All Forum Posts by: Karen F.

You can go down to the town hall and pull the file on the property to find out whether it ever was a legal 3 family.  If it was, then it would be very easy to get it back to that status.  What the assessor's online records say, and what the actual hard file says, can be two different things.

If you are the one living in the illegal 3rd flr unit, I don't think that the tenant has as much on you - after all, their unit is legal.  

We bought an illegal three family and converted it back into a legal 2 family.  Turned the 3rd flr kitchen into a laundry room.  Wound up with a first floor unit, plus an enormous 2 story 7 bedroom 2 bath unit, got a huge refugee family with Sec 8 in there with the government paying us a king's ransom for it.  We get about 25% more for it in rent this way than if it had been a legal three family.  You see, it is so difficult to find big units for big families on Sec 8 that the government allowance for units with over 5 bedrooms increases exponentially, rather than linearly.  They'll beat hell out of the unit, but they'll stay there for 20 years, because they'll never find another place big enough for them, that will take them.

If you're not willing to rent it to Sec 8, then what about students?  They will happily live 6 people in a 6 bedroom 2 bath unit, and pay a premium for it, because it's still more privacy than a dorm, and cheaper, too.

Just because her lease is up in June, doesn't mean she's leaving without you having to evict her!  She can still sit there, not paying rent, building up the utility bill that you'll have to pay, and causing damages, and you'll still have to evict her.  I would give her a notice to quit for non-payment of rent and utilities, plus the smoking, not shoveling, damages she's causing.  If she wants to pay up and stay, let her - but get the money out of her!  Then, if she doesn't pay next month, you can serve her for non-payment of rent, and you won't be losing as much because she will have at least paid off the water bill.  If she doesn't want to pay up, you weren't gonna get the money anyway, and probably not any rent until you got her out by evicting her.

I strongly suggest that you start off close to home.  Lots of people wind up making nothing, because they're paying property managers and high prices for the workmen that they engage.

If the property has appreciated, and it is LOSING you money every month, why not just sell it and 1031 exchange it into something close to you that you can manage yourself, without paying a management company?  That way you can consolidate your capital gain into another property, that can have positive cash flow, instead of keeping a property that is losing you money every month?  In fact, if you have a lot of equity now in that property, you could leverage it into a multiunit that brings in a lot more rent, close to you, with no property manager.  Honestly, if the potential for future gain were so great, why wouldn't rents be going up, too?  If the area is simply building more and more housing, the property is going to stop increasing in value, plus rents won't go up.

Increasing the rent to above the market rate will only cause you to lose your tenant, and you're going to have a very hard time getting another one if they can get the same unit cheaper next door.  So be careful about raising it above market rate - eventually, the frog will jump out of the boiling pot of water!

Paying off the mortgage doesn't change the fact that you're not getting a high rate of return on your money.  If you have the money to pay off the mortgage, you have that same money to invest in something else that gives you a higher rate of return.  The only reason to pay off the mortgage is if the interest rate on the mortgage is too high, and you don't have a better use for your money.

In any event, being an out of town LL is expensive.  It would be one thing if this were 1970s Palo Alto - and you could just have a tenant in that pays the taxes and maintenance, while it appreciates like crazy for decades.  But do you really think North Austin is like that?  Isn't there a lot of room to build new housing there?  I would seriously look at the options closer to home, where you wouldn't have to pay a property manager, and consider a 1031 exchange into something close by.

If you find a large single family in an area that is already zoned for 2 or 3 family homes, you might be able to do this fairly easily.  But if the house is in an area that is zoned for single family, you are going to have a very difficult time.  Not worth the effort and expense, and you have almost no chance of success.

The fact is, it's just not worth putting the time and money into areas that are low rent, which is mostly where you find multifamily zoning.   If you can find a lot or a tear down in a high rent area that is already zoned for multifamily, that's a better use of your resources.

You're probably better off to buy very run down multis and renovate them, or to build on vacant lots that are already zoned for multi.

Read a lot on Bigger Pockets. Get a job working for a handyman, carpenter, whatever in order to learn about the trades. Take shop classes in high school. If you have any interest in it, consider apprenticing yourself to an electrician or a plumber instead of going to college. You will earn about as much in those trades as you would in almost any other kind of employment. Earn as much as you possibly can, and bank every cent of it. Do not tell anyone (especially your family members) about your savings, because if they run into hard times, they will come to you for help. If you're a minor, they can take it without your consent. Look into living in an area where you can buy a foreclosed multifamily as an owner occupant with an FHA loan, only 3% down, as your first building. You could do this every year or two, moving as owner occupant, and build up a portfolio of multifamilies this way while you are very young, all with low mortgages. Eventually, consider exchanging it into a commercial building or larger apartment complex, if that is what interests you.

The big money would be in developing, and for that you'd need more education, I think.  Community colleges and state colleges offer construction management degrees, but I think you'd learn more apprenticing yourself to someone older who is in the middle of his career doing this.

We finally found a larger complex (albeit in another city) to potentially 1031 exchange our New Britain three 2 family buildings into.  We have potentially 3 two family houses, one with 2 bedroom units, two with 3 bedroom units, that we're looking to sell in order to 1031 exchange.  All are in okay areas, up and running, fully rented at market rate, good stable tenants, off street parking, tenants pay all utilities separated out, all the kinks worked out.  We've owned them all for about 4 years I think.  Only selling because we want to exchange into one bigger complex for convenience.

We're considering leveraging to buy a complex.  We would need to mortgage our existing portfolio, which we own free and clear.  Anyone with recommendations for a lender?  Any idea on rates, terms, percent of value we could borrow?

We're considering putting coin op laundry in the basement of a 6 plex.   Anyone with advice?  We think it would be best not to buy and service the machines ourselves.  Can anyone recommend a service that would bring in the machines, maintain them, and pay us something to cover the increased water and electric bills?  We only care about breaking even and not having to deal with aggravation.  I'm hoping there's some service which we'd just never have to even think about. 

What a nightmare.  Every time my husband (who either does or supervises all the work on our properties) suggests that we partner with one of the many friends who have asked to get in on the action by partnering with us, I have said, "NO, no way in hell, NEVER.  I wind up doing all the research and negotiations, and you wind up doing all the work, and they'll take their cut having done nothing but provide some capital that we don't need."  I know that my husband and I would never have the chutzpah to charge the other investors for the time and work we put into it all.  We choose deals that we can swing on our own.  I will never, ever partner with anyone in a real estate investment.