All Forum Posts by: Sen A.

@Shane C. Downs

I almost had a seizure trying to read this title

@Adam Scheetz

Ask the turnkey provider for a list of properties they've worked on. You should be able to find the owners of these properties through the county tax assessors website or a google search. Call them and see how the deals are working out. Get into the quantitative and qualitative aspects of their purchase and get deep into the details.

Then ask the turnkey provider for references and call these investors.

Get recent comps for rentals and make sure that $1250/month is legit. Do your own research as well through zillow, CL, etc. 

Your closing costs seem low and the interest rate seems high. You should be getting sub 5% on a conventional mortgage right now. 

Otherwise, good luck on your first OOS purchase!

If comps in the area support a $60k reduction of the list price then go for it. Most likely, your offer will be rejected unless the property needs extensive rehab. Your realtor may also be hesitant to put in a low ball offer and may not view you as a "serious" client. 

As an exercise, it's fine to play around with the numbers to get the desired cash on cash return, but you should know when you've deviated too far from the median price.

I suggest looking at the sold listings on Zillow, Redfin, etc. to familiarize yourself with recent comps in the neighborhood.

In today's market, if you find anything that cash flows $400+ per door after PITI/maintenance/capex/PM/utilities, then you've bought yourself a D class property.

@Taylor Atkinson

You need to start with looking carefully at the current lease agreement. Does it say that WIFI is provided as an amenity by owner? If it says nothing, cancel the service completely and tell your tenants they need to provide WIFI for themselves. This isn’t an Airbnb or hotel. 

You should be ecstatic that you’re inheriting month-to-month leases because you’ll immediately be able to raise rent 2.5% and update the lease agreements on your own terms.

There doesn’t seem to be much value add in this deal. I’d be a hawk and make sure that your tenants are not breaking their end of the agreement, i.e. subleasing illegally, own pets that are not allowed, have occupants that are not on the lease, etc. 

@Alexandra Chaploutskiy

It would be helpful for those of us who live in north jersey if you provided the contractor’s real name as opposed to using an alias.

If your rental estimates are accurate then you have conservatively given up $30k+ over the last six years to a late paying, inherited tenant that you have not personally vetted. Give him a 60 day notice with a lease at market rate and increase your late payment fee. Whatever trouble you may encounter is worth the $500 in cash flow you are losing each month.

@Shanese Francis Ask the current owner or listing agent and they will be able to tell you which of the utilities are covered by owner. In a walk through, you can verify that the utilities are split and can visually inspect the condition they are in. Trash/recycling is typically the responsibility of the owner and will be itemized as a separate fee on your property tax statements. 

@Larry Lee I'm completely envious of your taxes. You pay less in a year than we pay a month in north jersey.

Your updated numbers look reasonable, but make sure you are not responsible for any shared utilities like water/sewage and trash. 

This is clearly a manufactured home and combine that with it being split into 1-br units, I don't see much value-add. The tenant quality and the rent may never change. Just curious, in your area couldn't you find a single family for 100k that cash flows similarly? Wouldn't you rather deal with one tenant instead of three?

@Jackie Householder

Hi Jackie, good luck on your new venture. On a 2 or 3 year lease, you are committed to an unknown tenant and to the rent price. By doing a standard 1 year lease (or 16 months because of feb. start date) you give yourself more flexibility. You can then move to a longer term lease if she pays on time and is generally a good tenant, stick with a year lease, or go month-to-month. You can also raise the rent and even find a new tenant. 

The lease agreement should be ironclad and specific to your state. Be as thorough as possible and supplement it with any relevant addenda such as your pet policy, room-by-room house condition, rental insurance waiver.  A lawyer can draft this up for you or you can go online. We've used ezlandlordforms.com

In calculating expenses vs rental income, we break it down monthly and include maintenance and cap-ex (we use 10%), vacancy (8%), property management (10%), utilities and PITI. This allows you to estimate how much cash flow you'll make while taking into account future big ticket items such as your roof. You can use the BP cash flow calculator or build your own spreadsheet.

It might be a good idea to meet with an investor-friendly CPA to answer some of your tax questions. It's really important to track and keep records of all your expenses. Not just of contractors, but gas receipts, food receipts, etc.

We are currently using Cozy.co to do background/credit checks, collect rent and record expenses. It's amazing and free.