All Forum Posts by: Andrew West

Agreed @Suzanne Player. That is exactly how I interpreted the contract verbiage as well. The "incurred or paid by manager" seems to stipulate that they're only entitled to amounts they've had to cover (which is reasonable). 

In the case of a late fee, they're not incurring or paying any additional cost that they should be compensated for. I guess one could argue that continual follow up with the tenants is time/money lost (which is why I'd be open to splitting it). But when a tenant doesn't pay, it eats into MY cash flow. Not my property manager's. 

@Richard F. thanks for your insights and sounds totally reasonable to treat late fees as regular "rental income". The tricky thing is, my PM actually doesn't charge a specific percentage of rent like most do. It's a flat fee per door. I would definitely be open to them keeping 10%(ish) of the late fee as would be customary of a typical rental income fee.

Anyone have experience on this or can shed light on best practices for PM/owner relationships? 

Thanks @Suzanne Player and @Jacob St. Martin.

I did check the contract, and it's quite vague. Makes it sound like they collect fees only if they're "incurred or paid by Manager". Here's the verbiage:

Manager shall collect and retain the following fees incurred or paid by Manager (as applicable) directly from the applicable tenant(s): monthly late fees, dishonored check fees, credit report fees, administrative fees (such as charges for early move-in), paying in multiple checks, key replacement, parking tag replacement, and lease modification expenses.

Makes it sound to me as if they only have grounds to keep these if they pay them up front for some reason (which they don't).

Thoughts?

Hi friends-

Wanted a little sanity check here. Tenants in a triplex that I own are late on rent and get charged a small ($50) late fee per their lease agreement. 

In your experience, who gets this late fee??

My Property Manager is saying they get it. I feel like I should get it since I'm carrying the financial burden of the property and the delayed rent means lost revenue for me and not my property manager. At the very least, it feels reasonable to split it.

What has you experience been with late fees and/or what's industry-standard?

thanks!

While I love a good clickbaity title (kudos @Marcus Auerbach), I'm going to have to go with the folks who've clarified that BRRR is not dead, but rather harder than it used to be.

I'm holding one right now (rehab almost complete), and rates skyrocketing atm is not building a lot a confidence for an immediate refinance. But the keyword there is "immediate". In addition to folks assuming that BRRRs are a failure if you don't get 100% of your money back, I'd add to that another misconception which is that "you need to do the refinance immediately" (or at least ASAP). I'm honestly in no hurry. I don't need to pull my money our right away, and I'll probably sit on it a while, knowing I have a cash-flowing property with solid tenants. I've added some solid sweat equity (maybe not 25% of ARV, but a good chunk of change), and sure, I'd love to be able to dump that equity into other investments, but real estate is about DELAYED GRATIFICATION, and if you're not patient in this game you WILL fail. I'm gonna chill out with 50% equity in my property and wait for rates to come down.

Lots more to be said, and I love what's already been shared. Peace & love!

Thanks all for the great responses and for the lenders who've reached out to try to help me!

I'd love to hear from some experienced investors on my initial question. What would you do in my situation?

Thanks!

@Andrew Syrios, I know, those numbers on the new loan would be a tough pill to swallow. Thanks for the encouragement to keep looking for banks.....any suggestions where to look? I've discussed with about 5 community banks in the area.

@Miranda Holland I would DEFINITELY love to get closer to 70%-80% LTV! That would give me more of my cash back out. Unfortunately, the 65% comes from the new lender.....they just won't allow higher than that for my situation.

thanks to both of you!

Hi BP Friends-

Turning to the community for help evaluating a refinance that I'm considering. Would love any thoughts or expertise you can share to help me in my deliberations.

Quick overview of the situation: 

Exactly one year ago, I purchased two condos which are rented as STRs on Airbnb (and enjoyed by me and my family occasionally). The numbers (for both units combined, held on the same mortgage): Purchase Price: $299k, Down payment: 25% (Cash-to-close totaled ~$84k), Interest rate (6.25% fixed for 5 years, then variable at prime + 1.5%, 25-yr amort., 10 year maturity)

First year performance was stellar. They averaged $2300/month in pure cash flow after all expenses for a COC return of ~35%.

As I was keeping an eye on the market over the past year, I noticed a ton of strong comps selling for about 50% more than we paid. Considering this appreciation, I began exploring refinance options with the hopes of cashing out to get all (or at least most) of my money back out>>>>(Essentially a BRRRR without the "rehab"). With the market cooling, this seemed to be a "strike while the iron's hot" scenario.

I had a lot of banks tell me I had to wait until next year, when I had a full year's worth of Airbnb revenue on my tax returns in order to qualify. However I did find a lender willing to do this now with a non-QM DSCR product (which I'm told are common for STRs). I've started down the process with the lender and the appraisal came back at $460k for the pair of units (so just about at 50% more than I paid!). The terms are not as great, but I'm wondering if it's still worth it to get (some of) my cash out. Here's the details on the new loan: 65% LTV, 9.375% interest (30-year fixed), high points & closing costs totaling $24k (mainly due to them having the do separate loans for each unit, effectively doubling the costs). The new loan also has a prepayment penalty (which I guess is common with DSCR loans), so not ideal if i want to refinance again or sell within 5 years. Due to the lower LTV and high closing costs, I'm only going to get about $53k of my original $84k invested back out of the deal.

Using last years income numbers as averages, This basically will drop my cash flow to $1350/month (mortgage will be ~$1k higher), but now only having ~$31k left in the deal, COC return will be 53%. 

I'm definitely stuck on this one and see pros & cons of doing the refinance, vs. not doing it:

Pros: I get $53k back out to go invest somewhere else (leaving less money in the deal). I have a higher COC return.

Cons: Hard for me to stomach $24k in closing costs....that feels like money thrown away. Lower monthly cash flow after refinance. Higher interest rate on the new loan. 

All right that's it. If you read this far, THANK YOU! 

let me know what you think! I would love to hear: what am I missing? How should I be thinking about this? What would you do?

Welcome to SLC, Amy! Without knowing too much about your specific situation or goals, here are some quick thoughts:

1) It's okay to start out renting. Especially if you're new to town. This will help you learn the neighborhoods and study the market. 

2) Look into Non QM loans. DISCLAIMER: I'm not a broker or lender, but there are a lot of great loan products out there that aren't bound by the regular standards (for income, credit history, etc.). I've been working with David Greene's ONE Brokerage on an Non-QM refinance lately and they are ROCKSTARS!

3) If you do the rental arbitrage thing (renting and apartment/subletting on Airbnb), study up and do it "by the book", which will include being clear in your lease that these are your intentions. You don't want to get in any sort of trouble for doing this. 

Hope that's helpful! Best of Luck!

Great lookin' deal @Joe Hammel!

Gotta love a strong turnkey rental in Oak Park. Keep it up!

Hi BP friends!

Would love to get some thoughts from anyone out there with property parcel & tax experience.

We're about to close on a duplex in Harper Woods, MI and we learned late in the process that the duplex actually sits on two parcels of land, so our purchase agreement was updated to reflect this. The dwelling itself actually straddles the property line (I guess this is fairly common in the area), so from what I've been able to gather this actually means we pay TWICE the property taxes. We pay taxes on both parcels and they're each assessed based on the value of the FULL property...Yikes!

This seems silly, but luckily isn't a deal-breaker for our cash flow analysis and it's still a good deal, so we're moving forward. 

However, I'm curious if anyone out there has experience with this and knows of any solutions to improve the property tax situation moving forward? (I'm wondering if combining the parcels is an option, or perhaps getting them to reassess property taxes based on half the property value since it straddles the line).

Constantly learning over here and would appreciate any knowledge or experience you have. Thanks!