All Forum Posts by: Allen Clark

In Seattle Washington.

This 100 year old house is 2,600 square feet and the seller wants $750k which is priced high for the market. I went into the house yesterday and there will be lots of deferred maintenance as the owners have taken a very hands off approach to landlording. They're getting $2,750 a month in rent right now which is much lower than market. With $20k for a light rehab I could get $4k/month. This is still not enough for the deal to work. I know that. 

These sellers have priced it too high and I think it will sit and not sell. I think that with patience I may be able to get them to $650k. Then when I take out my pencil it gets more interesting. The area is zoned such that I could finish the basement and make it a legal duplex. I did this in a house very close by for $200k and the numbers worked out well. 

So, if I can get it for $650k put in $200k and then get rent of $5,000 / month for the top unit and $2,800 / month for the bottom does this deal work? 

Having a duplex in this area means I know the area rents well and my rent expectations are in line. I'm getting $4,500 for a 1,500 sq ft 3br / 1bath upper unit around the corner. 

Thoughts?

Well, of course, talk to an account or tax attorney to get a useful answer. If she is an owner then it seems to me that it would be owner occupied. Now if she is on title then does she have to be on the mortgage as well? Would she qualify to be on the mortgage? Also, when you get income how do you split that up from a tax perspective? When you sell would only her part of the capital gain be tax free but yours would not due to you not having lived there. 

Personally, this sounds like increased complexity for not much benefit. 

I joined RHAWA when I got my rentals on the advice of a friend. I use their lease forms and that has been very handy. I have not yet gone to any events put on by them. I will try very hard to attend the meetups that Troy does in Bellevue, they sound great. 

I rent month to month in the city so I am actually very happy with medium term stays. I have two properties. Tenant #1 moved into the house in January and was supposed to stay 5 months. They're now probably leaving at the end of the year for a 12 month stay. Tenant #2 is a group of students that are in town for six months so that seems like a very defined period. 

I prefer 3-9 months for my places but I let the tenants set the lease length terms. For that flexibility I can charge a premium. 

When I got divorced we liquidated most of our assets in order to split them up easily. Also, custody of the kids was split 50/50 so I was sitting there with a bunch of cash and some time on my hands that I was not accustomed to. A colleague at work does REI on the side and she was pushing me hard to buy something. I checked out Redfin.com every morning as part of my wake up routine. In December of that year I put an offer on the 1922 brick house that was an illegal duplex. The deal fell through because the bank I was working with would not finance an illegal duplex. Later that month I found an 8 year old half duplex that fit my criteria and I put an offer on that and closed the deal.

Funny thing was that the 1922 brick house came back to me. The people that tried to buy it after me walked away from the deal. The owner came to me and brought a banker that he knew would finance it. So we closed. I've now made the house a legal duplex and have the top rented. The bottom will come online in the next three months. 

Now I have the two properties and I will keep an eye out for more. Seattle is so hot right now for sellers that I am not in a rush to buy more. So I will enjoy the two I have and think about what to do next. I would like to add 2-3 more over the next couple years. 

My 21 year old tenants use Venmo to pay me and it works great. My older tenants mail me a check. I don't care (so far) how they get the money to me. As long as they are paid in full by the due date. 

I am pretty new at this and have purchased two separate SFH in Seattle. One was ready to move tenants in and I've had that operational since January. The second one I've turned into a legal duplex and have the top rented out. I still have to finish the driveway and basement to complete the project. I told myself I would not buy another property until the work was all done on the previous house.

However, an opportunity has come up but I would need a partner or two to get this done comfortably. 

A colleague of mine invests as well and I respect her REI work. We would work fine together. How does one structure a deal such as this typically? Houses sell fast in Seattle so we need to get an all cash offer in quickly. Is the general advice to go to a real estate lawyer pronto to draw up a partnership agreement? What have people done when doing this with one or two partners?

I was confused as well as to why you would look outside Chicago if you have no properties currently. I just bought my first two rental properties in the last year and they are both within a 20 minute drive of my house. I cannot imagine them being further away as we are learning a ton and being hands on with the property management. 

Having said that my parents winter in Lakeland so it did raise my eyebrows to hear that location. It is just so far from my home in Seattle that I cannot imagine it working. 

I am renting to three room mates and charging $3,500/month. They are 21 so young and a bit inexperienced. They're good kids though and have been good tenants. The pay the rent individually to me via Venmo which is convenient for all. Each month they are just a bit short on the rent. This month they were $0.33 short when all three portions were received. Now I don't really care about $0.33 and they are good tenants so whatever but it does bug me a little (so maybe i do care??). 

Should I pursue the $0.33 so they know that rent is due in full each month? I'm likely just to let it go.,.

If this is your only property why would you pay for property management? I have two houses and manage them myself with no issues so far. I understand that good property management might be necessary in the future but right now I am fine. Also, I wanted to learn what is really required to manage a place so when I hire it out I will know what I want. 

On financing why wouldn't you finance half of it? Then your capital is free to do other things. Your tenants pay the mortgage and the cash on cash return should rise a bit.