All Forum Posts by: Robert Edwards

How long has tenant been there? Do you 100% know there wasn't a prior problem that has just now showing its ugly head?

I would handle this one, so know it got done properly, we factor in maintenance for our numbers for a reason. Educate the tenant, and set a baseline so that future costs if this is an excessive problem that recurs is on them.

Also we pour some lye down every drain at turn overs and annual inspections. All drains get build up, and for us this keeps us from having to deal with problems down the line. $2 every year vs $100.

Don't underestimate the cost of a slightly running toilet.......but your leak comes out to almost half a gallon a minute!

Michael,

I don't know your market to tell if those rents are spot on or not, when your numbers are tight it does matter and these are oddly round. I live in a really strange market that for decades had a significant vacancy factor, I don't see that in your numbers. (Or an eviction factor) now with covid there has bee a huge influx of people and rents have doubled in 18 months. Lots of old landlords sold, and in with the new, who pushed rents further....and places are starting to sit, creating a vacancy factor. New owners are panicking as their asking prices are not realistic, and that's what they based their numbers on. Just because you see a place listed on Craigslist for a high price, doesn't mean they got that price,....how long has that ad been sitting?

I encourage you to not overlook physical deprecation and replacement costs, just because everything is "new". That can work if your only planning on holding a property for a limited time then pass the hot potato onto the next guy, even then your resale will suffer. Under estimating maintenance costs is the biggest source of failure I see for new landlords.

I myself am super aggressive with calculation of physical depreciation of the plant. Example a water heater costs $1200 to replace and has an expected lifetime of 7 years. (84 months) That's $14.29/ month/ water heater....how many water heaters this place have? This gets worse when you also calculate future cost of money...a $1200 water heater today costs more 7 years from now. in todays inflationary climate....very well might cost much more.

A few things: 
Water - are tenants paying that? Where I manage if it's more than one unit usually we pay, so just check on that.
Taxes: if you can, get a past tax bill, or contact your city to find out the taxable value they are paying. If they are paying for a taxable value of 300k, and you are buying at 700k, expect things to go up. Even if you are in a state where sales numbers are not public, they will go up. 
Insurance: same as above. Get an actual quote. The same insurer might not take that property, etc. 

Ages: How old is the roof, heaters, etc, and when do you expect to need to purchase again?

A final thing: These expenses feel oddly even. Like they are guestimates. Snow plow will never equal out to be exactly $50. Some days it snows, others it doesn't. Some months it doesn't snow. So an accurate average monthly for snow plow will never be precisely $50. Maybe $50.13. But never exactly $50. Same with utilities (even budget billing won't be on the dollar). And NEVER maintenance!

So just do your due diligence!

I'll give you my own example:
My wife and I own a duplex. Its in our own names, not an LLC. We live in one side, rent out the other side. Any improvements we do on our side, we cannot write off. Anything we do to the other side, we get to write of 100%. Anything common area (the deck, fence in the front, etc) we can only writ off 50%.

For us, the loan financing was at a much higher rate and didn't make sense through an LLC, so we purchased it personally. Now, for the first 6 or so months, both units were occupied by tenants. We didn't take over one side until then. During those 6 months, we could write off 100% of improvements (we pointed and painted the brick, etc).

So my opinion is if money isn't an issue, and you don't need financing (or the difference in financing options is negligible), definitely rent to yourself, so you can take any improvements as expenses.

And yes, at least in the state of Montana, it is legal to rent to yourself (but I'm not an attorney!) My wife's photo studio rented form another LLC she owned recently as well (sold the building this year). That wasn't an issue at all.

I would report them abandoned, but would NOT tell the past tenant. That gives them the opportunity to move the vehicle, drive it 3 feet forward, across the street, etc, then move them back. When they move the car, it is no longer abandoned. In our county, the city puts a bright yellow notice on the front of the car a few days before removing. 

One way to think about it, is that you are enabling them to be irresponsible. And you aren't helping anybody by enabling them to do things they should not be doing. They have to take responsibility for their actions, that is part of being an adult.

Greg, I agree 100% with what Joe Homs just said. You can usually get a free consultation from most attorneys, with no obligation, so that's a good thing. Bring with you any/all documents that mention the solar. The closing documents, email between you and your realtor, etc. Give them what you have, and the attorney should be able to tell you if you have a winnable case. The top attorneys are picky with their clients, so if they don't think they can win it for you and refer you elsewhere, take that as a sign, but definitely look at other attorneys as well. 

You can also have this attorney write a letter to the realtor(s) asking for negotiation, or else litigation will ensue. Getting a letter from an attorney is something people cannot ignore, and will respond to, vs. an email from a "disgruntled past client" which they likely will ignore or not take seriously. If it does go to court, you can have the attorney add in legal fees to the suit.

I am not an attorney, but work with one often for evictions and other things.

We had a renter that was on hospice care. The corrugated cardboard container his oxygen was delivered in was unknowingly carrying bed bugs into the unit (the oxygen company keeps using the same carriers). We were able to detect the few bed bugs early with Smart Traps, via his hospice care provider who sent in the trap. We were able to call in an exterminator and deal with a very small issue. It would have been horrible for our tenant to have to deal with a bed bug infestation on his final days of life. This was a big win for me and my team.

I agree with many of the above statements - electrical, foundation, and very especially Insurance like someone else mentioned. My wife and I purchased a building about 8 years ago (sold it this year), and the insurance the prior owner had would not take us on. Many insurance company's won't even look at a property more than 100 years old. So always look around for insurance, and get a quote. Our insurance ended up costing 3x more than the previous owner was paying.

In addition, plumbing! We had one pretty bad issue with an original pipe that was cast iron having rotted. It took many trips to figure out the core issue if what was going on. In the end we replaced the pipe. But what other cast iron pipes are hidden in old buildings? 

My wife and I LOVE old buildings, and live in a home now that was built in 1900. We have not had any issues, but then again, we did completely redo the plumbing.