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All Forum Posts by: Michael Totman

Michael Totman has started 5 posts and replied 129 times.

You would also make your lease mutual and exclusive, meaning they all owe rent together and each owes the entire rent individually in case they can't agree on how they split amongst themselves.  In my experience once one of these roommates decides to leave for any reason it starts to fall apart. You may get one or two more months out of it, or they may find a new roommate to take over, but that's usually the beginning of the end for college age kids.

This sounds like 6 college kids getting ready to destroy your condo and piss off your neighbors.  Assuming there are at least 2 young couples here, what happens when one couple breaks up and decides to leave, can you force the 17 year olds to pick up the slack in rent? I think I'd decide that if the minors are not the children of the adults, and the minors can't sign a contract, then the minors can't live there.  All 6 drive, but only 4 cars? Are you sure?  I rented to college age siblings before, it was not entirely pleasant. Be careful with your screening. 

Post: Small multi maintenance

Michael TotmanPosted
  • Real Estate Agent
  • Berlin, MA
  • Posts 130
  • Votes 95

Landlords, how are you handling your lawn care and other landscaping on small multis, 2 - 3 units? Every year I battle internally as to whether or not to continue doing it myself or require tenants to do it. Hiring a lawn service is not an option I want to consider.  They are small yards, takes about  3 - 4 hours a week, and so far I do not mind the task as I get to inspect the property regularly. 

I don't believe there are laws governing lawn mowing as there are with winter snow/ice control but I want my properties looking taken care of so as not to offend the neighbors and town officials. I don't need perfectly manicured lawns, just nothing overgrown. 

If you require tenants to do this, how do you control who does what and when without one tenant claiming it's not fair they do more than the other? The entire yard is considered the common area, no single tenant has exclusive use to a particular area.  

I do not want to offer lower rent or other compensation in exchange for property maintenance.  Its either the tenants responsibility or mine. 

Thanks for your help.

Post: Can't collect rent on time

Michael TotmanPosted
  • Real Estate Agent
  • Berlin, MA
  • Posts 130
  • Votes 95

No written lease? Get a written lease. Rent is paid when the lease says it's paid, or when allowed by law. Sounds like you're out of luck, but if he pays on the first then why worry too much? This may be a good time to remind everyone that there is a new owner, new rules, and a new WRITTEN lease regardless of a month to month or annual term. 

Post: Upfront repair costs canceling out cashflow for X years

Michael TotmanPosted
  • Real Estate Agent
  • Berlin, MA
  • Posts 130
  • Votes 95

@Brendan L., try thinking differently.  I assume the numbers work out here either way, and your choice is to either repair all at once now, or piece by piece over the next few years. It doesn't matter, if the numbers work. What matters is how many calls do you want to get from tenants about another leak? How late do you want to stay up at night wondering if those structural issues will survive the next nor'easter? As far as a repayment period I like 3 - 5 years myself. If I can invest $xx.xx and it increases rents by $yy.yy and that means the difference covers my investment in 5 years on something that should last at least 20, then giddy up.  If it doesn't increase rents then does it make the place easier to rent thus having fewer down months? That's worth it too. Otherwise, depend on your relationships and replace as you go. Faced with a choice of a $10k hvac job today my contractor, who we've built a good relationship with, tells me "don't worry, if it goes I can get it replaced in a few days so ride it til it dies...."

Post: BASICS: HOW TO KNOW IF THE DEAL MAKES SENSE

Michael TotmanPosted
  • Real Estate Agent
  • Berlin, MA
  • Posts 130
  • Votes 95
Originally posted by @Ken Rodriguez:

Thanks Gordon and Michael,

Michael can you tell me how you get 17% return. with $7000 total investment and $100/cashflow/monthly.

 To answer this, i assume your $100/month cash flow is your profit. 100×12 months is 1,200. 1,200 / 7,000 is a return of 17%. This is simply cash returns, it doesnt account for taxes or appreciation. When investing I compare my vehicle options, so if I put 7,000 into a mutual fund I aim for a particular return for the risk. If I put 7,000 into a house I expect a different return for the risk and effort.

Are you familiar with how to calculate the various numbers you need to compare and analyze deals?

Post: BASICS: HOW TO KNOW IF THE DEAL MAKES SENSE

Michael TotmanPosted
  • Real Estate Agent
  • Berlin, MA
  • Posts 130
  • Votes 95

Contact an agent, they can get you good rental data and have a feel for the current market based on their daily activity.  Your second question is the holy grail every new investor wants answered, including myself. The answer is it depends on your personal situation and risk tolerance as with any investment. If you're happy doing all this work for 9%, great. Most aren't. If you need a number use 12 - 15% minimum return on your investment. If you can't get that just put your money in the market or some other business and save yourself the headaches.  What Gordon is saying is along the lines that you put $7,000 in to cash flow $100/month well that's 17%; pretty good and you'll recoup it in 6 years. But if it cost you $20,000 to get in for that same $100 well, that's crap as it will be 17 years to see that cash back.  Personally I like a 5 year payback. *This does not account for inflation/appreciation and tax advantages. 

Post: Can you check my work? First rental analysis.

Michael TotmanPosted
  • Real Estate Agent
  • Berlin, MA
  • Posts 130
  • Votes 95

Your vacancy seems a bit low, that won't even cover 1 empty apartment for 1 month.  Maybe I looked too quick but I didn't see a budget for insurance. 

Post: Am I Overestimating Expenses in my Analysis?

Michael TotmanPosted
  • Real Estate Agent
  • Berlin, MA
  • Posts 130
  • Votes 95

10% for all of that might be too low. 10% for management alone might be reasonable. Are these MLS deals? Those seem pretty thin, especially in the northeast right now.

Keep at it, the good deals that are easy to find are already under contract by the time you see them. 

Post: First time financing a commerical for newbie

Michael TotmanPosted
  • Real Estate Agent
  • Berlin, MA
  • Posts 130
  • Votes 95

Do you have the 5+ multi under contract or at least in negotiations? If so then forget to books, go talk to a lender. Today.  If the deal is good they'll work with you.

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