All Forum Posts by: Andrea Hauserman

Thank you Neil, I have reserves, that does not answer my question  - is there such an insurance policy?  

If there isn't, ins co's could make a fortune since a huge % of American's own a cat or dog.

I bought a 4-plex with 2 dogs in it...... except a few months later, there were dogs in 3 of the units, and # 4 had gotten a cat. Is there an insurance policy I could make the tenants buy that would cover their animals potential damage to my units? I am not going to make claims on my own insurance which would cause my premiums to skyrocket, but it would be a deterrent to say I require them to carry damage insurance specifically for their pets. Having cleaned up after a cat one time, a security deposit would not have covered what we had to do to remove the odor. I'm in Ohio if there's a state specific answer.

Upper end homes are already seeing a flattening of prices around the country, but that should be a normal part of the cycle. I think the lower end of the market gets hit the hardest because of unemployment, but... the demand is there to resale those properties to other new buyers. In our market, avg time on market is differentiated by price point - the beginning housing is on the market days and goes under contract. Interest rates are so crazy low - I had 3 very normal buyers get quoted 2.75% last week. At that rate, you are paying $4.08/$1000 of loan so even the first time homebuyers can afford $50,000 more in mortgage - it's pushing the low end of the market to prices not seen since 2002 or back to the late 90's. Investors work very hard to find a deal because anything livable is being snapped up by the low end owner occupied buyers. 

You can buy me lunch in Tampa LOL. There’s not a big deal - you need someone to do the layout and execute the plan. I wouldn’t use an architect unless these are expensive properties - my architect friends would charge $5000 for that plan. A decent contractor can tell you which walls to remove and how to rearrange the kitchen. 

I get it. After making myself nuts with complicated spreadsheets I now use very simple math because for the average me - it doesn’t matter. some of the inputs depend on being right in the past and future - like vacancy. That was an estimation up front when I purchased - what are the probabilities this place will stay rented or not - location dependent. What’s the economy in this town - will give me a warning about future taxes like in broke communities in Cuy County or things like sewer and sidewalk assessments in Akron or Kent. I track Tax/ins/maint/cap ex actual expenditures and watch for projected needs. I keep enough in the acct to pay next due taxes/ins + about 2-3 months rents to cover the inevitable. I inspect my own properties once a year, I try to take care of the things that reduce later damage like cleaning the gutters and servicing the furnaces. I stopped spending time on continued analysis because I don’t have that time to spend and it hasn’t made a difference in the actual outcomes of owning rentals anyway. I do take an annual look at actual profitability and that has caused me to plan the sale of 1 property this year - despite my investments it continually underperforms my goals. Best wishes

1. Separate bank acct for biz only - income and expenses all captured

2. There aren’t that many lines - allocate the shared expenses to each side -like a roof or property taxes - at 50%. Your side is only mortgage interest deductible, the rental side you line item, and add up the deductible expenses. If there are special rules for this your CPA will know. Big fun figuring out the cost basis if you sell before you convert your side to rental but that’s why we pay them.

3. You convert your side to business the day you put out a rental sign, from then on it will be simpler. 

4. You could just make it simple and collect rent to offset your cost of owning and not file all the extraneous baloney, then convert the whole property to business rental when you move on. Consider the costs of collecting info and filing all the forms. I have 1 client who just does this and doesn’t try to write off all the bits and pieces. Depends on how much you’ve spent probably. 
Good for you that you’re doing this - much respect to smart investors. Wish all my younger clients/friends would be so smart to start growing their wealth this way. 

My lender wants me to sign transfer of current leases to take effect on transfer - is there a canned form somewhere I can use? Thanks!

Actually it is full replacement coverage

Can you find something just outside Valdosta? Is there any seasonality to the real estate cycle? Are you willing to move on short notice - if not make yourself ready so you can take advantage of an opportunity. Where I live I find properties on Facebook which still amazes me. Join swap groups and post what you are looking for, there are people who know they need to do something but dread making the first step. FB is a non-threatening place that makes it easy for them to PM you to ask questions.  Contact real estate property managers, accountants, insurance people and mortgage officers. The right ones know people who are in the flow of off-market deals. The most interesting thing that I learned this week is how many police officers own rental property. Not sure why.  I ran into 3 officers this week randomly who all have been long time landlords.

I was in the investment business for years and always thought it was interesting that on one side the stock investors think that RE is high risk, and on the other side, RE investors think the stock market is high risk. No matter what you invest in, seek to reduce risk through knowledge.  You also have to choose a niche and from there you expand your knowledge base. Diversification is very important to me.  Whether it's small cap growth stocks, large cap value, laddered bonds, single family houses, duplexes, syndicated apartment deals, medical office buildings - Learn all you can to get started, be willing to make mistakes and then just keep learning.  

I was so completely lucky with my first rental, I rented a nice place at below market to a woman and her young boy with cancer - I kind of felt like it was a contribution to the universe to keep it affordable for her - and what I learned was that if you can stay just below market people won't leave. Where you lose big time is through turnover. As a self managing landlord the other thing I learned is you have to keep track of what rents are doing in the market or one day - as I did - you wake up and find out you are so far behind the market you're going to lose your tenant when you raise the rent and then have to remodel because they lived there so long. Lesson #2 out of that one was - keep abreast of what's going on, and either keep fixing places up along the way or have a slush fund to remodel when a long time tenant leaves - either way, it costs money to maintain a building

Second property - I bought the cheapest house in a super high demand town by Xome auction - won't ever do business there again - it took 6 months to receive the title. Then it cost me $80,000 in contractors to rebuild the entire place because I lost all my contractors waiting for the title to arrive and I had to make do with a string of contractors in the middle of summer who didn't have my best interests at heart.  Lesson # 3 - have your act together and know who you will do business with before you leap into a purchase - you can network every week through meetings, your local realtors, old landlords who like to shoot the breeze over coffee. Because of wasting money on contractors who didn't do things right and having to redo them - I make about 9% cash on cash at this house now but it was painful and my husband thought I was completely nuts. When it was done and he saw profits, he became a believer and told me to keep going because I learned so much the hard way it would be a shame not to.

Third Prop - slightly overpaid for a ready 3 BR house and put about $9k into electrical, tree trimming and pouring a driveway.  My cash on cash is about 14% now - but before I got here I used a property manager who failed to put utilities into my name when a tenant left last Dec and it was 4 degrees below zero. The entire house froze, even the water meter busted out. Lesson #4 - you can't take your eye off the ball and you have to manage the managers at some level of frequency till you know you can trust them. 

4th Prop - finally understood why people like multifamily, bought a slightly shabby solid brick 4-plex in a fantastic growth town and make about 13% cash on cash. 1 apt totally rehabbed, taking a forgiveable landlord rehab loan through the local govt to rehab 1 apartment and agree to a section8 tenant in that apt for 8 yrs. The other 2 rehabbed as money became available. Lesson # 5 - Ask questions, demand more and then ask some more questions. Keep asking till you get the answer you want. Don't be afraid to negotiate, don't be afraid to ask more than once when you get a No, just be polite about it.

5th prop- duplex, old siding on the outside but the owner spent $51,000 on it 8 yrs ago and redid the entire place all the mechanicals, new roof, wiring, interiors - the important stuff. Sat on the market for 18 mo as people turned up their noses at the mustard yellow aluminum siding - which I can replace for about $6k when I get to it. Meanwhile my cash on cash return is 22% and the tenants are keepers. Lesson # 6 Just because its ugly doesn't mean it won't make money. I can fix ugly. When I got started I looked at properties too much through the lens of whether I would live there. I'm more balanced as an investor now, and also more realistic.

I'd say most people outside of RE think that RE is high risk. Just go for it, you're young, if you fall down you'll get back up. Have fun!