All Forum Posts by: Scott Ficek

In some states the damage deposits are required to be held in security accounts, but in others they are not. By getting new renters, these security deposits could inject some cash into your business.

Chaz-
As a realtor that works with investment property buyers, I see it as my responsibility to validate all the expense numbers. Once we get interested in a property and before we make an offer, we require the seller to give us the following: last 12 months of all landlord paid bills (electric, gas, water, etc), tax statements (although these can be confirmed on the web), and all leases.

We review all these and run our own analysis. Plus as MikeOH says, every area is different. Maybe the owner is renting a 2 bedroom for $1200 per month and in that area your research says it should only be renting for $800. What is going to happen when that $1200 tenant moves out? Your cash flow goes in the toilet.

Lastly, as you check the expenses, see if they are missing any. Is there just one gas or electric meter? Who pays the bill for each meter, etc. Examine the leases to see if it talks about who pays the bills.

If the seller refuses to comply with the request or anything looks shady, trust me, there is possibly a problem!

I never like trying to sell a feature of a house that is not an obvious benefit such as better roof, better appliances, better insulation.

You didn't list the difference in price, but I assume it is enough to make you think about it. If you are selling in the near future, think of your house like a flip. Just put on a respectable and appropriate roof that is professionally installed and save the money. Then replace the cooler also.

Always better to do it sooner than later so you can enjoy it!

You are correct that it can/will take away from the cash flow of the 1st property (that you are refinancing). How much it affects the cash flow depends upon the original cash and how much equity you pull out to buy the next property.

Keep in mind though, that most investors are more concerned with long term capital appreciation than cash flow. By leveraging that small amount of down payment (equity taken out of property #1), you are able to have a much larger amount of money (the value of the house) appreciating for you.

For example (using very simple numbers): if you take $20k out of another property, maybe that costs you $200 per month ($2400 per year) in additional payments. That $20k could buy property #2 for $200k (at 10% down) that will be appreciating between 2-6% (on a typical year and dependent upon your market). Therefore, property #2 will be appreciating at $4k-12k per year.

Hope that helps.

My only concerns about the water/sewer is here in Minnesota, the property owner is always liable for those charges, regardless of who was supposed to pay them. This is different than any other utility such as electric or gas.

In other words, if the tenant doesn't pay the water/sewer bill, those charge are assessed against the property and must be paid by the owner. Consequently, I always keep that bill in my name. I have sent a copy of the bill to the tenant for them to pay, but it always comes to be so I can see the balance was paid the previous month.

Just my $.02.

Is the commission you are speaking about a real estate commission (ie: you are a Realtor)?

Anyway, I am not an accountant, but I can't imagine you can deduct something that you never really had. If you had made an investment and lost it (cash out of pocket), then you typically can write it off, but if you never spent it or made it, I doubt it.

Not sounding smart, but I suppose if you could write it off, what would prevent me from saying that every time I showed a house, I could have sold it and I should write off that commission as lost. (I know I am stretching the question a bit, but hopefully you see where I-and probably some creative people-are going with that!).

Plus how would you prove to the IRS that this deal or another one falling through was not your fault? Seems like a slippery slope.

What does your accountant say?

Even though this is a realtor question, I am hoping this forum can maybe shed some thoughts on this topic.

In the Minneapolis/St. Paul, there are about 5 Realtors that have 90% of all the REO listings. They developed relationships long ago with the asset managers at the banks and simply have new listings faxed to them every day.

I am understand selling REOs are tough because of the upkeep of the property during the listing, but if I could get 1-2 per month, my kids could get that GI Joe action figure they always wanted :roll:

How can I find the REO Asset Managers at the bank and get them to give me shot at listing/selling one of their properties?

Phil-
I do agree with REI. It is much easier to simply rent to a group of students that know each other. Even then, the cities are starting to crack down on the total number of non-related persons that can occupy a property. In Minneapolis for example, in properties that are zoned R2B, only 5 unrelated persons can occupy each dwelling unit.

I rarely see rooms for rent anymore (boarding houses). In fact, most cities are not renewing those types of licenses when they expire or the building changes hands.

I would buy after the tenants are in place for a couple months. If you bought right at the beginning of the school year, I would be concerned about the quality or longevity of the tenants/students. Remember that with students there is a high probability that you will turn your entire building over each year. Most of my properties have multi-year tenants in them, as a comparison.

Lastly, keep in mind that around colleges & universities, property is often sold at a premium price and then it may be in substandard condition. I guess it is the old "location, location, location" principle!

I see you are in Minneapolis. If you want to talk at more length, shoot me a PM and we can grab coffee.

I agree with Beachbum, it is tough to know his motivation. Could be divorce, he needs the money for something else, relocation....you get the picture. In fact, I have seen deperate people sell good properties to get cash because they have some bad ones that are going into foreclosure.

Just get all the numbers and copies of the leases and make sure it truly is a good deal.

Absolutely. We have so many multi-family units here in Minneapolis that are in foreclosure or short sales, it is not funny.

Not sure where you are looking for properties (MLS, signs in yards), but keep in mind that most multi-family buildings (at least here) will not have signs in the yard. A realtor with access to the MLS may help you find more multi-family units.