All Forum Posts by: Chris Rich

@Sabrina Dagostino There are still some Florida markets that are still good investments if you are appreciation focused, such as Palm Bay and Ocala, where you can buy new builds for $250-300k and rents will be between $1600-$2200, depending on area.  Both of those areas have seen 130%+ appreciation in the last 8 years.  Now, they are starting to get a little saturated, but you have some nice built in equity once you close. But I generally agree, it is getting tougher to invest in Florida and cashflow if you don't already own the property. 

As for Section 8, I don't have any personal experience with it, but I do know a couple investors who do Section 8 rentals.  Like Taz said, it can be more of a roller coaster LOL. The guaranteed money is nice, and there are a lot of tenants who are good tenants and appreciate the assistance.  There is also a higher risk of getting a bad tenant (IMO) and I have seen some pretty destroyed properties from Section 8 tenants (more so than non-Section 8).  

Quote from @Brian Maloney:

Lots of growth all around Central Fl but best ROI will likely be West/Northwest Orange County (Winter Garden/Windermere/Apopka) and into Lake County (Clermont). Areas south of Disney (Davenport/Winter Haven) are growing and could be solid options since their pricepoints are lower.

I agree, Horizon West is a great area in my opinion.  The purchase prices aren't crazy yet for a brand new build and the rental rates are pretty strong depending on the actual property ($2,600-$3,200).  The way that area is growing I think it would be a great area to invest for appreciation purposes while still having strong rental rates. 

Quote from @Matthew Lamoreaux:

@Marcela Patino  Currently I'd say the Lake Nona area to the south (large medical professional population), Windermere (large expansion out to the west currently), Winter Garden / Clermont (North West of Orlando) a ton of expansion to include a fitness community Olympusorlando.com.

@Marcela Patino

I agree, if you were talking about the appreciation for a primary residence, but for a rental I don't see how the numbers would work.  To buy in those areas currently the purchase price would be way too high for the rental rates they would command unless you put down a huge down payment or bought outright. 

Quote from @Duane Gunkler:

I have a 2BR/2.5BA townhouse that I have had the same tenants in for a little over two years.  They've been late on the rent forever, and have slowly been slipping further and further behind.  I am just not seeing any progress toward getting caught up so my options are to terminate them living there (they're on month-to-month now because I did not resign another lease) or I am considering selling the townhouse to be done with them and free up the equity.  Curious to hear some thoughts input from the hive mind?  I bought the townhouse in June 2019 for $158k.  It is worth approximately $250k - $260k (Zillow at $262k).  Rent is currently at $1725/mo.  Thoughts?

In my experience, when I have self-managing landlords come to us because they're running into this issue you are having, the tenants will cooperate at first, and then either stop paying and move out, or have to be evicted.  Some tenants are used to routinely paying late and take advantage of self-managing landlords.  The hard part is once you let them start paying late without penalty, they continue to do so.

I'm not sure selling solely because of a bad tenant is the best idea.  I highly doubt you would be able to replicate the same type of cash flow scenario currently.  I'd have a "come to Jesus" meeting with the tenants, and if they don't shape up, evict and find new tenants.  

Quote from @Eric Lowe:

I am looking to hire an established Denver firm to perform a cost segregation study on a rental. What sort of hiring criteria do you evaluate in the firm performing the study? And what is the usual fee range? 

Thanks in advanced,

Eric

@Eric Lowe I don't know if the cost is different in San Diego, but the two companies I know here in Florida charge roughly $2,500 for a SFR Cost Seg.

Quote from @Ryan Duphorn:

I'm having trouble deciding on whether to hire a PM for rental 1.

I close on my 2nd house with owner occupied loan next week. I've been house hacking rental 1 and will be moving into rental 2 with my tenant/roomate (cool dude). Rental 2 will need a few weeks to renovate before fully moving in (paint, cabinets, flooring, tile). I will be doing all that work myself then using plumbers & electricians to trim out the house. My fear is losing money in vacancy and regretting not just hiring a PM to quickly onboard and screen a tenant properly. A good PM around me charges 30% of rent to onboard then manage it for 10% / mo (only 1 unit to manage). My payment is $980 and market rent for my neighborhood is $2000 (per multiple PM's, 4 bed 2 bath). So roughly $3k a year expense for PM minus any maintenance costs. There's room there to pay a PM but I also work in construction in homebuilding so I have a team of trades/punch guys to manage repairs. 

But if I end up eating monthly vacancy expenses at rental 1 because I can't efficiently onboard a tenant for applications, screenings, showings, etc while renovating / moving into rental 2, than that $600 onboard fee would sound nice to pay for assuming they can get me a good tenant within a few weeks. But I know I can easily manage just 1 rental myself since it's local and I lived in it and renovated it myself and know the ins and outs of the home. 

Tried to keep this short as possible while still providing as much info as possible given my situation. Thanks

Vacancy periods are going to happen, its apart of owning LTRs.  I recommend to my clients to put aside 3 months of mortgages and $2-4,000 for turnover costs.  This should cover most turnovers outside of an eviction.  As for the onboarding time, assuming the property is rent ready, we are usually able to list within 48-72 hours of onboarding.  If it's a unit turn in-between tenants, our target is 10-14 days for the inspection, vendors providing estimate, and completing the work (depending on depth and scope of work.)

Quote from @Ayesha N Everett:

Hey. I am getting ready to purchase my first property and I am curious of what to expect. What does it take to be a good landlord in Detroit? 

If you only have one property and live close, you likely don't need a Property Management company.  But definitely make sure you do a few things.

1) Tenant Screening-  It is absolutely imperative you screen the tenants before accepting any funds or signing a lease.  My company has certain criteria- 3x the rent in gross income, credit score of 600+ preferred, background checks, eviction checks, etc.  Our eviction rate for 2022 was 0.3%.  Conversely, depending on source, self-managing landlords will see an eviction 20-25% of the time, which is likely because only about 65% do thorough checks.

2) Take pictures documenting the property before the tenants move in.  Open all the drawers, cabinets, every wall, etc.  Make sure the pictures are time stamped.  Have them complete a move-in check list.  Do the same inspection upon move out.  This procedure provides great evidence if you need to file a claim against the security deposit. 

3) Find a good lease that protects you and the property.  In Florida there are some readily available leases online that you can use, I'd imagine you could find something for Michigan.

4) Have a network of good vendors - This is a tricky one.  In my experience, vendors are 2 out of 3.... Good, cheap, reliable... not all 3.  A good handyman and plumber should cover most of your maintenance issues.

5) Make sure the property is rent ready - Have the property reflect the tenant you seek.  The tenants who are willing to pay top of the market pricing will want a property that reflects that.  

6) Have money in reserves--- If mortgaged, I would recommend 3 months of mortgage plus $2-4,000.  This should provide you plenty of money to cover any occupied repairs (outside AC or roof).  This should also be enough to cover any turnover costs as you should be able to turn the unit in 2-3 weeks (if not shorter).  As your portfolio grows, you can adjust your reserve amount if necessary.

Feel free to contact me if you have any questions.  Good luck @Josie Brown!

Quote from @Klesta Lamaj:

Quote from @Chris Rich:

Quote from @Klesta Lamaj:

Quote from @Basit Siddiqi:

It appears that you were aggressive with paying off the mortgages.
The issue you will have is that you won't get the same 3% to 3.5% mortgages.
Rates right now are likely around 7% for an investment proeprty.

The issue with HELOC is that it normally has to be on a primary residence and is normally a floating rate. I suppose floating rate is good if you anticipate rates to go down.

Thank you Basit. My parents are still living in it, for now. Does this mean, if I open a HELOC now, I have to close it by the time I'm renting it out?

Confirm with your lender and the type of HELOC, but likely no. As long as it is a primary at the time your take out the HELOC you should be good-- that was the case with my HELOC. Floating HELOC rates are typically around prime (but likely higher.) The fixed rates are usually shorter periods (20yr v 30 yr, with a 5 year draw period instead of 10 year.)

Thank you Chris! Will certainly check. 

 No problem! Good luck!

Quote from @Gopichand N.:

I'm currently encountering some challenges with my family's existing property management company and they are considering a change. Anyone with expertise and experience in the Lutz and Wesley Chapel areas, I was wondering if anyone could recommend any reliable property management companies.

I'm looking for a company known for its professionalism, effective communication, and ability to efficiently handle property management tasks. Any suggestions or insights you could provide would be greatly appreciated.

Thank you in advance for your help. Looking forward to hearing from you soon.

 @Gopichand N. What challenges are you having with your current PM?

Quote from @Klesta Lamaj:

Quote from @Basit Siddiqi:

It appears that you were aggressive with paying off the mortgages.
The issue you will have is that you won't get the same 3% to 3.5% mortgages.
Rates right now are likely around 7% for an investment proeprty.

The issue with HELOC is that it normally has to be on a primary residence and is normally a floating rate. I suppose floating rate is good if you anticipate rates to go down.

Thank you Basit. My parents are still living in it, for now. Does this mean, if I open a HELOC now, I have to close it by the time I'm renting it out?

Confirm with your lender and the type of HELOC, but likely no. As long as it is a primary at the time your take out the HELOC you should be good-- that was the case with my HELOC. Floating HELOC rates are typically around prime (but likely higher.) The fixed rates are usually shorter periods (20yr v 30 yr, with a 5 year draw period instead of 10 year.)