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All Forum Posts by: BOB CRANEY

BOB CRANEY has started 15 posts and replied 157 times.

Post: Inspectors killed my deal -- 3 times, Any advice?

BOB CRANEYPosted
  • HIGHLAND, MD
  • Posts 160
  • Votes 141

If you hadnt noticed i also live in Highland, Howard County. Are you possibly related to John Lyons ? I went to Glenelg HS with him and graduated in 1986

Post: Inspectors killed my deal -- 3 times, Any advice?

BOB CRANEYPosted
  • HIGHLAND, MD
  • Posts 160
  • Votes 141

You are being taught a business lesson here by the market and instead of learning from it your trying to fight what you see as an injustice to the "quality" rehab you have done and those "evil" inspectors. 

Renting a home is not the same as selling a home and especially a rehab home that has been extensively updated. I have personally been in the same boat as you selling new rehabs and have 12 rental units also. Here is what you can do to preemptively protect yourself when selling. 

1. Hire the most reputable Home inspector that is well know and trusted/used by the best local realtors. Call these top realtors and ask for 2 names under the guise of wanting to get your house ready to sell. Get one of these companies to do an inspection of your home prior to listing it and fix every problem/issue he finds.

2. Repeat the above procedure and get a Roofing cert, chimney cert, HVAC, plumbing, electrical cert or statement of recent service and opionion of condition, etc for any other prefessional trade that might be an issue. Termite cert is also another thing that buyers lender will require. 

The cost to get all these inspections and certs should only be $1500 max. vs you having to give away $3-5000 to some buyer that wants to nit pick your contract. Nit picking is a negotiating tactic that when understood correctly actually helps you close the deal. When someone isnt interested in your house t, they dont nit pick,they just walk away.  Its not the inspectors fault when people back out. They are making a decision based on emotions and not always just the facts as you have learned. 

This may not keep a potential buyer from hiring their own inspector but if you show them the report openly at their showing and then tell/show them that you have fixed anything on the report and  on top of that provide them with your certifications there is a lot less chance of them getting squirrelly when something pops up on "their" inspectors report. Another cheap piece of mind for the newer buyer in the market who has been an apartment dweller their whole lives is to off to buy a 1-3 year Home warranty for them at settlement. Tons of companies sell them and they are reasonable priced for you vs loosing multiple potential sales. 

Now go sell that thing and control the situation instead of falling victim to it. 

Post: Purchasing a 8 unit Baltimore Multifamily

BOB CRANEYPosted
  • HIGHLAND, MD
  • Posts 160
  • Votes 141

Connie, 

I too am looking for a smaller size multiple family in Baltimore. Would you mind sharing the name of your lender, terms you got LTV etgc, and if this will be a hybrid construction loan if you are doing any renovations.

Post: Are Section 8 Payment Standards Real?

BOB CRANEYPosted
  • HIGHLAND, MD
  • Posts 160
  • Votes 141

I have 8 units with section 8 tenants and there are a lot of misconceptions on how the payments are figured out. The Payments standards you can find online are a maximum payment for a perfect house in a perfect neighborhood with the landlord paying all the utilities. A tenant gets a voucher that is good for a bedroom count only, its not for a set amount of money for rent. The voucher provides  flexibility to be used for a 2BR unit that the tenant finds that will meet their criteria. With the voucher in hand they can get a 2BR apartment, townhouse, condo or single family house. Your payment for each option may vary based on the area, size and amenities. You can ask the inspectors how the grading works and some will even show you the worksheets they use to analyze your property. The biggest variation i have seen is in how they grade the area on a good, better, best type system. i have had the same property graded differently by different inspectors and had to fight them because they tried to offer me less in rent than the previous section 8 tenant was paying. 

Your can post your listing on gosection8.com and  when its posted you can then access and option that will show you what they are paying in your surrounding area. Make a free fake ad just to check the rents then put it on inactive status until you are ready to rent it for real. Trying to get them to tell you what they will pay before hand is hopeless. If you know other landlords in the area, ask what they are getting and look at their places. I have had to politely argue with section 8 case workers sometimes and they can make mistakes in the calculations due to them not giving me credit for paying for water and sewer or the upgraded condition of my properties. Be aware though that the case workers often dont care if you accept their rent offer or not. I have only rejected 2 offers i was given but i asked for another rent comparable review and had the tenant complain loudly and ask for assistance in getting the rent bumped to a level i would accept so they can move. 

Check your market rates vs the rates section 8 will pay. These days in half decent areas, market rents are very close to what section 8 pays other than rougher areas, where section 8 will usually pay more. 

Post: How to manage your contingency funds

BOB CRANEYPosted
  • HIGHLAND, MD
  • Posts 160
  • Votes 141

I am growing my self managed rental portfolio and am up to 12 units in 8 buildings with a monthly gross of around $14,000. I have always figured an amount for future capex, vacancy and ongoing maintenance and repair which is small stuff(not capex sized things). I am trying to figure out the best way to manage these contingency funds within my banking and accounting system. For those with similar or larger portfolios how are you manging your contingency funds.

  • Would it be best to hold it in separate bank account apart from my operating account or just make it a separate account in Quick books with the funds actually still co mingled with everything. Should these funds be held in a interest bearing account to offset effects of inflation?
  • How would you access and account for these funds when used and under what circumstances should you "tap " the account. Ex.  Should it be drawn from for an extended vacancy or to get a rough property rent ready?
  • I have been figuring 7% for Capex due to the fact that my properties are rehabbed really heavily/completely but i want to put a total dollar cap on the amount i should be holding if i reach that. 
  • What % of property value would be a good rule to max out for total dollars held in contingency for a particular property 

Post: Is Section 8 Housing as bad as people say?

BOB CRANEYPosted
  • HIGHLAND, MD
  • Posts 160
  • Votes 141

I currently have 7 out of my 12 tenants that are in the section 8 program. Your have to think of the Section 8 program as your partner. Tenants are tenants and you or your PM will need to screen them base on your mutually agreed on criteria. Section 8 tenants pay 28% of their income towards the rent that gets approved by section 8, no income, then section 8 pays all. It doesnt matter what amount you are asking for your place, section 8 will only approve a rent amount they think is fair based on what they are already paying in the area for other places and adjust that up or down based on the condition of your property on its own and whether or not you include any utilities. 

Section 8 tenants have an incentive to cooperate with you and the program to remain enrolled. When they no longer care about that incentive you will be in a bad place and their lease should not be renewed. If you have a PM who doesnt have any section 8 experience then you need to find someone who does. You dont want the PM learning on your dime.  

section 8 tenants pay the security deposit, they can only be charged a late fee on their portion of the rent of any, you cannot evict the tenant if the housing authority doesnt pay you its portion, any notices sent to the tenant usually need to be copied to section 8 also, yearly inspections are not as bad as they are made out to be if you have a decent property. They can be a pain if you have a lot of violations you never fixed with a market tenant. It takes about 30-45 days to get a section 8 tenant moved in from when you show them the house unless they can get section 8 to move faster with initial inspections and such, they most often want a tenant to move in at the beginning of a month so they arent paying rent at 2 places. 

Post: Multiple Family/Unit Rentals Issues

BOB CRANEYPosted
  • HIGHLAND, MD
  • Posts 160
  • Votes 141

Kristen

I have done some rehabs on houses 75-100 yrs old and they are a nightmare due to the construction standards from that long ago. It costs a pretty penny and requires a much more extensive renovation if you plan to hold them for the long term. I used to live in Ellicott City and the really old stuff your describing sounds like its in or around Old Ellicott CIty.

I would never, ever buy a multifamily property with the idea that multiple tenants would share bathrooms unless you were talking about a rooming house or something for college kids. No woman with kids (95% of my tenants) or a family would ever go for that kind of setup unless they were previously homeless or lived in a commune.   If you stick to places built in the 1940-50's at most then you will find the properties at least easier to get rent ready without requiring a complete rebuild. The longer the house is not being rented is a drain on you and not getting you down the road to financial freedom

Post: What would you pay for this 3 unit

BOB CRANEYPosted
  • HIGHLAND, MD
  • Posts 160
  • Votes 141

Single family home in a C+ to B- area. Property consists of 3) 2br units that are all a large self contained, 1100 sqft each. Property is completely renovated and all units are individually metered for all utilities except for water/sewer. Very nice renovation with all new major mechanicals and interiors including laundry in each.  Rents in the area are solid at $900-$1150 for a 2BR of this type. I have other 2br townhouse units in this area and i am getting these rents. 

With a possible gross rent roll of $3450 per month whats the max you would pay for this property using market rate financing to get a nice return?

You need to see the condition of the interior of the property to see how its being kept. Multi unit buildings or attached rowhomes are darn near impossible to keep 100% bug free because they can come from units you dont control. If your tenant is a slob and there is a messy kitchen its like ringing the roach dinner bell. Move the range and fridge and look under and around them.  if there are crumbs of food and grease around the stove then you have a cleaning problem.Document the tenants sanitation practices with pics and video. Nobody thinks they are slobs until presented with evidence. Send them a polite but firm letter about how it works and hold them responsible. Roaches and other insects also like moist areas so maker sure your basements and crawl spaces are dry and well vented. 

Same tenant will probably attempt minor repairs in the same manor and then try to tell you to pay for it. You have been warned

Post: Section 8 tenant hasn't paid rent

BOB CRANEYPosted
  • HIGHLAND, MD
  • Posts 160
  • Votes 141

Why didnt you know the tenant hadnt made their payment? Isnt the PM sending you your share of the monthly rent. 

I have had tenants portion of the rent go up several times over their tenancy due to new jobs and raises but you should always be informed by the HA prior to any changes to be made in the HA or tenants portion of the payment, they cannot just  arbitrarily change the payment amounts. 

Your PM sucks and has cost you time and money. They should have filed on her the first month and you should have been informed of that. Then they should have filed for eviction following the tightest allowable timetable by law.