problems aren't horrible, but to me, they should be chargeable.

Any advice or additional advice is greatly appreciated!

Apologies for not correctly linking @Tim Swierczek in contributors

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Minneapolis.

Purchase price: $387,000
Cash invested: $60,000

Contributors:
Jordan Moorhead @Tim Swierczek

Up/down duplex in southern Minneapolis, on the border of Edina. Both units are a 3 bed - 1 bath set up. Top unit has been recently renovated and should fetch top dollar rent. enants currently living in the bottom unit on a month to month lease. I plan to move in, and do updates similar to the upstairs unit to help get higher rent and force appreciation. I am then going to rent out the extra bedrooms. Going to be house hacking the property! It should cashflow (~ $1100/mo) once I move out.

What made you interested in investing in this type of deal?

It's in a good location. It has a huge shopping center about 5 minutes away and the MSP airport is about a 10 minute drive. Not to mention its a good neighborhood. I liked how the property was meant to be a duplex and the layout feels natural. Half of the unit was renovated already, so I can get to collecting rent right away while I dip my hands into renovating the bottom unit.

How did you find this deal and how did you negotiate it?

Through the MLS and my agent. Did a low down payment option, so I didn't fuss too much over the purchase price as it really didn't change much for me. Negotiated $5k at closing to be paid by the seller using the inspection report.

How did you finance this deal?

10% down conventional with mortgage insurance buyout.

How did you add value to the deal?

I am going to be increasing the rent for the top unit as well as updating the bottom unit. This should help get the rent up for the lower unit to match that of the top unit. It should also force some appreciation. Lastly, I will be living in the unit and self managing for the time being.

What was the outcome?

TBD.

Lessons learned? Challenges?

Things might seem slow at points, but then everything hits at once. I find its best to be prepared ahead of time if you can (obviously), but learn to tackle one thing at a time and eventually tasks will stack up and lead to your end goal.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes, Jordan Moorhead (Realtor) and Tim Swierczek (Lender) were super helpful throughout the process and continue to be great sources of information. They do a great job of helping out the community here on Biggerpockets and I highly recommend their services.

Hey @Erik Anderson @Tim Swierczek @Jadde Rowe

Sorry I am just getting back to this. As of right now I have gotten my pre-approval through Tim, met with a realtor, and have been shopping around for the past few months. I've sent out a handful of offers with one of them being the highest bid and still getting shot down! I sent out another offer today and I am waiting to hear back, but fingers crossed.

Thanks for the advice Jadde! Tim has been great and I have already begun looking, but thanks for the offer. I made the leap to taking action and now just need to be persistent. Would love to connect.

@Tim Swierczek

Ok, that’s what I was thinking. And I have seen you often reply to people. I sent you a PM.

Hello everyone,

My name is Nathan McDonald and I am new to the world of REI and bigger pockets, and I am eager to join ASAP. However, I want to be methodical in my approach. To get a better grasp of how to start in the business, and to network, I have attended two local meet ups this month and plan to attend at least two more, including the "How to buy your first rental property". It is my goal to have an investment property (most likely owner occupied) by the end of the year. From what I have heard it is best to find out how much I qualify for before eyeing properties that could be out of my price range. I have been blessed with the finances to get in to nearly anything, but I figure as a recent college grad who still has student loans I still won't qualify for much, so my question is this: What steps should/could I take to getting my first property and is there anything you recommend to have set up or avoid before hand? Obviously it is impossible to have everything go my way, but its worth a shot. I would like to get the ball rolling and not lose any steam of enthusiasm.

Thanks!

Nathan McDonald