All Forum Posts by: Josh Michel

I've found a duplex I'm interested in buying in NJ.  I have the ability to purchase it cash and then later refinance, or I can just take out a mortgage for the property.  I would live in neither unit and rent out both.

Which is the better move? Are there any limitations to purchasing cash and then refinancing? Any timing issues I may be unaware of? Do I have to wait to pull my cash back out for a period of time? I can get a 80% LTV mortgage fairly easily, would refinancing a cash purchase be able to get me back to an 80% LTV?

What are the advantages and disadvantages to each?

Hey Patrick. I applogize for my poor phrasing. With a hold out I meant a non-paying tenant dead set on doing everything in their power to remain in the unit for as long as possible. Basically needing to evict with reason, either failure to pay rent, or being a literal hold out at the end of a lease where they refuse to leave should you want to replace them with a new tenant for whatever reason.

This is a 6plex, so a commercial residential building, if that makes a difference. I would not be residing in any of the units.

I'm looking at a property in NJ that I KNOW will eventually have a hold-out tenant.  I'm curious if any of the board members know what NJ's eviction process looks like, with regard to timeline and general costs.  I'd like to build it into my calculation for determining whether the deal is worth it.

Of course there are other possible solutions, like cash for keys, but assuming they tenant actually refuses to leave and I have to go the whole way through eviction, what can I expect in terms of legwork, out of pocket costs, and maybe most importantly, time until I can have my unit back to re-rent?

Thanks so much for the help!

I've found a 6 unit property I'm thinking about purchasing.  Every unit needs major work (some electrical, plumbing, etc.) but the purchase price still makes it a very good deal even after rehab costs.

I have a contractor friend that I've been thinking about trying to partner with on this property.  I'd be the money guy, he'd fix it up.  On a normal fix/flip you'd structure a deal where you do some sort of profit split after sale.  For a buy and hold it's a little trickier.  I'm trying to come up with a model that will work for the Money Guy/Labor Guy model for a buy and hold.

My initial thoughts would be I cover all expense of the purchase and flip.  Have him do the work to bring the units up to snuff.  Try to have him do the units 1 at at time so we can start renting one while continuing to renovate another.

Then do an 85/15% split of rental profits until I recover 50% of my expenditure, then have it drop to 70/30% until I recoup the rest, and then have it settle at 60/40% into perpetuity.  Any maintenance would be handled by him and come out of the profits.  Anything beyond the profits would of course be added to my recovery amount.

If he ever wants to sell we'd get 3 independent appraisals to determine an appropriate sale price and I would buy him out.  If we both want to sell we of course just market it and split the proceeds, 100% until I'm fully compensated, then 50/50% the rest.

My questions are, does my initial plan make sense?  Am I being objectively reasonable in my profit splitting?  What am I missing if anything?  Is there a better way to do it?  Do I need to have him put in 10% or so to have "skin in the game"?  Am I just flat out wrong in thinking this is a good idea?  

I'm recently under contract on my first investment property, a Triplex, one unit of which is vacant.  I'd like to try to fill the unit for as close to the closing date as possible, which is about 55 days out.

Is it OK to shop the unit (with the current owner's consent) with the available date as a few days after close?  I realize I cannot show the unit (unless I get permission to from the seller of course) until then.  Assuming I cannot show it, is it wise to try to fill it?  At least get the ball rolling?  What pitfalls will I hit if I do shop it?  Does a rental get "stale" if it sits on the market too long because I cannot fill it until after close?

What would the BP forums recommend?

I'm a first time landlord and I just went to contract on a triplex yesterday.  I've been following the forums and podcasts for years and am finally taking action.  I however now have a boatload of questions.

1.  The sellers recently inherited the property and are just looking to turn it into cash.  The original owner did everything month to month with no leases.  NOW there are leases in place, they were signed to make the property marketable.  However, the leases don't mention security deposits.  I'm thinking I'm SOL on getting them, which is concerning, however the leases themselves don't mention them so I think I should be in the clear?  Is that accurate?

2.  When we close it will be around the 15th of the month.  The seller should provide the second half of the months rents correct?

3.  I believe the rents are under market.  However all 3 of the units have the same lease end date, what strategy do you think would be best for increasing them?  I'm worried about singling out one unit for an increase as they might talk to the other tenants, but I also don't want to end up in a situation where I'm filling multiple units at once.  These seem to be long term tenants.  They've painted the walls etc. (which also concerns me regarding the security deposits).

4. What are the biggest mistakes I'm likely to make and how should I avoid them?  What's the biggest learning curve with being a landlord?  What can I do to ease the transition?  I'll be self managing.

@Steve

Not to highjack my own thread, but your breakdown leads me to another question I've never been truly sure how to factor in.  Certain of those expenses I know cold, taxes, management, utilities, etc.  Others, like maintenance costs I haven't figured out how best to work into my numbers.  It seems I'm always overestimating them, which I do to be cautious, but I find that a baseline is really difficult to locate.  How in your experience do you go about estimating that number?  To a lesser extent I have the same question about turnover.

Originally posted by @Joe Villeneuve:

how much time do you have?

 At this moment or in life?  I'm a young-ish guy looking to buy and hold as far as life.  I'm on lunch as far as at the moment.

I realize the 50% rule is supposed to be a "rule of thumb" that helps you weed out potential properties before more fully analyzing properties that pass it.  My question is, when is the 50% rule fail?

For example, if I'm interested in purchasing a multi-family property built within the past 3 years, do I alter the rule at all.  I know that long term the 50% rule applies, but CapX costs shouldn't be a factor for a decade or more.  At what rate do you factor these in.  Of course you want to be accounting for these expenditures down the road, but it seems that any income generated is better used to fund more property purchases than to get socked away waiting for the eventual wear and tear of the property that likely won't happen for years to come.

In short, when does the 50% rule fail for properties that are still good deals, if ever?