All Forum Posts by: Casandra M.

Have you visited commercial banks? 

What are the reasons the banks are telling you they won't loan the money... are they literally just saying "we don't do investment properties"?

I think this varies from person to person, but it was under a year for us. We got overwhelmed by the mass amount of information online so we ended up just making the decision on what we wanted out of our first rental (Short term) and what we wanted out of a real estate investment business (long term). 

We questioned everyone that we had to deal with during the offer and closing process about everything, and read every word of every piece of document we had to sign, which is where the most useful learning was for us because it was information relevant and pertinent to the current situation we were experiencing and not just a bunch of advice we were trying to piece together from online that may or may not be important to us.

I'm in Wisconsin and this falls under municipal codes so it varies from city to city. Since this happened once to you though, it wouldn't hurt to now call your insurance company and see if that type of damage is covered in general.

This is more of a light hearted story: When Epic Systems built their giant new campus in Verona, WI, they ended up not passing the fire inspection because the underground parking clearance was too low for the fire trucks and ground areas were not supported enough for a fully loaded firetruck to access parts of the building because of the surrounding marsh lands. It was cheaper for Epic to purchase new fire trucks for the city and have the city resell their own firetrucks to surrounding towns (including my hometown) than to do any modifications.

Every time I remember this I think of Oprah yelling "YOU get a firetruck. and YOU get a firetruck. and YOU and YOU and YOU!"

This definitely depends on the standard of the neighborhood as it affects tenant expectations, but generally, I just make sure at least a queen size bed can fit with a dresser.

We just closed on a property last month with a month to month tenant... in this case, we were ok with it because the unit was severely under-rented so it gave us the opportunity to raise rent right away. 

Generally, if the unit needs any repairs/remodeling or is under rented, month to month tenants work for us. Otherwise, we prefer empty units to choose our own tenants. If we had bigger units, like 4+ units in one building, we would of course not want them completely empty, but this was a duplex :)

You should qualify for the FHA loan, but they will be more stringent when it comes to the condition of the property. There is however, the option of doing a 203(k) FHA construction loan if the property is not in appropriate condition for a traditional FHA loan.

At a minimum, we consider:

• Mortgage P&I
• Insurance
• Property Taxes
• Any utilities (gas electric water)
• General maintenance cost as a % of rents, as a realized cost
• Property management fees if applicable
• Expected vacancy rate as a realized cost (we use 1 month vacancy which is realistic for our area and properties)

Lastly, we amortize a savings plan for the next large piece of maintenance as a monthly expense since we are fairly conservative. So if a roof needs to be done say, about 5 years from the date of purchase, we estimate the cost of replacement and amortize over 5 years as a savings to come out of rent profits. We track this savings amount in a separate savings account for our properties to ensure larger maintenance costs aren't being overlooked or spent on something else. 

In our case, we lived in our first duplex while remodeling it. We re-did the electrical in the downstairs unit that we were living in, and used the electrical codes that the city was transitioning to in the following 6 months (did the work in July, codes went into effect the following January). Got the inspection done and got coded because we weren't compliant to the current codes..... which were less safe than the new codes that were going into effect in those next 6 months... we fought it and were eventually left alone by the housing authority but we had to raise hell in the process.

 I completely agree. The minimal negative cash flow is only because of your own (positively) aggressive plan to pay off early - if push comes to shove and you need it to produce monthly, just refinance into a commercial loan. Plus, if the profit of your other properties can float that cost + the maintenance for 7 years, then what is the true harm?

Sounds like you have a good deal ahead of you - congrats!