All Forum Posts by: Account Closed

My husband and I want to purchase a 2nd rental property. We have been listening to the podcast and reading the books. It seems like the advice when running the calculators is to budget $100 per unit each for cap ex, management fees, and maintenance and 5% for vacancy. Is this what others are doing?

We have run between 10-15 properties and have yet to find one that flows when using these percentages. Have we just not run numbers on enough properties yet?

Is it dangerous to lower the percentages for these operating expenses?

Each property is different for numbers to run them. A property that has to be fully rehabed before renting it will in theory have a lower capex expense since you just replaced all the capex items.

In a general wag for me I will use

5-7% for capex

10% vacancy

10% PM

5-7% for repairs

Depending on where you are findin deals you could be digging thru a lot of crap to get to the gold. Just don’t pass up on all the nickels and dimes in search of the dollar.

I don't know if you are looking at SFR or multi family. But my path has led me to multi family and hopefully mobile home Parks in the future. Good luck.

1 Vote

Originally posted by @Steven Smith:

Hello Everyone.

I'm in the process of closing on a 4 unit building in CA in which I will live in one of the units. I will be raising rents about 8% since the current owner hasn't raised rents in a long time. Even if I eventual move out and make it investment property, I'll still be negative CF of at least $200 to $300 a month. I know that BP has guidelines about cash flow being the driving force in buying investment property.

Would this still be a good investment since equity would grow from rents collected?

What are your thought?

Thanks everyone!!

It depends. Is that accounting for everything cap ex and everything else. Can you raise the rents 75 dollars a piece? That makes it break even. So you just need to raise it 175 bucks a piece over the next year or so to make money. But that's only if you are accounting for everything already. If not it could be a horrible investment

0 Votes

I night of missed it, but I don’t see insurance listed as an expense. Looks like it could be a solid deal if it is in the right area. Is this a C/D area

1 Vote

hold them to their lease. It isn’t your problem where the husband sleeps at night. He is obligated to the contract/lease and as such he has to pay. Let them know, in writing, that despite him moving out he will be on the hook if the rent isn’t paid and will be on the eviction paperwork if the rent isn’t paid. Word it nicely but firmly.

1 Vote

Originally posted by @Joe Kim:

Originally posted by @Don Konipol:

@Joe Kim Comparing STR with properties that run 12 + month leases is not a correct comparison. One is an investment in real estate; the other is a real estate related business. And if the property isn’t owned by the party running the STR business the analysis is much simpler. The real estate investment component doesn’t have to be separated from the real estate related business component.

The fact that you have to wait a year to obtain profitability information from your accountant is a bit scary. You should be getting monthly financial reports on your rental units, which should include the real cost of depreciation on the furniture and furnishings, as well as all repairs to each property.

One of the increasingly frustrating aspects of the STR business is that the places of greatest demand and potential profitability are the same areas that are passing legislation restricting a property owners right to rent his property short term. Whether it's because of the hotel lobby, politicians afraid of losing hotel occupancy tax revenue, or misguided liberals who think that the STR market lessens supply and raises rental costs for permenant tenants, these groups have been successful in getting municipalities to restrict STRs.

Have you heard of amazon? Almost never "profitable" but very successful. During the growth period, you may not be in the "black".

That being said, I've hired a bookkeeper to analyze the data for 2018 and prep for taxes. My first two rental arbitrages in California, I broke even in about 4 months. I've been profitable at $3000+/month for the entire 7 months after breaking even.

My Indy duplex had gross rents of $2200/month but now I get $6000-7000/month. Setup cost $20,000. That's approximately 5-6 months break even period.

My biggest setup cost was in Altanta - this is a giant home at 6 bedrooms/4bath that I tried to setup as an upscale home. Also, I didn't furnish it myself, I hired someone to do it...which cost more. So that property may take up to 1 year to break even in setup cost. But what's the problem, if I own this home and it's soon to be profitable at $3000+/month.

What I don't understand is the naysayers have never done STR or have failed. I agree not everyone is making money doing Airbnb or STR. I would say only about the top 10% of all STR owners are making good money and probably less than half are really profitable. But that's a law of business (and nature), not everyone is going to have the same success.

There is a secret sauce (that's not secret at all).

#1 Work your tail off

#2 Do it smart (learn from others or take a course)

#3 Keep improving your business

#4 Hire the best people to run your business. (Cleaners, cohosts, etc..)

#5 I cannot share on the forum. Message me.

It is a great story. The thing I think people had issues with your story was the useage of gross income versus net income. Since gross income takes into just inbound money and not after expenses. My gross number for my property is amazing as well, but I don't use that for anything at all because it means nothing. It's like saying a player swings 27 times in a single game... that means nothing if the reality is he actually strike out 9 times in a single game. Come back in a few weeks after you run your legit numbers and don't forget about reserve and everything else and the. See how much you made.

0 Votes

Originally posted by @Eric Nurmi:

@Clayton Coombs a friend of mine has strategies I’m using to significantly lower my taxes. There are new laws coming into effect this year that we can take advantage of and even use for 2018. I sent you an email.

Sign me up. I like money and I like keeping as much of my money as legally allowed.

1 Vote

Originally posted by @Nicole Obregon:

Is this a deal breaker for you? Is it an automatic disqualified? Or, do you take it on a case-by-case basis?

Here's some background info on my situation:

Renting out a townhouse in a decent, working-class area, some crime, but ok
Rent is $1,000/month, 2 bedroom, 1 bath, renovated

I have a prospective tenant who said that he has a past eviction, in 2015. His credit is spotty, but he said he's working with a credit correction / assistance company to get it straightened out and improved. He makes $5,200 verifiable income at his job. He explained that he and his roommate got evicted in 2015 because his roommate lost his job, and they had a hard time paying the rent.

WWYD?

I would pass. Leaving the unit empty for a month is so much cheaper then risking having to evict someone. I could see if it was 10 years old or something. But it was just 3 years ago.

Like everyone else here said during the eviction process there are tons of chances for the tenant to voluntarily move out. Florida it is 2-3 months without it being contested. So if someone tries to rent from me and has an eviction I am gambling on 2-3 months rent plus 2,000 dollars in attorney fees that they will always pay on time.

Why risk that much money to fill a unit 1 to 2 months sooner?

3 Votes

Originally posted by @Thomas S.:

@Account Closed

As Matt points out I would tell them on the phone when they called to open the door and let it out. I am absolutely not at my tenants beck and call.

One advantage that a C/D class property landlord would have is that they would not get a call. The bird would end up as dinner.

Haha. I can’t say that I’ve ever had city bird before.

0 Votes

Originally posted by @Thomas S.:

As their landlord you have a responsibility to help your tenant. Tell them to open the door.

Wow... your lease says you are there for them to abuse? Man that sucks.

If a tenant called a professional management company the PM would most likely tell them it was their problem to handle and would possibly give the advice given here of how to get rid of it.

I know I’m not running over to my property to do a tenant responsibility. Next they will be calling to do their laundry.

1 Vote

there's a strategy for everything. Typically a negative cash flow strategy is for someone that is trying to make their money by adding value or increasingly the monthly rents very quickly. The strategy takes money to be able to do those things. I have no desire to lose money monthly to gamble on appreciation, if I want to gamble I'll buy a lottery ticket. Is it negative cash flow with all the units occupied or just when you are house hacking in it? Because that makes a difference.

0 Votes

All Forum Posts by: Account Closed

Account Closed has started 23 posts and replied 927 times.

Post: Operating expenses for good deals

Post: Purchasing A 4 Unit Property With Negative Cash Flow. Bad Idea?

Post: [Calc Review] Help me analyze.. Liking what I'm seeing! I think?

Post: Tenants getting a divorce

Post: $200,000+ rents in 1 year - 10X cash flow

Post: How to avoid taxes with primary income from flipping properties?

Post: Would you rent to someone who had a past eviction?

Post: Tenant has a bird in there unit .. what to do?

Post: Tenant has a bird in there unit .. what to do?

Post: Paying on a muti-family