All Forum Posts by: Andrea Lane

Rod,

An attorney in the state you will be doing business in to hammer out the operating agreement is a good idea.  I have properties in multiple states and I have an attorney I work with in each state.

Tyler

How much are you putting down.  Based on your input, if there are no repairs required, 20% downs and 5% maintenance, vacancy, and management the numbers look good.  

You need to make sure you are including all numbers in your calculation to determine cash flow.  I know the market is hot right now but you don't want to start with negative cashflow.

What is your strategy?  Are you buying to hold long term or are you looking for appreciation to set you up to sell in a few years.  I would look at all the parts before you decide if it is a good deal for you or not.

Cory

You can ask the tenant, but the most important part of your tenant relationship is your due diligence.  If you are in NY or NJ and find you have made a mistake it can be very costly, ask me how I know.  

There are many great companies that will do a thorough background check, including getting the emails or phone numbers for past landlords and actually verifying employment - not just collecting pictures of their pay stubs.  The current landlord probably will not share how bad a tenant is because he wants them gone.  Prior landlords have nothing to hold them back for telling the truth.  You can ask for the renters cancelled checks or proof of payments for the last 12 months.

Also, you determine the criteria for your tenants and you can require a minimum income of 3 or 4 times rent and/or a FICO score of 400 or better,...

At the end of the day your due diligence is what will determine how good a tenant is.

Before I would make any decision to purchase any rental the first questions I have is does it cash flow now? I know that appreciation is happening at an amazing rate in many markets, but that is not paying your bills. Evaluate the property including HOA fees, property management fees (even if you are managing it yourself) and maintenance, vacancy, and see if there is any cash flow today. If not walk away. If it were a SFR with no HOA I may allow for no cash flow with anticipated rent increase but you have no control of the HOA increases.

Justin

Is this a property you live in or already rent out.  If you currently live in it and it is in an area that is appreciating,  you can make sure that it is rent ready: that the rent will support your costs: and bet a good local property manager.  Since you may want to stay there while you visit, are you thinking of it as an Air B&B, that has a different criteria.

I am a buy and hold person.  We have SF, MF and small apartments and almost all of them are out of state.  It is definitely doable but a great Property Manager is really important.

Since your lease did not have any stipulation for lawn care, the onus is on you to take care of it.  I do not know the market you are in, but the states I work in allow an attachment that can be modified after the lease is signed.  I would create one or add a paragraph to the one you originally had signed.  Check with your local laws, but make sure it is understood and signed by you and the tenant.

Amy, 

I don't know any underappreciated opportunity in this market.  We own SF, MF and small apartments.  The SF operated the best during COVID and has always been my favorite.  If I were to follow my next shiny star it would be senior housing, I think the opportunity is available almost anywhere and as the population ages it will be a very good commodity for the next 15-20 years.

Keely,

For unit 1 I would let them know about the rent increase.  I do not know landlord/tenant law in your area, but you want to make sure you do not do anything to break the rules.  Since they have been in the apartment for 6 years, you can ask the current owner about there rent history.  If they are good tenants you may have an easier time with your application process (or you may decide not to renew).

I would look to find a reliable translator for the language barrier.  I also have tenants that I cannot easily communicate with and a translator is a great asset.  I would also video the translator reviewing the new lease line by line with the tenant before they sign it so there is no confusion if something happens.

Kevin, 

If you want to keep the property, then look to refi and use the proceeds for more good rentals.  Make sure your expenses all in after refi  (including maintenance and property management ) still offer you a cash flow position.  Rents in most markets are going up 7-10%, have you looked at your marketplace?

If you decide to sell and don't want to pay capital gains then look at a 1031 exchange.  

Logan, the 1% rule is really a suggestion.  It looks like you have ok cashflow, but if you paid yourself a management fee the return would be a little lower.  The way homes are appreciating in this market and the average rent increases are 7-10%< I think the deal is great.  Go find some more.