All Forum Posts by: Chris B.

If you are handy, you can purchase and install your own mini-split.  I installed a high SEER Mitsubishi 18,000 BTU heat pump / AC and then had an AC technician come out at the end to vacuum the lines and do the final electrical hookups and verify everything was good all for under $3k.

I think you will need to be much more specific. Too many factors at play here. Size, condition, rooms, location, nearby factors that affect price. If you provide a sample property address, those who know the market may be able to provide guidance. Price of the house has minimal correlation to rental income. Some people get great deals and others overpay. Some purchases return excellent ROI and others do not.

As you can see a lot of people on this forum including myself don't have a direct goal of any particular number in our bank account.  We see the goal of continuously building wealth with your profits.  We can cash in at any time, but that isn't the goal.  How quickly you accumulate wealth I think is what you are asking.  The answer is it varies wildly and can not be predicted.  It depends on environmental conditions and your decisions.  Some people can start with nothing and wisely manage their RE business and have a million in a few years.  Others can start with $100K, make poor decisions, and loose everything.  Some people have high risk tolerance and others do not.  I have been slowly acquiring RE ad do not have $1M in equity.  I'm guessing that if you take all RE investors in the US, more than half do not have $1M in equity in their lifetime.  Many do as its not too hard to get if you make wise decisions and are active.  Only your decisions can predict your outcome.

Its the snowball effect for me.  Whenever I moved in the past, I bought a new home and rented out the old one.  It was a decade long process for me.  Now after that time, I've acquired a decent amount of equity across multiple properties and utilized cash out refinances and have the ability to purchase a property with cash should I want to.  HELOCs are a similar option for some.

I think one important aspect is being missed here. A large tree is certainly capable of destroying a house if it falls on the home. Generally if a healthy and well maintained tree falls over, it’s not considered the fault of the property owner and any loss is the responsibility of the person who suffered the loss and their insurance. However if the tree is not properly maintained or is unhealthy, and it falls over and destroys a house, the land owner of where the tree was is completely responsible for paying for all damages. Your neighbor may be annoying and bothersome. You can deal with that. However, the neighbor is probably also taking pictures and documenting every transaction and conversation building up a case indicating problems with the tree should it ever fall over and cause damage. Don’t let your neighbor or neighbor’s agent onto your property. I suggest you have a certified professional provide something in writing that the trees are safe, healthy, and well maintained for your proof should something happen. And if it’s not safe, do what it takes to make it so. And having an arborist take a look and tell you it’s safe isn’t sufficient. Get it in writing as an official assessment. Treat this appropriately now so that should there be a problem, you are legally ready.

If part of the tree overhangs someone else's property, and the part falls and damages a truck there are two options.  If it was a healthy tree, you should have engaged the owner before the issue and expressed the concern and documented it.  If the tree was unhealthy or poorly maintained, you may still have a case after the fact to seek compensation assuming not too much time has passed.

It’s good that you’re asking questions and trying to understand this. It sounds like you are asking if you should purchase a home if your W2 is not sufficient alone to cover the mortgage. The answer is more complex than a yes or no based off your W2. The majority of American families don’t have more than a W2 for income. So for them it is a major factor and the simple answer is no, they should not make the purchase. W2 income only becomes somewhat less important as other steady income comes into play that can be considered. If this is your first property and you want to rent half of it out, that’s great. However a bank will see this as your first house and you have no experience renting and have no history of rental income so there is nothing to consider other than the W2 income. Income isn’t the only major factor. Your debt to income ratio, credit score, cash assets available and more are also considered. If you had 3 properties (and lived in 1 of them) and wanted to purchase a 4the property, then yes, along with all of the other factors, a bank would consider rental income. They would be interested in your current rental income and apply 75% of it to your counted income. In the end, your overall income, credit score, backup assets, down payment, debt to income level and much more are all still considered before you can get a loan. After 4 properties, adding additional rental properties gets even more challenging as the emergency reserves requirement increases. There are other types of loans that are based on the equity of the property and you need to put down maybe 30% so the lender isn't at risk as much and these may have higher interest rates but less restrictions.

Back to your question… I don’t think in general it is a good idea for someone with no experience to obtain a mortgage that is more than their W2. Can they pull it off? Sure it’s possible to pull it off and succeed nicely. I’m speculating it’s not likely though. If you don’t have decent emergency funds, what will you do when you are laid off from your W2 or have a major medical problem that is both expensive and takes you out of work. The bank does consider and factor in these possibilities. You should also.

In the end, you have to take some risk to make money.  Just be smart about your choices.

I think some people here may have misunderstood some of the OP's information... or maybe I am :) It sounds like a repair guy came out and replaced 2 pounds of refrigerant. It could have been R22, but I suspect it was R410 as the AC is only 5 years old and R410 isn't nearly as expensive as R22. Installing a R22 system just 5 years ago would be malpractice in my opinion with it being banned. This top off of the refrigerant probably cost $250 or so. Then the OP stated it would cost $1500 for a repair. I suspect it was implied this would be the cost if a major component needed to be replaced. If it’s a simple hose leak at a solder joint, that would be repetitively easy for a tech to identify and fix. $1500 to replace an evaporator isn't bad given the industry. I had a Lennox evaporator coil fail in under 3 years on a new unit. Very disappointing. Lennox supplied the parts at no charge but I had to pay for labor and refrigerant. It was about $1500 many years ago.

Assuming you know no history on the unit as you just acquired the property, I would wait and see how long it takes for the leak to cause another issue. Maybe it’s a very slow leak and you won't need to touch it for another 3 years. Even if you do need to touch it, its maybe $250 a pop for a refill. If you do need to refill it within a year or to, have the technician also diagnose the leak. If it’s a simple fix, they can resolve your issue right then and there. If it’s an evaporator or condenser, it will be a more expensive fix, but still a fix none the less. I'd rather pay $2k to properly fix a 5 year old AC than pay double or triple that for a new system. Just make sure you have time before the warranty expires. If it expires soon, get the leak traced before it’s too late.

Also, most people don't seem to know this, but when an AC dies of old age, the AC needs to be replaced. Not the entire unit. Here in AZ, the AC and heater are usually in one package. I had an AC die and got 4 estimates. They ranged from $7200 to $9500. Then I got a 5th estimate from a local guy. He took a look and saw the blower fan was fine and the heater was also fine. Only the AC part was bad. He charged me $4200 to completely replace the AC. So, my lesson was don't fall for a slick sales guy selling you a whole package. Only get the AC replaced if that is all that is bad.

If you are getting a traditional primary home mortgage for this, I suspect the bank will make sure you can afford the property before they offer you a loan. The debt to income ratio is too high in your example and the bank won't like that.  Also, it is not in your best interest to take a loan you can't afford to repay.  If this is your only home, and you don't have experience as a landlord and know the business, that is extra reason not to do this.  With that said, if you can pull this off, you certainly will be leveraging your assets well.  There's just excessive risk here.

My required security deposit is slightly more than 1 month’s rent. I require that at signing or there will be no signing. I require the 1st month’s rent before I hand over the keys. If I don’t receive the 1st month’s rent on time, the applicant forfeits the security deposit and I start over. In my early days, I’ve accepted a very small security deposit and the applicant found something else she liked better and never notified me or followed through with my property leaving me in with no renter and none on deck when the day came. Learning lesson. In your case, if the applicant has 4.2X rent in income, it’s unlikely there is a decent excuse to not have the deposit on hand. At the rental rates for your property, I’d be extra careful. It sounds like a tenant’s money management issue. I understand 690 credit may qualify, but it is far from being considered good credit.  Here in AZ, a landlord doesn't have to return the deposit until 14 days after the move out.  Are you willing to have someone move in with zero deposit?  Not a good choice.

The terms of your agreement state how it can be canceled.  You will need to refer to that.  You may have backed yourself into an uncomfortable position.  Look for a CA Realtor contract and use that one.  They are fairly bulletproof.

I would definitely want to read the rental contract and look at the payment history and deposit before I agreed on a purchase price. As stated, there is a very good chance the situation is sub-par. I would still move forward with the deal, but account for in my offer any likely lost income due to sub-market rents, likelihood of Covid non-payment, etc...