All Forum Posts by: Shera Gregory

As with most things ... "it depends". Are you looking for immediate cash flow? Or are you OK with just covering costs for now and looking for more appreciation or to have a free-and-clear home at some point in the future (when you can really rake in the cash flow)? If you are looking for appreciation is that near term (3-5 years) or long-term? What are the average rents for each? In most markets a $400,000 house would have to bring in a pretty high monthly rent to cover not only the mortgage , taxes and insurance but also set-asides for future capital expenditures and annual repairs. Are you planning to manage the property yourself or use a property manager? If you are thinking of going the property manager route then check with a couple of local property managers to find out what is working well for their clients. I am personally investing in lower end homes because I can't reach my cash flow targets with the higher end homes. But that's just me.

Hi Jeff -- You may need to add more detail to get responses to your questions. What part of the country is this? Is your question about LVP vs Tile for the entire home or just the kitchen/bath areas? It's not common to have tile throughout the house unless it's in an area near water, sand, etc which is why I asked about location. Do you have a property already or still looking? There are many other aspects to consider for an airbnb rental vs a "normal" rental. Without knowing much about your property or location I'd say a decent thick LVP with foam backing is a reasonable alternative to tile but the substrate needs to be very flat for either of those so preparation is key to a good result. The one sold by Sam's Club is decent. Floor and Decor has good options too. Kitchen cabinets - a clean shaker style is pretty timeless and not very expensive. Base molding serves a purpose especially if you are having a property cleaned frequently. You'll have less damage to the walls from the vacuum cleaner. Toilets all flush down the same size pipe so my plumber says it's not worth the extra money. However, sturdy is important.

Hi Sheldon -- Congratulations on buying your first primary home and for having the foresight to start planning for it being a rental in the future. Are you planning on having work done prior to moving in yourself? If the main goal is to make improvements in order to get higher rent in the future then that really doesn't have to be done right away. You may find other things that you would want to upgrade while you are living there. If you are planning to have a property manager handle your rental then you might consider having a prospective property manager take a look to get their opinion on what would be most beneficial to the future rental.

You mentioned forced appreciation. Is that necessary for your immediate financing options or just something you want to do at some point? In that case it's a balance between doing work now that you will be able to enjoy while you live there vs having it all be new later on.

I can't give any input on the costs, etc not knowing your local market. If you are just looking for people to do the labor and you will provide materials (i.e. buying the cabinets, vanity, etc) then a decent handyman with some plumbing skills should be able to manage that. Best of luck!

According to the Fair Housing Act: FAMILIAL STATUS AS A PROTECTED CLASS Federal and state laws forbid discrimination in housing transactions because of "familial status." ... "Familial status" means having a child under age 18 in the household, whether living with a parent, a legal custodian, or their designee.

I'm not sure if you have to abide by the FHA (it depends on several factors including the number of rentals you have). But in general I would be wary of ruling out a potential renter due to something related to the presence of children in the home. I understand you are talking about the income requirement but just be aware that this can cross over into the Fair Housing Act arena.

I agree with what's been said already. I have found that how people act at the beginning is a good indicator of how things will continue. If you feel that you are now working on their terms that's a bad start. I had someone who wanted to move in right away which I thought was great but then I wound up having to track them down for all the details necessary to wrap up the lease. And that was how things went all the way through the eviction.

Is your estimate of a $50k loss based on the current market and current condition of the house? These things can change month to month so if you haven't had a realtor look at it yet I would do that to get an up-to-date idea of the potential sales price. Selling on the MLS is likely to get you the most money even if it has to be just to cash buyers due to the condition.

Hi Cheri -- I remember many years ago hearing the advice "to really understand real estate investing you have to understand financing". And my thought was "ugh ... I don't want to have to think about that". But, it's true. So the good news is that you are seeing this now for yourself early in your investing career. Many new investors ask about whether or not they should buy in an LLC with a focus on liability but they never stop to consider what that means for your financing options. I'd suggest calling two or three small local banks (i.e. the banks you've never heard of) and talk with them. They are likely to be "portfolio" lenders. When I first heard that term I thought it meant they loan on rental portfolios but actually it means they keep their loans in their own loan portfolio rather than selling off the loans. Since they don't sell the loans they can be more flexible on their requirements. Best of luck!!

I've also heard of putting together a small basket of items like toilet paper, soap, take-out/delivery menus from local restaurants, etc .. things to get you through the first few hours of moving without having to unpack all your stuff.

Hi @Khari Lewis -- first off, good job on knowing that you need reserves! So many people just dive in without a plan for how to cover costs that can (AND WILL) occur. The money for maintenance and capital expenses can come from several sources such as 1) cash reserves that literally exist in an account somewhere; 2) "good" money you have access to such as a home equity line of credit; 3) "bad" money you have access to such as a cash advance on a credit card; 4) funds you are building up each month by setting aside (again literally) money into a rental savings account or your rental checking account; 5) payouts from a home warranty for specific items covered by the home warranty.

The amount that I set aside each month can vary depending on the amount of rehab that I have done to a property before renting it out. Even with an extensive rehab I still set aside at least $150 per month for maintenace and capital expenditures. If I didn't get to do much rehab then that number can go up to $200 or higher. But I do have funds from items 1 and 2 listed above. If you were trying to build reserves faster in order to drop the home warranty or reduce the likelihood of having to use a credit card for emergencies then you might be stashing away every bit of cash flow for close to a year. 

The target amount that you want to have in reserves may be some number of months of your set-aside amount. For me, a number like $5,000 is good because even most big ticket items can be covered with $5,000.

Best of luck to you in your real estate journey!!

Another thing to include in your screening process is to get a copy of their drivers license and make sure that this is the same person who is applying to rent. If you aren't of the criminal mindset it's easy to not even consider things like someone pretending to be someone else to look good for the credit and background checks.