Who to turn to for experienced advice?

Question

I will be closing on my first investment property in the next coming weeks. It is a 2-family and we will be househacking. We are inheriting the tenants of the 2nd unit.

We also will be leaving our SFH to do this househack, and will be renting that out as well.

I've done moderate reading and educating myself , but im really looking to speak to an experienced investor to help guide me. I feel like I could really use a half hour or so of their time to ask questions and learn what I should be doing or prepping for in this stage. Questions about things like where is best to hold a tenants security deposit, how best to setup accounts to manage these 2 seperate rentals away from my personal accounts, advice on insurance policy for new property. etc.

I do not have a mentor at this time.

How would you suggest is the best way for me to find these answers and learn?

TY

Dan Beaulieu · Answer

@Michele Granata Simple stuff here, try not to overthink it! Here are some (hopefully) helpful tidbits that I wish I knew starting out as a new landlord:

1. Read "Landlording on Autopilot" by Mike Butler

2. Read BT's "The Book On Rental Property Investing" - Dives deeper into security deposit management etc.

3. Set up 2 new bank accounts. one is for holding security deposits (and nothing else) and another one that your rents will go into and mortgage payments get drafted out of. Keep cash reserves in here set aside for repairs. Bare Minimum 5K but 10K would be more comfortable.

4. Check out free property management software. I personally use "Avail" but I do the paid version so that I can amend the standard leases that they write up. Avail will allow tenants to autopay rent, will collect security deposits and send them to your separate account, esign leases, email about late payments and lease renewal reminders.

5. Tenants must make at least 3x rent and have min 600 CR. The single best thing you can do when selecting a potential tenant is drop into their current residence (or zoom call if out of state) and see how they are treating their current residence. If zoom, just asked them to show you around. The right tenant for you will gladly give you a tour, and the wrong one would push back.

implement the practices in those books and you'll be just fine. :)

Joe Minteer · Answer

Congrats on the investing started.  Nothing like drinking from a firehouse when it comes to owning real estate.  Sounds like you're going to be busy for the next few weeks before closing.

For insurance, you can always reach out to the big companies: Liberty Mutual, Allstate, etc for Land Lord insurance.  Just give any of them a call and you can get both places covered.  Best to have this done soon.  As for accounts, it's always best to have your rental income/bills separate from your personal stuff.  Since you'll have 2 places to deal with, an accounting software suite sounds like overkill.  I do one of my rentals with just some Excel and use Zillow Rental Manager to handle with collecting rents and advertising when it's available.  They have a great screening process so you know quite a bit when it comes down to finding decent tenants.

You have a huge amount of help from BP, local REI folks and you've already gone through it with the purchase of your first house, so this isn't your first rodeo.  Once you get into it and work more with getting new properties, this all gets easier.

Best of luck on your investments.

Stefani Mokris · Answer

Hello @Michele Granata!

When we bought our first income property we opened a regular joint checking account at PNC Bank, which was the bank where we opened a HELOC to fund the new property downpayment + closing costs, and also the bank for provided us with a mortgage for the new property. At the time we didn't have a LLC, so we it was a simple bank account on our personal names. This is how we separated our personal money, and our business money.

We kept the security deposit in that account. We knew $2400 was the deposit and we always kept $5000 for repairs and maintenance. So it meant that our account always had $7400 in it. And anything extra would go into our HELOC to get it paid off. Very simple like that. But I am sure things become more complicated once you scale.

We use USAA as our primary bank for personal needs. They also have all of our insurance policies: primary home, income properties, car, and jewelry. By having one insurance provider we are able to get lower rates. So I suggest you to start checking for a insurance policy for your new rental at the same company you already use for your current primary home.

I am not that much more advanced than you in real estate investing, but feel free to contact me anytime with questions. You have my contact information.

By the way... I am super happy for you!!! Congratulations!!!

Malcomb Stapel · Answer

@Michele Granata  your welcome to DM me and we can setup a phone call this week. I can walk you through everything you had listed.

Jonathan Soto · Answer

if you live in the home it will be primary policy with renters coverage. which is normally cheaper than if it was only tenants living in the home. for the security you'll need to deposit either in a money market fund or an interest-bearing bank account.

congrats!!

Bjorn Ahlblad · Answer

@Michele Granata you might turn to your local LL or REI Association. Great for networking and meeting folks. Membership is pretty cheap and they usually offer great support. Hanging our here helps too. Congrats and all the best!

Harold Looney · Answer

Michele Granata - congrats on your House-Hack! I've house-hack in various locations for almost 40 years, include the past 16 years in Brooklyn NY. DM if you want to connect.

Jaron Walling · Answer

You'll find expert advice in here. What are the NUMBERS for your SFH primary as a rental? This is really important. You can't assume it makes sense as rental property. You need to know it makes sense. Sometimes it better to sell and take the money tax free. You could reinvest $$$ into another deal or use that to remodel/repair the 2-family.

Maybe you need money for reserves? You're buying an un-screened tenant. That comes with surprises. Get prepared for it.

We hold our rental income and security deposits in Capital One 360 savings account. It's easy to setup. We also use our Capital One card for all rental expenses. This keeps things separate from our personal checking accounts. None of our properties are held under an LLC (yet). It's not necessary when you're starting out.

Eliott Elias · Answer

You are looking for a mentor because you are entering the unknown. This is normal. Make relationships in real estate to where any question is one phone call away from being answered.

Who to turn to for experienced advice?

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