All Forum Posts by: Becca F.

@Mary Eubanks

Congratulations on closing on your first rental! I would say that getting good tenants in is one of the most important things and know your state and local laws. Have a handyman, plumber and electrician. 

At first I stated no pets for my SFH in Indiana. My first tenant pulled a last minute "my daughter really wants a dog". She passed the background check, great credit score, everything so I didn't want to try to get a new tenant in place. After talking with my property manager. I decided to charge a monthly pet fee, $35 for a small dog/cat or $45 for a large dog (Labrador, Golden Retriever, Saint Bernard, etc). If I wanted to get specific, I could have stated the weight of the animal for the small and large sizes. My PM said some people do a pet deposit of about $200 and a monthly fee or just one. Sometimes it's not clear who does damage to the property, the people or the pet so he suggested doing the monthly pet fee. The pet fee also nets more money over a year than if I did the $200 deposit (if the tenant didn't get any of it back). I also stated tenant is responsible for mowing the lawn, no overnight guests for more than a certain number of days, no smoking, no other pets including visitors, etc

For my SFH in San Francisco Bay Area that I self-manage, I have the same rules as Indiana but a few more specifics. I stated in the lease: no candles, no smoking/vaping of any product inside the property, immediately mop up any spills or standing water, no non-operating vehicles, items they can store in the garage (bicycle is okay), no illegal drug use (I have to state the obvious) and "if any part of this lease is deemed invalid, it does not invalidate the other parts of the lease." I also can't charge pet deposit or fees for someone who has a registered emotional support animal. SFHs aren't subject to rent control (so far) but multi-units are. I have a Master Tenant to avoid the multi-unit issue and any roommates pay rent directly to the Master Tenant and have a written agreement/lease with the Master Tenant. I charge a garage use $100 monthly fee so whoever wants to park their cars in the 2 car garage pays for it. You probably won't have this issue in Texas with rent control.

@Evan Reinhardt

I didn't purchase the Invest with Ace course.

Here's a free rental calculator but I don't think you can save it as pdf or spreadsheet (at least I can't figure out how to save it). It also shows what the financial analysis is if you hold the property for a certain number of years, for a example 20 years: https://www.calculator.net/ren...

I bought two rental worksheets (a BRRRR one and Rental Property Calculator) for $24 during a Black Friday sale from another investor, Soli Cayetano, known as Lattes and Leases on Instagram and on her website. It has the many of the same features as Ace's calculator but I don't see the numbers of years hold feature, like the free calculator above.

@Tahir Em

I have a SFH in SF. One of my investor friends advised me that SFH aren't under rent control (for now) and that if I have a tenant that tenant becomes the Master Tenant and collects rent from other tenants (the roommates) with a written agreement, no separate leases with me and the future roommates. If I'm renting out an in-law unit (aka studio on the other floor) it could technically become a multi-unit and could be under rent control - I will consult a real estate attorney when that time comes. I'm renting to a tenant I know personally so they're unlikely to cause problems for me. Once I get roommates in, I'm charging a garage fee (not under rent control) and whoever wants the garage space can decides who wants to pay. Another investor said I could charge $100 to $200 for each garage space depending on the part of SF and how valuable parking is.

I'm not a big fan of condos because of ever increasing HOA fees. I sold a condo in the East Bay (Oakland) because it was badly managed. I really wanted to hold onto it because of California appreciation but I cut my losses - Oakland and Berkeley heavily favor tenants and a non-paying tenant can live there for months and it's a nightmare to evict them. I'm taking the proceeds and I'm investing out-of-state now - Midwest or possibly Tennessee, which are landlord friendly. This is a bit off topic but the cash flow is much better with lower price points in the Midwest (have one SFH there) but historically the appreciation is better in California so I'll see what happens in 5 to 10 years.

If you can get a multi-unit building in SF that seems better than a SFH. Good luck!

Quote from @Nathan Gesner:

Quote from @Eric Dekker:

I have a new Rental property that I BRRRRed and is cash flowing relatively well. There is no early payment penalty on the loan. An extra $100/month would equate to the loan being paid off 7 years earlier and $27k in interest savings over the life of the loan. Does anyone have any thoughts on overpaying the mortgage?

Joe is right. Let the Tenant pay off the mortgage and keep your cash free to build up an account for the next purchase.

Have you heard of the law of diminishing returns? The longer you hold an investment, the lower your return. This graph demonstrates it visually, though your return may drop faster/slower depending on circumstances:

This chart shows that the property earned an 18% return the first year, but after year 10 the return has dropped below 12%. If you're trying to keep returns above 12%, you would want to sell this property and reinvest the equity in a new rental that earns a higher return and maximize growth.

People think "buy and hold" means holding on to a property forever. The truth is you will get a better return by reinvesting your equity to maximize the rate of growth.

Read a few books on real estate investing to learn the power of leverage. I like the Unofficial Guide to Real Estate Investing. Here's a very basic explanation to get your juices flowing:

Assume a house costs $200,000 and rents for $1,500. The market appreciates 3% per year.

Pay cash for one house and rent it for $1,500. After five years you'll have earned $90,000 in rent income and gained $34,000 in appreciation.

Buy four houses with $50,000 down on each. Mortgage payment is $1,000 on each house, so you're essentially earning $500 per house or $2,000 a month. After five years you'll have earned $120,000 in rent income and gained $136,000 in appreciation. You've earned $132,000 more by splitting your money and leveraging it.

This is super helpful. I thought about paying extra each month on my Indiana SFH rental to be mortgage free sooner but I'm still trying to acquire a few more properties.

I had a lender suggest to me to take out a HELOC on a California property (no first mortgage) and pay cash $150,000 to $300,000 for my next rental out-of-state to avoid those pesky interest rates which are going up and down and have a faster closing.

That makes no sense to me to pay $300,000 cash for a house, let alone $150,000. I'm seeing San Francisco Bay Area investors do this, pay $680,000 cash on a fixer (Selling agent said they had all cash offers. I looked at this property and he can't get it rented out now on Zillow $3750 asking rent). I did do a cash out refinance (pulled equity out of that California house) so I could do 20% down on a Midwest property. I'm not a huge fan of HELOCs with variable interest rates

Now all these responses are scaring me. I've been doing my own taxes through TurboTax Premier with my first rental in 2019. My 3 properties are LTR with one multi-unit owned with co-investors. I take the 12 month cash flow sheet the property management company gives me and plug in all the numbers (my percentage ownership) for the multi-unit. The properties aren't in LLCs. I did a renovation this year and will start entering the numbers. 

A family member's CPA gave me a rough quote of $1500 - I'm in the San Francisco Bay Area. I have a TurboTax CPA look through my returns before I file. It is time consuming doing my own taxes but I feel like it's valuable knowing the financial details. If I had the properties in LLC's I would definitely hire a CPA.

@Jack Jiang

It depends on who the CPA is when I call for help. There was a mistake on the rental income reported so I had to fix that and file an Amendment. The last CPA said he owns 15 properties so he gave me lots of helpful advice on how to file my 2022 returns. He also sent me a link on what counts as capital expenses and how to write them off on my renovation, what to depreciate and for how many years. 

I completely agree with the last part. Don't spend $35,000 on educational materials or "how to become a real estate investor" or "how to BRRRR" courses/programs. I attended free webinars or watched their videos on social media (mostly Instagram) and at the end the person is trying to sell me a mentorship program or additional courses. They range from $500 to more than $35,000. The last one was ridiculous, asking the potential investor/buyer to put up all the down payment but the mentor would help find the property, obtain property management and have access to his world class team of financial experts. Then sell the house 3 to 5 years later to find a better performing rental and you only get 50% of the proceeds. I told the guy if I have an extra $18,000 to $35,000 I would use it towards a down payment on a rental not on your program. Not sure if I should put out his name but everyone is now a real estate guru. I found YouTube video and the webinars on Bigger Pockets good resources - all free.

Like some of the others have commented, house hacking is good place to start. And network but be cautious - not everyone is out looking for your best interests and they will try to take advantage of newbies. 

I started out by renting out my primary residence in the Midwest instead of selling it when I moved to California(SF Bay Area). Good luck!

@Jack Jiang

I do my own taxes. I use TurboTax Premier and their CPAs review my return before I file. I have 3 properties, 1 SFH that was recently renovated, 1 multi-unit (co-owned with other investors), 1 SFH out of state. None of them are in LLCs. The multi-unit and out-of-state SFH were on my 2021 tax returns. The renovated house will be on this year's return so this will take a bit of work. I think learning how to file on my own was been very valuable. If I had just handed over my information to a CPA, I wouldn't have awareness of what's going on in detail.

I'm in the Bay Area and know one CPA charging $1500. The $500 to $1000 you  were quoted sounds very reasonable if that's for federal and state tax filing. For now, I'll probably do my own taxes. If I get LLCs for my properties or future rentals or just get tired of doing my own returns, that's when I'd get a CPA. 

@Daniel D.

Wow $450 and $750 are really low rents. You've been a nice landlord. 

That is something I've struggled with also. My tenants are getting a very reasonable rent for out-of-state (Midwest) SFH rental. My property manager advised me that if I raise the rent too much it will scare them away - they've had the same rent for 2 years in a row but I'm planning to raise it the summer of 2023 when their lease is up, not sure if it will be 5%, 7% or 10%. My property taxes increased significantly and didn't pass it onto my tenants. My current rent is in the range of other rental comps but rent is going up across the country.

I agree with the other comments. Talk to them so they get advance notice. And raise your rent each year a little. Good luck and keep us posted!