All Forum Posts by: Joshua Feit

@Jim Adrian

Totally! The down payment is actually 25%. That 5% is closing costs for a conventional mortgage. (I'm hoping that's high, but I try to figure my numbers on the conservative side.)

@Account Closed

Thanks so much for this! A couple of quick follow-ups:

1) The person I met does not use leases -- just straight month to month, and he uses an auto-pay CC system. Bad idea?

2) What qualifications do you put in place for your month to month tenants?

Thank you!
Josh

I have an opportunity to purchase a duplex in a C/D neighborhood -- 8br/6ba total. It's a newer property (2009) with very little maintenance (just some carpet, paint in some rooms, etc.), new HVAC, great roof, etc.

Though it is not a great neighborhood currently, it is right down the street from a MAJOR Atlanta infrastructure project that has already begun and will finish in 5-10 years. I have wanted to buy something in this neighborhood for a long time.

I have networked with someone who is recommending setting this up as a rooming house, no leases but billed monthly (not weekly).

Here's how it pencils out:

Purchase price:
$100,000 // +$5,000 for conventional mortgage closing
(An identical duplex on the same street recently sold for $123,000)

Initial renovations:
$5,000

Rent:
$500 x 8 = $4,000/month

Income - Coin Laundry:
$200/month

Total income:
$4,200

Monthly Expense Breakdown:
Debt service: $800 (P/I/T/I)
Management: $400
Repairs: $400
Capex savings: $400
Gas: $150
Electric: $150
Water: $150
Internet/Cable: $150
Vacancy: $750 (planning on 1-2 rooms empty a month)

Total monthly expense:
TOTAL: $3,350

Cash flow:
TOTAL: $8,500

QUESTIONS:

1) Do these numbers seem conservative? Inflated? Am I missing anything?

2) Am I crazy for thinking of giving this a try?

3) This property could also be set up as a Section 8 duplex for $1,000 a side. Those numbers pencil out too, so there is an exit strategy if the rooming house is too much aggravation. I'm intrigued by the rooming house setup, but do you think it might be better to just go for a conventional rental setup?

Thank you for your assistance in sorting this through!

Okay, so, you see where this is going...

Big storm today, and one of my tree branches (big!) came down into my neighbor's driveway. No damage (thank goodness!) other than a downed power line.

I am a landlord, but in this case, this is my primary residence, and the house next door is owned by a landlord. I am glad to help with whatever is my responsibility, but I just want to know legally who is on the hook for what.

Questions:

1) Who is responsible for the removal of the debris?

2) Who is responsible for the downed power line?

3) My landlord neighbor now wants me to take down 4-5 trees, so that this doesn't happen again. The trees are healthy, but I understand his nervousness. What is reasonable to say to this request?

Thank you for the help!

@Kevin Polite -- Bingo! You and I are talking the same neighborhood.

@Matt Weiss -- I know the neighborhood very, very well. I know every street very well, I go down at least every other week to drive, and I have been there all hours of the day. I have a rental one neighborhood over.

Thanks everyone!

Thanks everyone!

@Matt Lefebvre @Kevin Harrison @David Dachtera

So, here's the real question: Is there equity in this home?

At a price of $65K, it is by far the cheapest property in the neighborhood (by the square feet). Empty lots are selling for $55-60K, And it looks to these untrained eyes that comparable houses are selling for $90 - $110.

So why are they selling for $65K? And if there is indeed equity in the house, why is this one hanging around? (It went contingent in a day, then it came back on the MLS, and now it has been out there for about a week.)

Thanks for any insight you have

Hello BP!

I am interested in purchasing a single family rental. (I already have five rental units, so I'm not completely new -- but yes, pretty new!)

The house I want to buy is a 3/2 on-market and I can get it for $65K. It currently rents for $850, which is under market for this neighborhood (market is probably $950).

With taxes, insurance, debt service, management expenses, 10% for maintenance, 10% for capital expenditures, and 10% figured in for vacancy, I'm calculating a current cash flow of $90 / month based on the $850 rent.

I know that's not stellar, but here's why I like it:

The neighborhood is one of those neighborhoods I really believe in -- it is minutes to downtown, and central to major redevelopment and transit projects in my city (Atlanta), and it may just be one of these hot neighborhoods that becomes one of the great places to live.

Right now, this is the cheapest on-market property in the neighborhood -- the closest comps are in the 85-95K range, and several flips (not comps, but nicer houses on the same block) have sold in the $200K range in the past month. Just yesterday, a lot came on the MLS for $58K one block over.

My questions:

1) I know this isn't an amazing return, but does it seem solid enough to go for it? Keep in mind this is mostly an appreciation play, with a little bit of cash flow each month.

2) If this is solid, why aren't several people jumping all over it? It's on the MLS and easy to find.

Thanks for your insight and assistance!

Hello BP!

Here's a quick post just to say that I'm feeling discouraged. This is probably very common, which is why I want to hear from you! Let me know if/when you feel discouraged, how do you push through?

This past year, after a ton of research and BP podcast listening, I bought a triplex, and two single family homes. Everything has been going pretty well, but a few realities have started to set it:

1) The calculators aren't always right: The numbers on my places looked great -- should have a net cash flow of about $1800 on all five units. (Used the BP calculators, and I'm pretty sure I didn't leave anything out...)  Well, I don't. I've just about broken even on these properties. I haven't lost any money, but I haven't made any either. Obviously, I'm doing something wrong, but I can't tell where I went wrong.

2) Finding reliable contractors has been ridiculous: I just got through with a rehab on the latest property, and the contractor screwed EVERYTHING up. I had to come back behind him and do all the work myself. Yikes. And now that a tenant is in there, we realized he totally screwed up the wiring. Tenant is without power, and we're scrambling to rework the mistakes.

3) Vacancies are expensive: On one of my units, I had the tenant vacate two months ago. I decided to fix up the place -- new carpet, new kitchen, new paint, and try to raise the rent. Now that I've sunk around $3500 into the unit, I can't seem to attract a tenant at the new rental rate (only $50 more than the old rate, which hasn't been raised in 10 years).

I realize there are so many variables, and that investing is for the long haul. I guess I got started with a lot of excitement, and now I am left wondering how anyone turns a profit in this business.

Rant over. Thanks for listening. And I'd love any advice you want to send my way!

The project is 100% paid at this point -- a mistake I will never make again.

A general question: have you found contractors more responsive to 'carrots' or 'sticks'? In other words, what do you think would work better: bonuses for on-time completion of milestones, or penalties for missing deadlines?

Thanks again!

Greetings BP!

I have hired a contractor to help me with a rehab in downtown Atlanta. We are fixing the house to solid rental condition, and then I am going to hold the property.

The work is 95% finished, and the punch list is dragging on and on and on. At this point, I think my contractor is working other jobs, and finishing out my job is not getting any priority (probably since mine isn't making him any extra money at this point).

Does anyone have any tips for me about how to get this contractor motivated to wrap it up? Or better yet (for the future), how to keep a contractor motivated the whole way through the project?

Thank you for your insight!