All Forum Posts by: John Newman

Hi @Matthew King,

I grew up in Florida working for my dad in his residential HVAC business.  I have seen more evaporator coils than any person should.  That being said, it was always easy to tell an owner from a renter.  Tenants just don't change filters.  Ever.  No matter if it's for air, water, whatever, even though they're the ones breathing/drinking it in.  If yours do change the filters, consider yourself extremely lucky.  

In terms of intervals for changing them, that depends not so much on the type of filter, but on your climate.  Primarily heating climates with blast furnaces move less air and can go 2 or 3 months between filters in ideal conditions.  Primarily cooling climates move more air and need to be changed monthly.  In Kentucky, your in the middle, so minimum monthly in the summer and maybe every other month / quarterly in the winter.  If your tenants have pets (I hope not), than minimum monthly no matter what.  Pet hair is the quickest way to clog an evaporator coil.  They are not easy to clean either.  

Here are a few pro tips:

Buy quality filters, not the cheap ones.  They will save you from spending thousands in replacement equipment.  A dirty filter restricts airflow and strains the equipment.

If you want your tenants to change the filters, you're going to have to supply them.  If the air handling unit is in a utility closet, just leave a few filters in there.  You could even automate a friendly reminder when you receive their rent check each month.  

If you're going to be changing them yourself or hiring someone else to do it, buy a pair of washable, electrostatic filters.  They cost 3X-4X of a single use, but last forever.  When you change the filter each month, just replace the dirty one with a clean one, and take the dirty one with you to wash at your leisure.  It takes all of 5 minutes with a gentle soap and garden hose.  Then repeat next month.

As for what I use in my home, only the gold standard top quality reusable filters.  I have allergies and it goes a long way to improving the indoor air quality.  Remember someone is going to be breathing that stuff in, so better in the filter than the lungs.  Good tenants will appreciate that too.

Hi @Michael Herr,

Who is the electrical utility in your area?

Hi @Uriah D.,

I put your figures into my cashflow analyzer that I've used on quite a few other properties in the area. To be fair, I am not a fan of condos because most of the time, the HOA fees kill the cashflow, and appreciation tends to be minimal if any. Looking at your deal and making some standard assumptions of 10% each for vacancy, insurance, maintenance, reserves, with self management and 1% RE tax, the cashflow would be around $400 per month, not including HOA fees.

A zero percent loan sounds extremely enticing. But if I were you, I would only do the deal if the HOA fees are $100 or less per unit. Any more than that, and your money would probably work harder for you elsewhere. If you're in it for the long term buy and hold potential when the loan is paid off, maybe. But there's no telling what the HOA fees will be then.

HOA fees $0/month = 34% COC return

HOA fees $50 each/month = 26% COC return

HOA fees $100 each/month = 17% COC return

HOA fees $150 each/month = 9% COC return

HOA fees $200 each/month = 0% COC return

If I were you, I wouldn't walk away from the deal, but instead negotiate a lower sale price or down payment.  Best of luck and PM me if you need anything!

Hi @Mila Makhanova,

You should ask Quicken if this is a conventional or FHA loan. Conventional loans have Private Mortgage Insurance (PMI) until the LTV is <78%, while FHA loans have Mortgage Insurance Premiums (MIP) for the life of the loan, regardless of LTV.

When I purchased my primary residence, I got a similar loan; mine was a conventional loan with 5% down payment, and I chose the Lender Paid Mortgage Insurance (LPMI) option. My mortgage broker provided 3 options: traditional monthly mortgage insurance until my LTV was <80%, upfront mortgage insurance (cash due at closing), or the LPMI mentioned above, in exchange for a .25% increase in the rate (.5% sounds like too much). The upfront MI option was significantly less than the monthly MI in total. Between the LPMI and monthly MI, the break even period was over 8 years, so not great. I then compared the upfront to lender paid options only. My thinking was if I had the cash to pay all my MI upfront, and I invested it instead of paying the MI, I would come out ahead even with the higher rate and tax considerations.

Also, mortgage insurance is currently tax deductible, only because Congress keeps extending the sunset each year.  The tax deduction for mortgage interest on the other hand is likely to stick around much longer.  

If you choose the monthly PMI, you will probably need to get an appraisal done (an extra $500-$2500ish) to prove the value of the home if you want to count appreciation for eliminating the PMI. Lenders do not automatically remove the PMI requirement, so the responsibility falls on you to make it happen. That is unless of course you want to just wait it out (not likely) until your regular payments bring your LTV <78%.

In my opinion, LPMI makes great sense (cents too) for investors who can do something better with the money, while upfront PMI makes sense for savers.

Hi @Paolo Ruggieri, I worked with Movement Mortgage in 2013 for my primary residence.  They were fast, but I closed in 21 days.  I think it has a lot to do with the responsiveness of the local team that you work with.  The regulations did change recently,so you should probably ask the mortgage broker that you're working with how much time they anticipate.  I would also ask how many loans they have done similar to your situation.

Hi @John Upperman, welcome to BP!  I'll see you at the Meetup group on the 29th!

If I had a property manager charging 30%, I would find a new property manager.

Hi @WIlliam Hernandez,

another great loan option is the Fannie Mae HomeStyle Renovation loan.  It is for both owner occupants and investors.  You can borrow money for the purchase and rehab.  Some of the caveats are that you need to have a licensed GC and usually they don't allow you to borrow for DIY projects.  I don't think any lender will let you be your own GC (I tried).  

Hi @Sean OReilly,

Do these properties have other common utilities besides heat?  

What is the age of the heating system?  

Do you have any other heating choices besides fuel oil?

Jenna and I will definitely be there.  We're looking forward to seeing everyone and meeting a few new faces.