All Forum Posts by: Peter Falk

Another quick way to get a feel for what people are paying for the rental income on 1-4 units is to look at the Gross Rent Multiplier.  You can take the sale price/annual rental income or monthly income to get a range of multiples that people are paying for rental property ($250,000 property/$2,500 per month rental income = 100 x monthly rent paid or 8.3 x annual rent paid.  

Big outliers could mean the condition is very different than typical or rental income may be way below market rents with buyers bidding the price up based on raising rents to market rate. Location also can vary with more troubled areas usually seeing a more enticing cash flow number or lower GRM paid.

In Madison, WI it is usually very hard to find a property selling for less than 10x gross annual rents and many areas see more like 13x gross rents.  

The pictures and lay out do help a lot.  With it walking out to the pool and hot tub agree that area will get a lot of use and guests should find amenities like a fridge, plastic cups, bar to set stuff on/sit at, and sink all useful.  

Other than cosmetic updates, it looks a little dark if all the existing lights are on, so would consider adding some more lighting to brighten the space up when needed (maybe dimmable LED wafer lights).

Sounds like a fun house to work with. 

If people aren't staying a long time at the property, doubt they will haul drinks down to the basement to set up/stock that bar, and suspect they will just make drinks/set all their stuff in the kitchen (especially with the pool in the summer), so wouldn't worry too much about it if you remove it to use the space differently, but don't think it's a big deal if you leave it.  If left, I personally would not spend a lot of work on it, as I doubt people will sit at the basement bar.  If you start getting renter requests for an updated bar, than maybe could  consider it, but I think it'll go largely unused.

Our home in Madison, WI came with a 1970s wet bar in a finished basement rec room which we kept (removed the sink as it leaked) but never use the bar as everyone during parties stays upstairs (even when we had a kegerator and beer on tap down there).  If you keep it, could do some things like add a popcorn machine and some bar games (darts, etc).

I would also not automatically rule out looking at options in your area you can self manage as mentioned earlier.  It is hard to discuss local real estate markets even on the state level.  I am in Madison, WI where in general think you will find good appreciation and rental demand, but higher price points and am sure less cash flow than other WI locations.  So if you do decide to go out of state, would think about what product and neighborhood feel (class B, C) you want to be in.  Let me know if you end up with Madison/Dane County area on your short list and want to talk in more detail.

Assuming the leases clearly state a security deposit amount, the seller knows that the tenant will be wanting a refund when the lease ends (after closing) so should be an easy reminder that you need those funds credited to you at closing from them to refund to the tenant when needed.

If the seller spent the tenants deposit, at least the credit to you at closing comes out of the sales proceeds (seller just nets that much less at closing) and assuming they have sufficient equity should not be a big deal.  

Wisconsin has a 21 day timeline for landlords to account for any damages and refund the deposit, so if your State is similar, could also remind the seller of those statutes and that you can't just ignore these funds (like pro rating any rent the month of closing where you should be entitled to the portion from closing to the end of the month)

I agree with screening the Sec 8 applicant the same as all applicants for good housing history.  I simply view their Sec 8 voucher as additional income and try to make sure all else shows a quality tenant.  Unfortunately, my experience has also been they Sec 8 tenants have generally been rougher on property.  To help expedite the rental unit approval/inspection, you can also talk with your local housing provider that runs the Sec 8 program what basic items they look for and make sure you have those covered.
 

Congratulations on the duplex.  As you look to scale, just make sure to hold/build reserves for when repairs come up and take your time screening tenants as you will find a vacant unit is much less stressful than dealing with a bad tenant.

It sounds like the Title Co. was not aware that the tenant prepaid rent and just prorated the current rent for the month of closing, so agree if they had no knowledge of it, would not have ever gone on the settlement statement as a credit to the buyer and they likely will not do anything post closing to help obtain those funds.  I am guessing that the tenant may be short on funds to pay twice for Jan, until reimbursed by the old owner, so would first make your case to the old owner who has the funds you are owed and certainly hope once reminded of that will refund them.  It sounds like the tenant has solid evidence their check or auto payment was received by the wrong party.  

If the seller isn't responsive, then do like the idea of telling the tenant you tried, and see if they can get some free legal assistance from a tenant resource center.

It is a good reminder as closing approaches to ask the seller to keep tenants updated on the pending sale and when ownership is scheduled to change.

Hi Carlos,

I am in Madison, WI and we shopped around a lot when moving a few years ago and used Neckerman Agency (now McClone) who are insurance brokers.  Our actual carriers used to be Secura, but they seem to be getting out of a lot of insurance lines or pricing so high as to have customers drop off, and we just moved policies in Nov. to Hanover Insurance.  We have rentals, home, auto and umbrella with them.  I would at least recommend you have them shop a policy for you.

One thing we did note is that with hail damage to roofs, they seem to be decreasing coverage/increasing deductibles on that if ever needed.

You could start by reaching out to any local corporations that do assisted living in your area and see what they are looking for (location, space specs, etc).  My wife used to work for REM Wisconsin in accounting.  This was a few years ago, but at that time as I recall they were looking to do more long-term property leases over owning properties and doing pretty landlord friendly leases where they would do repairs and even pay property taxes.  My guess is that finding good staff in this industry remains hard to find.