All Forum Posts by: Benjamin Aaker

Hi BP Team! 
I have a 3 bed 2 bath SFR and have rented to tenants for the past 2.5 years. They rarely have repair requests, and only for important things that I want my tenants to inform me about (water in the basement). They always pay the rent on time. The mortgage is set up to pay down quickly and just have a profit. We raise the rent ~$25 annually but these tenants have refused to re-lease, so they are on month-to-month.

I'm all-in $150k into the place and purchased it for $135k and have $95K remaining in principal. It would sell right now conservatively for $220k. The place is comfortably paying down its mortgage but a big repair would mean an out of pocket expense, which I can pay, but not happily. I am all-in in multifamily and have a few SFRs, such as this one, from former days and am looking to get out of the SFR business.

The tenants are not interested in buying the property from me. Should I sell the property?

Great topic for discussion. Leverage is great and getting a bunch of cash out of your property is nice but there are two important things: What are you doing with the money? and Can you pay your new mortgage? Buying a boat means you won't be able to get that cash back when times are tough. Buying another investment has higher likelihood but no certainty. If you've evaluated the deal and it is good, then refi and go for it. 

Hi @Kyle Zigan, welcome to the BP community and Sioux Falls investing!

A nonconforming loan would be necessary. The unfinished house won't pass inspection for a traditional loan. Odd to have 2 homes on a lot. Are you sure it isn't two lots and you could purchase them separately?
I wouldn't let the nonconforming loan drive you away. That is, unless you require low money down.

That cash flow is really low for a 6 unit property. Unless you are budgeting a lot in for cap ex, this looks risky. Are you sure that it is illegal to RUBS electric in your area? You can't charge tenants more than you pay for electric in most places, but if you bill them equal or less, it is allowed. It would be difficult to separately meter in this old of a place. I'd definitely look into it if you purchase, but don't expect it in your underwriting of the property.

Hi @Joey Nugent and welcome to BP!

Variable income you say? Is that commission based or are you an independent contractor? Banks don't like uncertainty so variable income is not great. You don't need 2 years of work experience for a W-2 job. The 2 years thing is a rule of thumb for those who are independent contractors or have some other source of income. Different banks have different criteria, though, so take the time to talk to a bunch of them. Smaller local banks will be better. A hard money lender will scrutinize you less, but the deal more. If you can find the right deal and lender then your personal background is not as important. Be prepared to finance with a bank ASAP as the rates you get with hard money are quite high and the whole loan comes due in a year or less usually.

First thing to do is to give notice that you are not renewing their lease. That way, if you have trouble with eviction you will have another avenue to get them out. If they haven't paid rent then you have another reason to remove them as they haven't abided by their terms of the rental agreement. You'll have to make sure you follow the rules of the eviction moratoria in your area.

Appreciation is a side effect of supply and demand. A lot of the 'hot' areas are built out and have little supply. People want to live in those 'hot' areas too, so demand goes up. This raises the price they are willing to pay and we call that appreciation. That happens less in the Midwest, but not always. In Western South Dakota, we are experiencing a large influx of West coast people coming out for cheap housing and no income tax. The Black Hills is a beautiful area and has a lot of draw. Any time that happens is nice if you own property. It adds to volatility, so to answer your question, if you didn't get in at the start of a boom, it's probably best to avoid it because a bust can still happen.

Most tenants aren't aware of the Texas ruling. Most aren't aware of the details of the moratorium. The problem landlords have is that many tenants will see the moratorium as "I can't be evicted," and might not pay the rent or apply for assistance with this false belief. That causes a huge problem for landlords, who legally could evict (because the tenant didn't seek assistance) but can't get a court date. I recommend doing everything you can to get your tenants applying for assistance.

Direct mail works for large multifamily, but it's much less likely to get a lead and it takes longer. You need to be in it for the long haul if you get started. These owners are usually more sophisticated than the typical homeowner and your mailings need to reflect that.