All Forum Posts by: Carl Millsap

Mubarak, 

Depending on the size of your porfolio I'd do software demos for Appfolio, Rent Manager, and Rent Vine.

I currently use Housters and Appfolio. I had Rent Redi before - good for rent collection and maintenance. 

I looked at Stessa and a few other software companies it really depends on where you are and where you're going with your portfolio. 

Appfolio is pretty robust, it allows you to track subsidized housing payments; the maintenance and accounting system is all tied neatly together. You can set reminders etc. I recommend it, it's easy to use, and they're always improving the system.

I started with Housters. I keep it as a check and balance / redundancy against appfolio which my office manages.  

Hope this helps.
 

Spenser, 

Keep It Simple...let the current owner provide you a tenant free property. 

Do they have a valid lease? When does it expire?

Once you close the problem with those tenants whom you don't have a relationship / history with will be yours. 

Sounds like you plan to renovate when they move. They have 0 incentive to let contractors in once you take ownership, and the current owner has 0 incentive to assist you with them once you close. 

Don't take on someone else's problem....good luck. 

Lucas, 

Some things to consider:

1. If the property goes unrented or is rented but the tenant doesn't pay can you cover the mortgage, eviction cost, renovation cost and holding cost during that process and pay your bills? I'm thinking your $1k negative cashflow is factoring the place is rented. Just because it's rented doesn't mean the tenants will pay. Look at worse case scenarios. 

2. What is your financial goal? Can you take the small profit which may qualify as "tax free" and invest in properties on the mainland, or in a retirement account. Sure it may not grow as fast as the potential appreciation of a property in Hawaii but it will reduce risk.

3. The only time I recommend an investor take a negative cashflow deal is if they have a high W-2 job and need to offset taxes, and /or they can afford to wait for a house to appreciate. While HI has a lot of potential for appreciation consider the changing landscape with interest rates and people's ability to buy a house right now.

Ultimately, let the numbers decide. Can you truly afford to hold the unit for months without any income from it? 
 

Hello Chukwuma, 

What is your background? Do you have renovation / development experience? If the house is scheduled for tear down that implies the repairs etc are extensive. 

1. Is the foundation solid? Check with the City or government entity who determined it's uninhabitable to find out why. Once you know this...

2. Get 3 contractors to give you an estimate on bringing it up to code/ rentable condition.

3. Talk with the City / government entity about the projected repairs to see if that will suffice to stop the demo.

Once the above is done, then determine if it's a project you want to pursue. Are you financially in a position to handle the cost to see this project through? Is the ARV more than the expense of taking this on?

If you don't have a background in renovations / project management / construction I would recommend you leave "deal" alone. No deal is better than a bad deal and this appears to be a bad deal for a first deal.

@Adrian Akerman what's your long term goal? 

Do you want to have a rental portfolio?

Do you want to scale to multifamily or just flip properties?

1. Without knowing your goal my answer is simply re-finance it, let the tenant pay down the mortgage and use the $ from the refinance to work on your other properties. Rinse and repeat. 

2. Consider the tax implications of each scenario.

Hope this helps...

@Michael Chalke yes I've had this situation before.

1. Check with the gas company, local tenant advocates and your lawyer to see if you can turn off service because she failed to switch service. If the gas is the heat source I'm thinking you can't just shut it off.

2. Worst case scenario have her reimburse you for the gas until she can switch it. Section 8 usually has a policy about tenants paying amounts outside the agreement to landlords, but I would think when they financially qualified her for this gas was factored in.

3. Moving forward don't depend on the tenant to switch utilities. I learned this lesson the hard way. It cost me $278.14.....15 years ago. 

When we sign a lease we call / email each utility a request to shut off services in our name. We notify the new tenant when services will shut off so they have time to turn them on. If the tenant moves in w/o service that's on them.  

Hope this helps

@Alex Clark the fear is understandable. There is a lot that goes into this business. I'm not sure what level you plan to invest at or where but think about this. 

If you have 10 single family houses in a town with 5,000 people do you think you can find 10 people / families to rent. a house?

The key is to know your numbers, plan for worst case scenario. 

If the place is vacant can you pay the mortgage yourself? 

Are you disciplined enough to put the profit away so you can handle renovations, repairs, etc.?

For the most part everyone needs a place to stay. Look at realtor.com, Zillow etc to see what rents are for properties similar to what you want to buy. 

Don't let the fear (False Evidence Appearing Real) keep you from pursuing this business.

Hope that helps

@Prince Martinez on the face it looks like a feasible deal. 

1. How much time is left on the current leases? Will the current cashflow cover your expenses at the stated purchase price? If the tenants have long term leases you may not be able to increase rents until those leases expire. 

You don't want to start off in the hole.

2. What will the cost of renovations be? 

How long will it take you to recover that investment with the difference in rent? Let's say it's going to take you $7k to renovate a unit not including the carrying cost of having it vacant. On the unit currently renting for $500, when renovated the rent will be $900 so it'll take you almost 18 months to recoup the $7k investment. ($7k divided $400).

3. How did you verify your numbers? Did you check local listings for rent estimates? Talk w/ property managers? 

Long story short let the numbers make the decision for you.

1. Plan for worst case scenario.

2. Ensure the cashflow covers your expenses.

3. Don't let the emotions lock you in. Walk the property with someone not tied to the deal, they may see something you don't. Trust me this saved me from buying a house that was about to fall down early in my journey. 

Hope this helps

@Sendil Thangavelu absent local laws yes you should be able to sign an addendum that the lease continues as originally signed on X date. 

I would also look into adding a clause that states the lease continues after expiration for 1 year unless the lessor or lessee provides written notice 90 days before expiration their desire to terminate the lease. This as long as it complies with local laws should prevent the annual lease renewal process. 

Consider when you want to do rent increases if any when you write lease continuation clauses. Our leases continue month to month after the first year. We've also done 6 month renewals which allows flexibility if we need to change some terms and conditions at the next renewal.

Hope this helps

@Tracey Lane consult your tax advisor.  I'm not a tax professional but I've run similar scenarios through my advisors and here is the considerations:

1. You would have to count the rent as income on the other side of the equation. The S-Corp will get the deduction, but you and your parents will have to count that rent as income personally potentially offsetting deductions that pass through to you at the end of the year from the S-Corp.

2. If it's an income producing property will you have to pay County and City taxes because it's a rental property? 

3. If you write off expenses i.e. depreciation because it's a rental you may have to recapture that depreciation when / if you ever sell. 

Hope this helps.