All Forum Posts by: Becca F.

@Nathan Gesner

My friend's attorney must be a member of CAR or somehow obtained access to the lease agreement form because that's what he's using (I didn't ask too many questions)

I checked the California Apartment Association and San Francisco isn't on the pull down list of counties...very strange.

I'm not sure how to proceed now.

Which lease agreement form is best to use in California? Is it the one that the California Association of Realtors has? Does that form allow for adding a clause or addendum? I've read that it's difficult to add additional conditions or clauses to that form. My other investor friend said his attorney recommended the CAR lease agreement form. 

Also is DocuSign the best platform for signing lease agreements? I've used it for work before.I've heard of WeSign also. So far I have one tenant for a SFH and I guess I could use paper and pen but I'd be printing out a lot of paper. I'm not the most tech savvy person so whatever signing platform is easier to use and doesn't cost a lot of money would be preferred.

@Miller McSwain Thank you. How do you divide out the utilities (electricity/gas, water, trash/recycle)? For example would I just take a ballpark guess of $200 for electricity/gas and divide it into $100 for each of the two couples and since there hasn't been 4 people living there so I don't really have baseline amount on the previous resident's bills for that many people.  I don't know what the water bill would be. Its about $30 with no one living there (except when contractors did the work). If I estimated $100 or $120, then divide that out among the two couples. Hopefully no one is taking hour long showers with the drought here. And include that in the rent? Could I put an addendum that utilities would be re-evaluated in 6 months? 

 I'm still confused. If theoretically I could get $5400 for the 3 bedroom house but two sets of people are occupying 2 bedrooms, I'm not sure how to divide this up. 

I have a 3 bedroom, 2 bath SFH (1357 sq.ft) in San Francisco that I'm renting out to 4 different tenants (two couples, working professionals). The main level of the house just went through a complete renovation (all new electrical wiring, kitchen, bathrooms, appliances, recessed lighting and new paint and baseboards and trim casing in all rooms). There are two separate 1 car garages, washer and dryer, backyard (a pretty good size for San Francisco). There's a downstairs unit (a large room) with a bathroom which could be a potential studio apartment if I put in a kitchenette

I know the first couple personally so I'm giving them a slight deal. I'm having difficulty trying to find a market rate rent to divide among the two couples. Most of the rentals are apartments in that area, within half mile radius as most of the SFH are owner occupied.

Here are the Zillow Rents comps:

-  4 bedroom 2.5 bath condo(1655 sq. ft) for $5890. That condo has a view of the mountain in that neighborhood. 

- 3 bedroom 2 bath (1340 sq ft) Victorian house renovated for $7495.

- 4 bedroom, 2 bath house (2166 sq ft) for $8950 

- 1 bedroom (877 sq ft) apartment for $3195 right across the street

-  3 bedroom 2 bath apartment  (1471 sq ft) for $4895

The $7495 rent seems very high and my house isn't a Victorian but built in 1957. A realtor I know suggested charging $2000 for master bedroom with private bath and $1700 the other 2 bedrooms who share a bath. The makes the total $5400. He didn't give me comps. It's likely one of the bedrooms won't be rented out for a while since the two couples know each other and to get a stranger in there would disrupt the household balance. My thoughts were $1900 for the couple I know, and $2000 for the other couple who would have the master bedroom and private bath (maybe $2100). There are 3 cars (the second couple only has 1 car), so each couple would get to use the 2 garages. So that's $3900 to $4000 a month total rent. Is that low? I'm not trying to price gouge them but that renovation cost me a lot of money. 

Also I'm paying for PG&E (electricity and gas) and SF Water since I can't meter each person's usage. How should I bill them? Include a certain amount in the  rent? Bill them separately after I get the bill and divide by two (for each couple). When the owner lived there the PG&E I believe was somewhere between $100 to $180 a month for one person (who ran the heat constantly when it was cold). 

The second couple needs to know soon as they need to give notice to their landlord in 2 weeks (their current rent is a $2000 studio apartment). Thanks for any help you can give. I'm new to the SF rental market. My other rental is in Indiana. I'm having them all fill out a rental application and running a credit and background check (I wouldn't necessarily have done a check on the first couple I know but my friend advised me to). 

@Paul Guarino

Did you get the market rental rates from a realtor running the comps? If one of the sources is Rentometer, I've found that it's inaccurate by either overestimating or underestimating comparable rents. For my California property I think it's underestimating it - it doesn't consider the condition of the property (completely renovated and appliances are new). We'll see with that one as I'm trying to find a market rate rent right now. 

I'm renting out a SFH in Indiana and I thought I was undercharging my tenants according to Rentometer which was $1700 but I'm charging base $1500 + $60 (for city utilities of trash/recycle and sewer) so $1560. My property manager advised me not to be raise the rent (after 1 year, their first year renting my house) because if the tenants move out then I have to find new tenants. I got comps from a realtor I know so he said I was in the range of what other SFH are charging. I will raise their rent next year since rents are going up across the country - not sure if it will be 5%, 7% 10% or slightly more (don't want to scare them away). They've been great tenants.

@Mo Maktari I would tend to agree with what Mo said, raise it $100 a month and reevaluate it every quarter. You just raised the rent $40 on 3/1/2022 and then plan to raise it $200 on 12/1. To me $200 seems like a big increase 9 months later. 

Paul if you raise it $200 on 12/1 and she doesn't leave, would it stay at this amount for 12 months before another rent raise? I think the letter ahead of time is a good time. 

Has she been on a month-to-month lease the entire 5 years or is the month to month lease recent? 

Tanya, I didn't consider Stockton. I might need to drive up there and take a look around. I like Tracy but again price points are high for me. When you say the tenants are of lower quality than the Bay Area, are you having problems with the tenants (non paying, late rent, etc)? I have a SFH rental in Indianapolis metro area (a suburb) and it's landlord friendly and so far have had great tenants. We both abide by the lease terms. I don't have to pay them out a relocation fee like in Oakland or S.F if I want to sell the property (or move back in).

I just got rid of a property in Oakland (sold it). It was my primary residence, a condo, that I planned on renting out but after talking to property managers and Oakland landlords, I would have to have a high risk tolerance to rent it out. If I had bought it in 2008 or 2010 the cash flow would have been good and worth the risk but I bought it in 2019. I also learned never to buy a condo again thinking it will be a good investment property. People can literally squat in an Oakland rental and it takes thousands in legal fees to evict them. That's why the Midwest would be my choice to buy more rentals even though California properties appreciate a higher percentage over time. 

 Carlos that is an amazing cash flow for Antioch! I'm still getting used to all the terminology, A, B, C neighborhoods. My Indiana house is between and A and B neighborhood - excellent school district, low crime but doesn't have that prestige of a more upscale suburb (e.g comparing Pleasant Hill to Walnut Creek or Orinda). I was cash flowing $409 a month but my property taxes went up dramatically because I lost the homeowner exemption. Now it's more like $156 a month. The $520,000 purchase price (if I'm looking at your numbers correctly) for Antioch would still be high for me if I'm using my own money for down payment. I could buy a duplex in Indianapolis for around $290,000 according to my property manager. 

As you can see by my numbers, my $140,000 (house built in 2005) purchase price in 2013 in Indiana appreciated to about $250,000 in 2020-2021 so it took 7 to 8 years to go up $100,000 in value. That's good appreciation for the Midwest but I guess low appreciation compared to the Bay Area. I had realtors with buyers lined up and investors calling me non-stop asking to buy that house. I kept the house because I don't think there's anywhere in the U.S. you could buy a SFH in a nice subdivision with good schools for $140,000 now. I will need to look more into California because I was planning to buy in Indiana again.

@Patrick Thomas Dickinson I would lean towards keeping the Brentwood house. If you ever decide you want that house back and you've sold it you'd be priced out years from now. It seems like a lot of people from the Bay Area are moving out to Brentwood, Oakley, past Tracy, even to Stockton. I would take equity out like a cash out refi (maybe not at these interest rates if your current rate is lower) or do a HELOC. Are you getting good cash flow from your current tenant? Would this be expected with a future renter when the lease expires in Nov. 2022?

I have a SFH rental in Indiana (in a suburb comparable to Pleasant Hill, not quite as nice as Walnut Creek), bought it for just under $140,000 in 2013 as a primary residence with upgraded kitchen and bathrooms. It's worth around $246,000 to $250,000 based on comps from a few months ago. I kept it because I have a low interest rate and it was such a low price point for what I got, needed no renovations but I did have a new AC/Furnace and water heater installed shortly before I rented it out. It didn't appreciate as much a California house but it costs less than a high end Tesla and a Tesla doesn't bring in passive income :) I have positive cash flow, decent but not great.

@Carlos Ptriawan  Carlos how are you cash flowing $1500 in Antioch? That seems really good to me. This is a multi-family with how many units? I would definitely like to buy further out, Antioch or Oakley but I think the prices would still be too high. I'm not sure about Fresno, Modesto or Stockton. 

@Sean Fraser I have a SFH rental in the Indianapolis metro area and I found that the comps provided by my agent were accurate. My rent was right in the range of the comps. When I looked on Rentometer, it overestimated my rent. My property manager who also owns duplexes and an apartment building said that Rentometer isn't always accurate - it can be under or over. For another property in California, I think Rentometer is underestimating it according to my realtor but I'll find out soon when I get tenants in (not listed yet). I also looked on Zillow Rents and rents were all over the place but it helps with getting a wide ballpark range of what you could get for a property in similar condition.

Hi Mohammed,

Echoing what the others said, it's going to be difficult to buy an investment property with no money down. I also thought about doing a hard money loan but I'm not going to do that for now. The interest rates are high, at least where I checked. I'm a beginning investor - I started by buying a single family home in the Midwest as my primary residence then rented it out instead of selling it when I moved. I'm guessing that houses in Long Island are expensive. I've acquired two more rentals since then. I'm also looking into a private lender but I'm not going to rush into a real estate transaction. My student loan was not a major factor in my DTI ratio. Have to talked with a lender to have them review your financial situation or if you could buy property?

You should have at least 6 months of savings. Things happen with rentals -  major repairs, tenants move out, have to evict someone, etc. If you don't have any cash for a down payment, I would approach this very cautiously. Good luck!