All Forum Posts by: Chris Good

 Hi Greg, may I ask what lock system you use for your rooming house?

Hi Henry, True sub-meter does sell commercial grade water meters which is similar to the city meters. And yes, your plumber might have some recommendations as well.

Thats a good question. In my area, some of the judges don't like ratio utility billing systems because it's not as fair. This way, there is no question as to how much water they are using and they are invoiced accordingly. 

In a softer rental market like we seem to be in now, it becomes much more important to focus on the boring fundamentals like controlling expenses. One of the ways we have been doing that in our multifamily properties is by adding sub-meters to the water lines of each apartment and passing the water usage costs along to the residents. If the property has publicly serviced sewer, which is most times billed based on the number of gallons of water used, by using sub meters, we now have the information we need to pass along the sewage charges. Then we simply divide the trash charges among the number of units in the building. With that we can eliminate our utility costs which increases our bottom line and adds value to the building.

In a building with 5 apartments, where the average monthly water, sewer, and trash (W/S/T) costs run $75 a month which is about our average, that would equal $375 each month and $4,500 a year. If the building is evaluated at a conservative 10% CAP Rate, the value of the building is increased by $45,000.

We’ve found this to be more readily accepted by our residents than simply charging a flat utility fee because it gives the resident more control of their costs. Most times the water usage drop is significant and the residents are much more likely to notify you when they have a leaking toilet etc.

We've also found that the expenses for the material and install is often recovered within two years or less.

Sometimes we need to reduce the rent by $20-30 less than what we would otherwise be able to rent it for, but in some cases, it doesn’t affect the rent at all.

I have been using meters from a company called True- Submeter for the past 5 years. They monitor the meters remotely, and send you and the resident a statement on the 1st of each month with the resident’s W/S/T usage and charges for the previous month.

I use their Model TSN1 - PVC Meter which currently costs $95 each.
Each building also needs at least one router which currently costs $195.

If you have your meters in a centralized location, you only need one router but if the meters are scattered throughout the building, you may need multiple .

There’s a monthly $6 fee per unit for the monitoring and invoicing.

If you decide to give it a try, feel free to use discount code msam10 for a 10% discount.

If you have any questions or comments feel free to reach out to me directly.

And if you need to buy a building to put Sub-Meters in, I’m happy to chat about that as well

In a softer rental market like we seem to be in now, it becomes much more important to focus on the boring fundamentals like controlling expenses. One of the ways we have been doing that in our multifamily properties is by adding sub-meters to the water lines of each apartment and passing the water usage costs along to the residents. If the property has publicly serviced sewer, which is most times billed based on the number of gallons of water used, by using sub meters, we now have the information we need to pass along the sewage charges. Then we simply divide the trash charges among the number of units in the building. With that we can eliminate our utility costs which increases our bottom line and adds value to the building.

In a building with 5 apartments, where the average monthly water, sewer, and trash (W/S/T) costs run $75 a month which is about our average, that would equal $375 each month and $4,500 a year. If the building is evaluated at a conservative 10% CAP Rate, the value of the building is increased by $45,000.

We’ve found this to be more readily accepted by our residents than simply charging a flat utility fee because it gives the resident more control of their costs. Most times the water usage drop is significant and the residents are much more likely to notify you when they have a leaking toilet etc.

We've also found that the expenses for the material and install is often recovered within two years or less.

Sometimes we need to reduce the rent by $20-30 less than what we would otherwise be able to rent it for, but in some cases, it doesn’t affect the rent at all.

I have been using meters from a company called True- Submeter for the past 5 years. They monitor the meters remotely, and send you and the resident a statement on the 1st of each month with the resident’s W/S/T usage and charges for the previous month.

I use their Model TSN1 - PVC Meter which currently costs $95 each.
Each building also needs at least one router which currently costs $195.

If you have your meters in a centralized location, you only need one router but if the meters are scattered throughout the building, you may need multiple .

There’s a monthly $6 fee per unit for the monitoring and invoicing.

If you decide to give it a try, feel free to use discount code msam10 for a 10% discount.

If you have any questions or comments feel free to reach out to me directly.

And if you need to buy a building to put Sub-Meters in, I’m happy to chat about that as well 🙂

It’s no secret the inflation has been running rampant the past 2 plus years causing a significant price increase on just about everything. While we can grumble and complain about how our money system is mismanaged and how our government officials on both sides don’t know what they are doing, unfortunately grumbling and complaining most likely is not going to help us. So, we kind-of have to just figure out a way to play the hand we’ve been dealt and make the most of it. Monetary inflation has been around for thousands of years but became more apparent to our generation over the past couple years. And you can have it work for you by using debt to purchase cash flowing real estate! This might sound like a crazy idea but hear me out before you completely throw out this idea, please. 😊

Most of the thoughts I’ll be sharing here are a combination of ideas from Keith Weinhold, host of the GRE podcast, and from Victor Menasce, host of the Real Estate Espresso podcast, along with a few thoughts of my own.

1. Price Inflation benefit

Let’s say we purchased an investment property for 1 million dollars. If our down payment was 200K (20%) and we borrowed the remaining 800K and If inflation was at 2% each year for 5 years for a combined rate of 10%, our 1-million-dollar property would now be worth 1.1 million. So how is that a gain? Isn’t that just an example of how our money is losing purchasing power?

Remember, when we purchased the property, we put 200K of our own money into it, so we started with 200K in equity in the property. But now, because of inflation, an additional 100K of equity (10% of 1 million) was added, bringing the total equity in our property to 300K which is a 20% return on your original investment each year, simply because you borrowed the money and let inflation do its work. Inflation worked in our favor because it raised the value of the entire asset, not just our initial investment of 200K.

Another thing to keep in mind is inflation erodes the value of your debt just like it does the value of your money sitting in your bank account. Which bring us to point #2

2. Debt Debasement Benefit

Let’s look at what happens to a 1-million-dollar loan with a 6.75% interest rate over 25yrs with an inflation rate of 3% (the federal reserve’s target inflation rate is 2%).

In that case we would be paying 2.07 million in principal and interest payments over the life of the loan. However, because inflation is continually eroding purchasing power (including debt) that 2.07 million is worth $967,000 in 25yrs in inflation adjusted dollars.

And if the inflation rate is at 2%, that 2.07 million is worth 1.25 million in 25 yrs. (a little more than you paid for the property)

So how can a 2% interest rate devalue the currency faster than the life of the loan? It’s because of the way a loan is amortized, after we reach about the halfway point, the payment, which remains the same through-out the life of the loan, has an ever-increasing portion going towards our principle pay-down.

If inflation remained at 9%, 2.07 million would be worth 196K in 25yrs!

Inflation can work for you by eroding the value of your debt!

3. Increased Cash-Flow

Let’s say we purchase a 10 unit building for 1 million.

Each apartment leases for $1,400 for a total of $180K a year

Your 6.75% mortgage is $82,908 a year.

Property Taxes $12,000

Management fees $14,400

Maintenance $7,500

Vacancy $6000

Trash $4,800

Water/Sewer $21,600

Electric $3,000

Insurance $5,000

Which would leave you with about $22,792 at the end of the year.

Now let’s see what happens to our cashflow in 5yrs. with 2% year over year inflation on rents and expenses. Your loan will remain the same because we have it locked at 6.75%

Rents $198000

Mortgage $82,908

Property Taxes $13,200

Management Fees $15,840

Maintenance $8,250

Vacancy $6,600

Trash $5,280

Water/Sewer $23,760

Electric $3,300

Insurance $5,500

Our cash flow is now $33,362. Inflation worked to our benefit by increasing our cashflow.

This is what happens in a “normal” market over time just from inflation, this does not factor in the rents and property values increasing higher than inflation like we have just experienced, or a loan locked in lower than 6.75% etc... which would only improve these numbers.

So, this is how inflation can work for you, it doesn’t matter the size the property or loan to have it work in your favor, but the key is to take action and put yourself in a position to capture the benefits. : )

I would love to hear your thoughts!

@Joe Villeneuve thank you for the kind words.

As a realtor and real estate investor myself, I get asked this question a lot, and here are some of my thoughts on that question for buy and hold investors based on my experience, and after listening to folks that are a lot smarter and more experienced than myself.

1. 1. Time is your friend, and the passing of time is how wealth is built in real estate. While the real estate market does have cycles just like the stock market (usually not as dramatic), it’s difficult to time it just right. Some folks think if they wait, maybe they can get a better deal and maybe they can, but the more likely scenario is that they find themselves a few years down the road still waiting for the “market correction” while in the meantime, missing out on the cashflow, price appreciation, tax benefits, and mortgage pay-down from the tenants. Most real estate investors I know wish they had started investing in real estate earlier “back when houses were cheap” no matter how early they started.

1. 2. What about the high interest rates? My answer to that would be, interest rates don't matter that much if the property cashflows and your interest rate is fixed. Your tenant is the person paying your mortgage anyway and, in the future, if/when the interest rates drop, you can refinance and improve your cashflow! But until then, why not let your tenant pay down your mortgage, put some cash in your pocket each month, let inflation erode the value of your loan (more on that another day), and take advantage of the tax benefits?

1. 3. According to National Association of Realtors, we are over 5 million housing units short nationwide (other sources I've seen show 4-6 million housing units short). While some pockets of the country are affected worse than others, here in Central PA we are definitely experiencing a shortage. A real estate market is considered "balanced" when there is 4-6 months' worth of housing inventory for sale. As I write this in March of 2023, our average monthly supply of houses for sale over the past year averaged 1.1 months' supply of inventory according to Bright MLS. Also, the supply shortage is not just affecting the buy and sell side, the residential rental market is also affected by the shortage which has caused rents to increase rapidly. (Over 18% nationwide in the past 2 years) And while I don't have a stat to show you on this, we have been getting units leased within a week or two after it hits the market. And guess what low supply and high demand does to prices?? That's right, increases them! (It'll be interesting to see what happens to inventory and prices if/when interest rates drop)

We’ve all heard the adage that says, “The best time to plant a tree was 20 years ago, but the second-best time is now” I think it’s safe to say investing in real estate is much the same. I am still buying with the intention to hold for the long term and plan on continuing buying so long as God grants me the gift of life. 😊

If you gave the resident proper notice and have evidence of that, I would say you have a pretty strong case for eviction. You could always offer cash for keys to try and speed things up..

I've used REO Link and have been happy with them. https://reolink.com/us/flash-s...