All Forum Posts by: Brandon Roof

I wouldn't get too caught up in hypothetical financing scenarios.  If your place isn't renting there are usually only a few reasons.  Seemingly, and as @John Warren is somewhat alluding to, you are likely overpriced considering what else is available in your market.  Potential tenants may not value or appreciate the updates to the property as much as you might.

@Nathan Hui I'm really impressed by the amount of due diligence you have performed and your research appears to be quite sound and not particularly speculative. The similarity in comps you have nearby would give me much more confidence in proceeding.

The key at this point seems to be, and I think you're slightly struggling with the same thing, is how to add as much value as possible in order to increase rent and entice tenants.

Continue to drill down as to what tenants will appreciate most. Is it high end fixtures and appliances or community features such as the playground or sports courts?

It may not hurt to survey tenants of the complex you are looking at or even those at the opposing complexes.

From here, it appears as if you have one of two directions to go, align yourself as much as possible with the surrounding properties but by offering similar amenities at a more competitive price point, or completely differentiate yourself by offering something they don't that clientele will value more. Would people go crazy for free wifi or above and beyond pet friendliness by building a small dog park.

Both of the above examples could be terrible ideas, but hopefully it gets you thinking about all the options you have in front of you when determining the best way to proceed.

Great job and I'm looking forward top see how things progress!

First, I wouldn't get too frustrated because it sounds like you've done a good job sticking to financial principles and not chasing "deals".

I think any of the scenarios are going one of only a few ways:

- Your estimates are off and those a little more fine-tuned to the market are picking these properties up.

- Your estimates are correct but there are other investors willing to take a smaller return on investment or are volume players.

- You're not missing anything and these investors' optimism is going to get them extremely hurt.

Based on what I see a lot in my market, it's more of the latter two.  People with higher incomes splashing around without a true understanding of the implications of their purchase.  I have a number of doctors in my market that are some of the major landlords of single-family and small, multi-family rentals that I can only imagine are squandering away money and opportunity.

Then there are others that are wowed by what they see on HGTV and decide to try their hand at it only to get punished.  This often occurs with things like the stock market as well, or even things like sports betting and poker.  People hear the one-in-a-million story and believe they are destined for the same greatness.

Hang in there and be mindful of your process.  Take the blinders off every once in awhile to reevaluate yourself.  Often, not much will have to be changed but I think it is important to remain adaptable in an ever-changing environment.

The numbers have improved since your last calculation, but it may still be based on a number of assumptions.  I believe the 4% interest rate is going to be difficult to pull off.  Not impossible, but unlikely unless you've already locked in a rate with a lender.  Every percentage point will have significant implications.  A 5% rate would add another $40k to your 30-year mortgage.

We are also assuming that your additional $40k rehab budget it going to create $50k in value.  Again, not saying that this isn't the case but you'll want to be pretty darn sure before making that assumption.  This leads to the potential domino effect of raising the rents from about $513.75 to $700, which is a huge jump (almost 40%).  Your going to want to do a great deal of due diligence and confer with realtors, property managers and other trusted sources in the industry to confirm that the rehab investment will in fact lead to a return and that the going rate in the area for your type of unit can justify a $700 price tag, because if it doesn't, you're going to be in an even greater world of hurt than with your first calculation.

Lastly, some of your expenses shifted.  Some for the better, others possibly not.  Vacancy down, which your prior 6% could be borderline, let alone your new 4%.  Some of that is made back with the capex and repairs, which hovers at a much more likely 8% now, so that's good.  Insurance went down, which given the improvements you intend to make and increase in value, the insurance would naturally have to increase as well as it is now covering a more valuable property.  Management down is unlikely as well as your prior 10% is more typical across the industry.

On paper, this deal looks much better than it did before, but it is also likely to be much riskier than before as the changes may be predicated on a numerous dangerous assumptions.  Hopefully, some of these numbers are actual that you have received quotes for, such as with the insurance and property management.  Otherwise, you could be digging yourself an even deeper hole by moving the goal posts in order to make a nonviable deal "work".

I'd still very much consider moving on from this property barring a significantly lower purchase price and/or the ability to increase rents as you've proposed, but you would have to be absolutely certain that it's feasible.

I think your easiest solutions may be apps such as Cozy or Tellus.  There are dozens to choose from but these are seemingly two of the more popular within the forums.

Unless you are able to negotiate a buyout or termination of the lease, the bed has unfortunately already been made.  Any additional screening should have been done prior.

I unfortunately don't know what, if any, legal grounds there are regarding the tree, but you have a couple different avenues to explore.  If you're prepared to dig your heels in on the issue, your neighbor knew the tree existed prior to their purchase and now they are trying to change the rules of the game.  It's like knowing somebody's faults, marrying them and expecting them to change later.  It just doesn't work that way.

If, however, you are considering its removal, and your neighbors are coming in on the same page, I think it presents the perfect opportunity to get them to contribute to its associated costs.

@Steven Foster Wilson You'll tend to see annual more often than monthly.  You could probably even use the rental property calculator here to provide them with nice monthly and annual visuals.

They want a snapshot of everything.  Insurance and repairs, as you mentioned, as well as any funds spent on and for the property, so think of any utilities you may cover, garbage, lawn care, snow removal, mortgage, property taxes, property management, etc.  Any money going out as a result of the property should be included.

@Account Closed I invest more in the Rustbelt in blue-collar communities outside of nearby metropolitan areas.  I have also invested in REITs as well as they are so incredibly vast.  Single-family, multi-family, college housing, commercial, industrial and healthcare properties, self-storage, data centers, cell towers, the list goes on and on.  It's very unlikely for any investor to be involved in all those areas without REITs.

With their dividends being so substantial, I prefer to hold them in a vehicle such as a Roth IRA, which provides me the option to reinvest the dividends and not pay taxes on the gains (as long as I don't make any ill-advised withdrawals).