All Forum Posts by: Sam W.

Sean Price

Here is what I use in Ohio:

NO SMOKING POLICY. Tenant, or Tenant’s family or guests shall not smoke within premises. This includes smoking cigarettes, cigars, pipes or any other smoking device. This policy is in effect desire to mitigate (i) the irritation and known health effects of secondhand smoke; (ii) the increased maintenance, cleaning, and redecorating costs from smoking; and (iii) the increased risk of fire from smoking. Tenant acknowledges that Landlord/Agent’s adoption of a no smoking policy does not make the Landlord/Agent the guarantor of the Tenant’s health or of the smoke-free condition of the premises.

Lyall Storandt

Is the $5000 an earnest money deposit or "down payment"?

Thanks

Sam

Hi Britta W. , welcome to BP!

I guess the answer to your question depends a lot on what you mean by "investing in properties". Flip? Buy and hold (rent)? Wholesale? Commercial? Residential?

I only know my area (NE Ohio), but from reading the many excellent posts on BP, it is obvious some areas are well-suited to specific strategies while others are not.

Rob Padilla

Welcome to BP! I really enjoyed your post. If it means anything, I'm pulling for you. I don't invest in your area, but I can lend moral support.

Good luck with the first step.

Sam

In my mind, zoning is and always should be local. The communities have a far better idea of what is good for them than the Federal government does. Some communities do mandate lower densities, while others do not. Certainly utilities and traffic capacity play a part as well.

Also, most areas on septic systems also have minimum lot sizes to allow adequate leaching/percolation for the system.

John Fowler

I'd go the gas wall unit option BUT would ensure it was a vented model. A non-vented model introduces moisture into the air during operation (byproduct of burning natural gas = CO2 and water).

Introducing this moisture into a semi below-ground space (that may already be damper than the rest of the house) could give you mold problems. A vented heater will not cause this issue.

Good luck.

Sam

Roy N.

In comparing expenses between MFHs and SFHs, you're assuming that the alternative to buying 1 x four-unit is buying 4x SFHs....I don't think this is a valid assumption. I would offer that the price of a four-unit would probably only get you 2 - 2.5 SFHs in the same neighborhood....the price of a duplex would buy about 1.25 SFHs, etc.

My point is, when comparing expenses in determining whether MFH or SFHs cash flow the best, I don't believe you can say that a 4-unit only has 1 roof (1 driveway, 1 set of walls, etc) while the SFH alternative has 4 of each. In actuality, I only think you'll be able to buy 2 - 2.5 SFHs...and the larger MFH roof, walls, etc. will bump the expense of replacing it beyond a normal SFH replacement.

I said in my earlier post that I think expense difference between a MFH and the SFH alternative is a wash. In my opinion, what makes MFHs more attractive over SFHs is the fractional rent/unit vs. price/unit.

For example, in my area you can buy a 4-unit (2br/1ba each) for about $140K ($35K/unit). You can rent the units for about $575/unit - or a rent/price ratio of about 1.6%

That same $140K will get you 2 comparable SFHs ($65K/unit). You can rent them for about $675/unit - or about 1.2%. Granted, you'll have about $10K left over in this example.

So...long post only say that I agree with everyone - MFHs are a much better cash-flow option than SFHs but, in my opinion, it is not because of a reduced expense burden. At least in my area, the advantage comes because of a favorable rent/price ratio.

Now, of course none of this discussion factors in appreciation over the long term...so for total-return investors SFHs might have an advantage.

Sam

.......but 4 kitchens, 4 stoves, and 4x+ the turnover. Expenses can be a wash between them over the long term.

That said, I'm a believer in mult-family as well...but not because of a maintence $ / income $ relationship. In my mind, given the wash in expenses (my opinion), the benefit is the purchase $ / income $ relationship. In my area, a $180K SFH will bring in about $1500/month while, without trying too hard, I can find a $180K MFH that will gross $2800.

Kyle Matthews

My experience is that the 50% rule has held true for me across a range of properties and property types. I own condos, SFHs and MFHs and, over the long run, I average paying out about 50% of income to expenses. That said, I have not spent above $200K for a property so can't personally comment on expenses there.

Sometimes we might think that the expenses for a MFH are not proportionally equal to SFHs (i.e., a three unit does not have 3x the expenses of a SFH - a new roof is not 3x as expensive; insurance is not triple a SFH rate, etc), but we forget that USUALLY, income for a 3-unit is not equal to 3x SFHs either. And you have the added maintenance expense of 3x water heaters, 3x furnaces, 3x kitchens, etc...and your tenant turnover will generally higher in a MFH.

At any rate, for me the 50% rule is a quick rule-of-thumb test to arrive at pre-mortgage (and utilities) cash flow. Could it be lower? Sure, but in my experience not much lower over the long term. As a cash-flow investor there is a danger for me in assuming away expenses and falling victim to the "this particular property is different" trap.

Sam

Kyle Matthews

In my mind the cash flow is too thin. I'm a believer in the 50% rule - over the long term (several years) an average of 50% of gross income will go to expenses (less PI and utilities). In my personal experience that has played out pretty accurately.

If I ran the numbers, net annual income before PI and utilities would work out to about $22.5K. Subtract out PI and you are at $4430/year or $369/month.....before paying for heat.

I absolutely agree with Steve Babiak regarding heat. I can't imagine that heat averages $100/month for a 3-unit in New Jersey....especially with a total of 8 bedrooms. (I'd call the gas company to get historical data).

Just not enough spread for me.