All Forum Posts by: Scott P.

I agree with Nathan Gesner but I give a discount.

If I was in this situation, knowing only what I know from these posts, I'd rather have the properties in Jasper/Dubois County than Indy/Marion County even though the Indy market has more jobs (i think) and can support higher rent (in some areas).  In my past, 100% of the time I decided to increase rent as a result of a Property Tax increase, I sent a copy of the spring and fall installment invoices and showed my tenants that I was not going to get any of the money.  Since Indiana property taxes are collected in arrears, you already owe for a full year's increase BEFORE you see the increase and can inform your tenants.

If my cash flow position was strong enough to suffer a tenant possibly leaving, I'd pass on the full increase ASAP.  After all, the tenants live there and they get the services those taxes provide, not me. So, they should pay the increase or vote for someone else who would cut property taxes. If my cash flow was not strong enough to weather them moving, I'd eat the tax increase while considering a 1031 or an outright taxable sale, both of which I've done.  Possibly i'd subsidize the tenants and make the increase when they move because the market will eventually increase rent to catch up with the higher property taxes.

After making all those improvements, I would lean towards the long term and try to get as close as possible to break even now while at least slowly increasing rent enough for the tenants to cover the property tax increase.  My concern with switching properties would be that I'd go through another sent of renovation costs.

I've bought and I've sold rentals in southern Indiana with tenants.  I've sold a rental (duplex) in Fort Wayne with tenants on both sides of the duplex.  You don't say if you've been inside the rental to look it over.  If possible, I'd have the current Owner ask the tenant to lock in their rent by signing a year or 6 month lease and see what happens even though that would lock me into below market rent a while longer.

 Here's what I'd do if it was me:

1. Learn as much as possible about the existing tenant from the current Landlord/Owner.  I'm guessing the current Owner manages the property not a PM.  Learn why there is not a lease and how well the tenant and landlord relationship has been over the years. I'd learn the deposit status. I'd then make a tentative decision about how much I'd like to keep the tenant vs how much I'd like to increase the rent.  Keeping a long term tenant might be worth it to me versus cleaning up after a 10 year stay, even if the rent is below market.  I'd also contact the sewer provider (unless it's a septic system) and find out if the sewer bills are current.  You will be responsible to pay them if the tenant doesn't pay and if the current landlord leaves them unpaid.  I'd learn who the utility providers are, whose name the utilities are in, and if they are current IF the utility companies will tell you which they may not.

2. In my opinion, the new Owner news should come from the current landlord first.  That's what I did.  Regardless, I'd write an upbeat letter and U.S. Mail it, informing I'm the new landlord as of some date and including instructions on how to pay the rent and what the status is on any existing deposit.  If it was me, I'd ask them to let me know in the next couple of weeks if there are any problems to be fixed.  I'd give them my contact info and let them know I'll be calling after Closing to "say Hello," (and i'd get their # from the current landlord.)

3.  I'd talk w/them and get a feel for their circumstances if they talk freely but I would not pry.  I'd discuss if I have a spare key for emergency access.  Then, after that, I would know how to verbally give them my thoughts on the amount of the rent.  Assuming I decided to go ahead and raise the rent at that point, I'd let them know and I'd give them some reasons why.  I'd discuss how it would benefit them to lock in the amount with a lease.  Getting them on a lease would be more important to me than the actual amount of rent.  Depending on how that goes I'd follow up with a copy of the lease for them to sign, sent by US Mail or handed over in person.  The US Mail would include emergency contact #(s) and a letter informing of the rent amount and how they've agreed to pay and the due date.  I'd may send a copy of the rent increase letter by certified mail but maybe not, depending on what all i'd learned so far.

I'd always be respectful and positive and stress that the house isn't perfect but my duty is to fix what is broken and their job is to pay on time.  I'd give them 2-3 months notice of the rent increase and definitely a minimum of 30 days.

In my experience, Indiana is landlord friendly which helps landlords keep the property in good repair.  Mainly you're responsible for the sewer bill and to provide heat and hot water, but not things like air conditioning.

If this was winter, I'd be concerned about pipes freezing if the relationship isn't going well, but a 10 year tenant probably won't let that happen.

I don't really know about the downsides of not having a lease.  I suspect as long as you give at least 30 days notice you can raise rent or evict for any reason or no reason at all.

My hope is that the tenant is happy to have saved $ all these years being below market and that the tenant will continue with you at a market rate.  Giving them the 3 choices you noted above should be helpful and keep you on good terms with them.

It's probably time for you to get a CPA to help with taxes and questions like this.

If my wife and I were in this situation, I'd have her keep it as a Sole Prioprietorship.  I'd let the insurance company know I'm making it a rental.  I'd have an umbrella liability policy.  I'd use a Schedule E for my tax return listing this condo property on its own page.

I believe we (in Indiana) are a community property State. 

I mostly agree with the other 2 answers so far. Would you be willing to tell us what the 12-20k was for? That’s a big number for Terre Haute, in my opinion

If I wanted to be on the safe side, I’d do the sewer camera inspection.

I wouldn’t count on getting much from the warranty. I’d think any EXISTING issues would show in the first year. I wouldn’t think the warranty would cover existing electrical or sewage issues or pay to fix an existing broken AC.

I’ve never tried a seal on a roof. I’ve seen them advertised. I’m skeptical that it would work. I’d play it safe and figure I need a new roof, especially if that’s what the inspector says.

I regret you might be in for a lot of work for a 1st rental.

@BrookeLarson, Over 25 years between the two. I do a little of both. The new build looks like a SFR. So no, not really similar to a 2-family dwelling.

I've drawn the new build for an owner-occupant to have a single family home but with the option of having a "tenant"/roommate or family member (perhaps in-laws, or elderly parent/grandparent, or a brother/sister, who wants private, separate living space, etc.) living in their own space with their own separate utilities. This gives the Owner the best of all worlds - SF or STR/LTR - enabling keeping the home affordable for home owner while also providing an affordable place for a friend or family member to live, all while having privacy for both.

The 30% is just the difference between the total of my experienced estimate of what the build would have cost just 3 or 4 years ago plus a factor for the current period of inflation, versus the total of the bids that came in.  It's 30% more than I expected even though I was expecting to pay more than I would've just 3 or 4 years ago.   

A well known, senior Builder in my area quoted this new build from the same prints and for the same lot in the spring of 2021 after buying the lot in the fall of 2020.  I decided not to build at that time.  The bids now total 61.3% more than that Builder quoted. I expected it to cost 30% more than 2021, not 60% more. There are Scope differences between now and then.  I downsized the heating and air system but added a 2nd, separate system.  I upped the electrical service from 200 Amps to 400 Amps to accommodate future car charger(s).  I added rough-in only of a back-up generator.  And also,.... I deleted the Builder.  Builder's save people like me a lot of time and they earn their fees.  However, the largest line item in any new home construction cost for this type of home is the Builder, followed by the framing package and then the foundation system.  Even deleting the Builder left me 30% higher than I expected on this small, custom home.  So it's unaffordable at this time in my case to pay someone to Build i.e. be the General Contractor.  Had I hired that Builder or someone else to build it 4 years ago I'd have save 62% as well as a huge amount of time being the GC.

So, this build isn't just 30% more than that duplex I mentioned.  It's 30% more than I though it would be, even allowing for the recent inflation. So to answer your other question,  the estimated cost for this build 3 times the cost of that duplex build for roughly equal square footage and including the lots and utilities and everything for both.  If I add 10% for the Builder/GC for this new build, it would be 3.25 times the cost of that new build duplex 28 years ago.   (Keep in mind that duplexes have 2 kitchens, 2 HVAC systems, a garage on each side, etc.)

My 2nd duplex was a new build in Indiana.  I just finished gathering pricing for a new build.  It was 30% more than I initially estimated.  I'm reducing the footprint and repricing....

I'm sorry you're having to deal with this...

I suspect Marion County would not allow a septic system in that part of the County. The County Health Department (I think) could use the house address to confirm to you if one is allowed or not.

I've worked with Citizens for potable/drinking water, but not sewer.

Could you help me understand if you're talking about storm water (rain water) or sanitary sewer? Maybe you're talking about storm water which enters the sanitary sewer as result of what used to be done in the old days where storm water and sewage combined into the sewer system? If there was sewage in your basement, you'd smell it. Or maybe you're talking about basement drainage storm water/rain water only and you're saying there is a floor drain in the basement which is backing up?

Is there also a sump with a pump?  If so, where does it pump/discharge to?

Are you able to determine where the water in the basement is coming from?  I'm wondering if it's coming from a floor drain, a sump, or seeping in around the basement walls?

I'll try to watch for a reply.

In general, Yorktown is regarded as one of the best areas of the Muncie area.

I had a duplex in FW long enough for it to be mortgage free.  FW was good for me.  I can tell you who i worked with for HVAC etc. some day if that helps.