All Forum Posts by: Aaron Christensen

I would be extremely nervous about buying on such thin margins.  If you can't cash flow properly, it is not the right deal.  Appreciation is great, but it won't pay the bills each month.  If I were you, I would find a mentor to help you research and find a good deal.  Your agent is doing you no favors there either.  They are clearly more interested in their commission than they are in your financial well being.  You might want to keep searching for a better deal

If I were you, I would leverage the equity in your current properties to buy  more and grow your portfolio.  With an increased portfolio you could afford a full time property manager to handle your rentals.

I don't turn over tenants often.  They are all on a month to month agreement, so they are free to go with proper notice.  Typically, in a house like this, we will have a room turn over every 5 to 6 months.   As far as zoning goes, I have found that each municipality is different.  Some have not set up any restrictions, and others have some restrictions.  Many of them have already set out zoning parameters, like my city, and it is very easy to comply.  I have found that as long as I am a responsible and responsive landlord, the neighborhood and municipality have no problems.   I choose to invest in the areas where it is permissible.  I have several local organizations that specialize in helping people find safe, clean, affordable housing that routinely contact me for openings and require inspections in order to bring prospective tenants over.  There has never been a problem in this arena.  

This house I started renting the rooms out in February.  I have other houses that I have been doing it much longer.  This is just my last deal.  My interest rate is fixed for 30 years on a conventional loan.  There is enough parking for everyone but honestly, in this house, there have only been a max of 4 people with cars at a time.  The house is close to bus lines so I do have several tenants who use public transit so they don't take up parking space.  All of the tenants are on different schedules so the bathroom situation is not a problem.  Some work swing shift, some day shift, some are retired etc etc.  It has never been a problem.  I only allow one person per room.  More than that would be a bit crazy I think.  I don't allow overnight guests in the house as well, so that cuts down on a lot of potential house drama.  My goal is to have a simple set up with no phone calls coming my way.  There are not any other issues that we haven't thought of.

Hello BP

I wanted to share a success story in finding a great deal in an inflated market.  I live in a state where there are tons of investors from around the country, and around the world frankly.  A lot of money comes into this area to buy up real estate.  It is very competitive and difficult in my opinion to find a property that will cash flow month after month since the prices have been driven up so much in the last year.  Many people I meet are happy to get a 6% return on a rental property and are banking on the house prices continuing to rise for their investment model.

Instead of trying to rent out the house as a whole, my plan was that I would rent out the rooms in the house.  To break it down for you, I found a large house, of 2000 square feet, 3 bed 2 bath home in a decent (but not stellar neighborhood).  The neighborhood is safe and fine, and I would consider it very safe, but it is definitely not high end.

The house actually had 4 bedrooms, even though it was listed as a 3 bedroom house.  There was a lot of extra room in this house, so with the basement, I was able to add 2 additional good sized bedrooms for the cost of $15000 approximately.  The $15,000 invested also paid for some needed touch ups to the house with flooring and paint.  Each room rents out for $600/month with one room renting out for $650 because it is larger than the rest.

Here are the numbers

Purchase Price - $195,000

Down payment (20%) - $39,000

Rehab costs - $15,000

Now the break down on the monthly cash flow

Gross Rents monthly- $3650

Monthly payment (principle, interest, taxes) - $904

Monthly expenses I incur (garbage, utilities, etc etc) - $650

Profit per month - $2096

Projected Profit per year - $25,152

Annual Rate of Return on invested money - 47% approximately

I have been very happy with it obviously.  I checked with the municipality because it classifies as a legal non conforming use of the property.  I purchased the property in February, and it took about 1 week to fill all the rooms.  I set up a clear set of house rules and guidelines and have screened all the tenants sufficiently, so there have been no issues with tenants so far.  I have found that there is a decent population of people that are looking for clean, safe, affordable housing on a month to month agreement.

Anyways, if any of you are like me, it is difficult to grind out a deal in a great market.  I found that if I am looking at these properties with a different lens, then the opportunities seem to come available.  If I were to rent this house out to an individual family, I would have been hard pressed to get a 9% return.   I love to buy, and don't find myself selling properties very often, so I am looking for properties for the long term investment.  The monthly cash flow is my goal in this real estate game.

Thanks for taking the time to read

You probably do have a lot more problems to come with that property.  My guess is that you could find a different large house that is in better condition and you could turn that one into a successful room for rent house.  Good luck

I applaud you in your desires in real estate.  You have several good options, but I am with the other people on this one.  Many times we don't realize the income potential in the properties that we already own.  Renting out rooms in your house is a great idea.  I have done it for years and had success with it.  In the mean time, I would always encourage anyone to look for long term rentals that they can get a good double digit return on as an investment strategy.  The question is always, "How do I get money to purchase these deals?"  The answer is a second job, or a really good first job.  Wholesaling, flipping and rehabbing properties is time consuming so it is very much another job.  I personally didn't want to break my employment history bu jumping into real estate full time, when I had a decent job.  I used my income from my job to purchase houses to rent out rooms and that allowed me to get a really good cash flow on my properties that spring boarded into other properties.  Good luck!

Real estate definitely has some timing and market issues attached to it.  I had interest in my early 20s in real estate, but lacked the capital and credit to purchase.  I remember looking at all sorts of success stories about people that had managed to drum up investors and hard money loans to buy, flip, improve, sell and do well.  I was never comfortable using other people's money when I didn't even know what I was doing yet.

I personally waited until I had the money to buy my first property on my own.  It took me 10 years of studying, shopping, and trying to find a good strategy.  Once I found a good strategy for me, and I had good employment history, and some money for a down payment, it started progressing fairly quickly.  Finally, in my early 30s I bought my first property, and did well with it.  I definitely would not have done as well with it, if I owed a bunch of people money, or hadn't taken the time to research my steps.  

I do this extensively.  I would be more than happy to send you the contracts that use.  I also use an online screening website that seems to do well for me.  I can send that over to you as well

I rent out the rooms quite extensively in my area and have had success doing it.  There are lots of decent online screening websites.  I would be more than happy to send them to you as well as the contract that I use.