All Forum Posts by: Michael Win

Aaron,

My LTRs are professionally managed.  I understand the importance of tenant selection but my duplexes are on the lower end so the choices are from the same economic Pot so they tend to bring more people in to live, never cut the grass, do the bare minimum.  So after they move out, it usually requires new paint, patch holes, some appliances need replacement.   My tenants typically stay 2-3 yrs and wear the place out.  

The MTRs I manage it myself.  People leave it very clean.  I essentially spend  1  hr to bring sheets/towels home to wash, put in new set, run dishwasher if needed.  Cleaners come.  I come back for another 1 hr to replace consumables like paper towels.    I am getting the processes streamlined where I spend about 2 hrs for each turn over x 6 a year, so I think about 12 hours.  Throw in another 10 hrs for repairs I can do myself and I am thinking 24hrs/yr/side.  Rest is just communicating with guest.  

I will say that this is much less time than I would spend if I had LTRs dealing with all the repairs that they requests.

Plus with MTRs, I get to inspect it regularly and people renting these are high income professionals with occupancy of  1-4 people who rarely have any regular get togethers.  LTRs in  my price range may say 4 renters but it ends up 4-8 on a regular basis with weekly parties.   
 

From what I can see, it is night and day.  I expect to have very little maintenance requirements for my MTRs.  

I echo Ops Pros vs cons with the exception of LTRs taking care of the place.

After a LTR leaves in 2-4 yrs, the place is always trashed with more people living in the place than stated.  Typically families with bunch of kids who rarely cleans the place.

MTR guests keeps the place pristine b/c they typically are professionals without many kids.

Here is my journey. I never knew MTR existed but figured it out due to Austin's STR restrictions. I have great experience with STRs and my LTRs have so many negatives esp on lower rent homes/duplexes. I decided to try STRs but Austin restricts them. I have 4 duplexes and decided to turn one into a MTRs earlier this year. Been in the Duplex LTRs for awhile and my places/rents are typically on the lower end so the maintenance and kills any profit but appreciation has been great.

Anyhow, typically rent each side for about $1500/month and LTRs at this level typically trashes the homes and leave requiring 10-20K in repairs after 2-3 yrs.  So typically after 7 yrs of owning these duplexes, I have been cash flow neutral.  With Taxes essentially doubling last 2-3 yrs, these places are money losing holdings.

So in Jan I decided to put in 50K to do a complete inside renovation and furnish both.  If MTRs didn't work out, I could do LTRs fully furnished.  1st started on one side furnished then quickly furnished the 2nd as the 1st  rented quickly.

Fast forward to June, and both sides have been about 90% rented through July @ 5600/mo both sides. 

MTR 5600x.9= 5k - 1k VRBO/Airbnb/utilities/lawn care= 4k income/month. Cash flow prob 2k/mo accounting for PITI.

LTR 3k - 350 Prop manager = $2650/mo income.  Barely cash flows and negative when renters move out for another costly rehab.

Major benefit is place is well care for, I check on it every 1-3 months, renters keep the place clean/well care for, lawn always done vs LTRs where condition is always trashed requiring about 20K every 2 yrs.  It has been 6 months and both sides look like it was just renovated.

I plan on converting another duplex the same way in the next month and if it works out, I will eventually convert all 4.  I would be happy cash flowing each home $24000/yr x 4 appx 100K.  My 4 duplexes each have about 50K left on the mortgages and once paid off, should increase to about 125k/yr.

My STRs cash flows about 80k/yr and once I pay off the 500K in mortgages left will cash flow about $130K/yr.

This house is in habitable. It was rated a C4 and structurally sound. There is no functional issue. Everything works. Everything that they won fix is cosmetic such as changing out the carpet, changing out the tile, fixing and repairing the soffit. The renters just moved out of the house and have no complaints or issues living there. These cosmetic issues holding up a loan and having to be fixed, makes no sense to me.

Bill,

There is no way for me as a buyer to fix a property that is not mine.  The seller is not going to fix these issues b/c he would be put at different levels of risks.  Plus fixing anything would be impossible before closing.

Anyhow,  The lender now wants me to get an estimate of costs to fix and put money in Escrow.  Makes no sense as the appraisal valued the home above sale price "AS IS"

If this is what mortgage companies can do, they can literally use the deferred maintenance clause on practically any home over 10 yrs old.

I have closed on Homes in worse shape and NEVER had someone require me fix deferred maintenance.  My 6 yr old million dollar home has deferred maintenance if you look into it.  

I don't know what is going on with underwriting, but it looks like they are trying to find reasons to not do loans.  As a borrower, I am able to jump through these hoops.  But most people are not able to do this.

What is the point of doing a stall tactic?

This is a great loan for them.  I have high assets, high income, great credit that can easily cover the loan.  

I almost feel like they are finding a reason to not do the loan, which is strange.  This property other than cosmetic is sound and safe.  No different than any other properties that I have dealt with.

No other appraisal every brought up deferred maintenance like the carpet being old.  I mean, why does an old carpet matter?

So is it best to just go to a local bank that can be more easy to work with?

I have a home under contract. The Sale price is 15K under the Appraised value. My finances, income, credit history are all in order without issues for best rates. Typical 20% down.

The loan is in the final stages and received prelim approval last week and expecting final this week. Close is in 3 wks.

I get a call from my broker that the underwriter reviewed the Appraisal and the appraisal has "deferred maintenance" on the inside (carpet, tile), outside (Soffit). He gives me the impression that they would like this fixed before closing.

This makes no sense to me
#1 - all of the rental properties I had these same issues and it was never brought up b/c it appraised at sale price
#2 - All older homes will have these deferred Maintenance. If the seller fixed all of these, he would sell it for a Higher price
#3 - Who cares about these deferred maintenance. The place is livable, and not a hazard. There were tenants in it for years without issues. Everyone has deferred maintenance in a house.
#4 - The house appraised over Sale price. Even if I did nothing to it, the appraisal states I could sell it over what I am buying it for.

Has anyone heard of this and how can any lender expect the buyer to fix all of the deferred maintenance before closing?

Anything to do about this?

I have a home under contract. The Sale price is 15K under the Appraised value. My finances, income, credit history are all in order without issues for best rates. Typical 20% down.

The loan is in the final stages and received prelim approval last week and expecting final this week. Close is in 3 wks.

I get a call from my broker that the underwriter reviewed the Appraisal and the appraisal has "deferred maintenance" on the inside (carpet, tile), outside (Soffit). He gives me the impression that they would like this fixed before closing.   Home is rated C-4

This makes no sense to me
#1 - all of the rental properties I had these same issues and it was never brought up b/c it appraised at sale price
#2 - All older homes will have these deferred Maintenance. If the seller fixed all of these, he would sell it for a Higher price
#3 - Who cares about these deferred maintenance. The place is livable, and not a hazard. There were tenants in it for years without issues. Everyone has deferred maintenance in a house.
#4 - The house appraised over Sale price. Even if I did nothing to it, the appraisal states I could sell it over what I am buying it for.

Has anyone heard of this and how can any lender expect the buyer to fix all of the deferred maintenance before closing?  How do I go about satisfying the lender as getting another lender at this time would be difficult?

Neg cash flow from Day 1 just gets worse once unexpected expenses come.  

Unless you make alot of money on your reg job  to cover the neg cash flow, you are setting yourself up to fail.

Good luck

I must be way tooooo nice as a landlord.  I would not even think of charging someone for 2 yrs of wear and tear.

One of my units was flooded by the rain.  I could have went cheap and just dried/wash the carpet.  But I decided to just replace all of the carpet b/c I plan on getting rid of all carpet anyhow.  

Knowing its a big inconvenience, I put a POD for them put their stuff in and put them in a hotel for 4 dys while we did the work.

I believe in doing the right thing.  We all have difficulties in life and I appreciate when someone goes out of their way to help out.  Its not always about making every penny.

If someone was a good tenant for 6 yrs, I would not only give them their deposit back but likely a gift card to thank them for 6 good years.  You never know, they may come back and need a place to rent.