All Forum Posts by: Breland Almadova

If you want to keep scaling rapidly I wouldn't recommend having all the debt and only half of the income/upside.  Just take down the deal yourself.  If you need their income to get you into the game sooner and gain experience it'd be worth it in my opinion.

If you both are 50/50 in terms of money in I would say all rent/income is split 50/50. If you sell after 2 years you could argue that any appreciation would have been taxed if you didn't live there so I could see an argument to you getting slightly more of that then 50/50 but it's probably a negligible difference in the end.  If you both want to partner together for a long time I wouldn't be too gready.  Have your partner get the next loan to even it out.  

Well, will you be managing it yourself as well or hiring it out? That would make a difference in my opinion. And I'm curious, how many units is it? 

How many units?

@Breland Almadova

We try and limit our rent increases to about 4% a year to limit turnover, but this year we are expecting to go to 6-7%. 

I’m not sure what rent calculator you are using… but wanted to offer some suggestions:

First, if $300 is making the difference between cash flow positive on a $2,800+ rental it sounds like you are pretty over-leveraged on the property. 

Keep in mind that if you lose your tenant by ‘over-raising’ the rent too much, and it takes you 30 days to put a new tenant in place, you will lose about 10 months of a $300 increase.  So short term you will be even more upside down and would have to cover the mortgage on your own for a month.  So while market might suggest the increase is warranted, there are possible negative trade-offs if you press your rent higher too fast.  There would also likely be some refresh costs to be ready to rent again (new paint / small fixes, etc).  

I would evaluate whether it might make more sense to sell the property at this point.  $300 a month cash-flow on that big of a mortgage / property hardly seems worth it (and you won’t even have that it doesn’t sound like if you DO raise your rent).   What happens when you need a new roof?  What does your cash-flow look like then? Negative for 10 years I bet.  You might be better cashing out what equity you may have and putting it to work otherwise.

All the best!

Randy 

Does your first purchase have any value add that you can perform the value add and extract the sweat equity?  If you had asked this before purchasing the initial property, my advice would have been to purchase a property with sweat equity potential.

At this point I think my main advice is to network and educate. Network will help you find decent contracts, referral to legal services if needed, referral to tax advisor, potentially some off market deals that are below MLS price. Educate on LL/tenant processes and regulation (initially important is good and legal screening methods), on different value add strategies, different loans available (interest only may provide quickest opportunity to use cash flow to scale to next purchase), and so much more.

Good luck

Do you have a good lease? Do you know it inside/out? Are you prepared to enforce it? How will you handle marketing, screening, collecting deposit, dealing with late rent, approving or denying a pet, dealing with lease violations?

Focus on reeling in the fish on the line and what you'll do with it once it's in hand. Then think about the next fish.