All Forum Posts by: Fred Grant

@Thomas S.

If you are just starting out and do not have a lot of reserves, then a slower pace is more prudent but don't be afraid to raise the rents once you are in a position to.

With regards to raising rents, just remember to keep the money flowing. There is usually a reason the rents are below market. If it is deferred maintenance then watch the numbers very closely. 

Sometimes it is better to have a tenant at $700 per month for the next year rather than raise the rent to the market rate (Say $850) and have the unit empty for a month while you repaint and fix all the little things the tenant had learnt to live with. The numbers will vary, but if the renovation costs are $1000 and the lost rent (at the old rate) is $700, then it is going to take you $1700/ $150 months (approx 12 months) before you see the benefit of the new rent. If you did this with all 3 units at once, it would still take a year to be ahead of the curve but you would have that one month where you had no income to pay any of the bills and would have to find $3000 for the renovations. So you may decide to leave things as they are until you have put aside enough money to cover the renovations and vacancy and only tackle 1 at a time.

I am not saying you should keep on deferring the maintenance, just think about your overall cash flow when deciding when to act.

Welcome to BiggerPockets

I would be careful about making any offers until you see the condition of the other unit. The fact that there is an eviction going on makes it possible that you will make lots of stuff left behind or damage. In addition, I was recently told by S8 that tenants cannot move to a new unit if there are rent arrears. So if the current tenant is being evicted for non payment of rent, then it is likely that they are also going to be losing their voucher and very unhappy. I would be concerned about what they would do to the apartment before leaving. I think it would be better to see the inside (after they have gone) before finalizing your offer and how to structure the payment.

Congratulations on making the decision to move from being a renter to an owner. 

Have you decided yet whether or not you want to be an owner / occupier for you first purchase and where in RI you would like to purchase? 

Costs vary by town but you will certainly be able to get Buy and Hold MF buildings in Rhode Island. 

My company has buy and hold properties in Woonsocket, RI and there are currently a number of 3 units x 3 bed units for sale for under 200k in town. I am sure others can comment on other towns.

If this looks like a town you would be interested in, I can send you the name of a local property manager.

I started with Excel and moved to QuickBooks (2012). 

There is a learning curve for QB but there are training guides out there for $100 that will get you up and running.  Once you are up and running you will have a lot of info at your finger tips and tax time becomes much easier.

I don't send invoices as the tenants know what their rent is and also when it is due. 

Regarding payment, have you considered getting a dedicated bank account and giving them the account number? I have dedicated savings account that the tenants use to deposit their rent and the bank I chose also has branches in the local supermarket which helps with off hours and weekends. There are no fees for me or the tenants and I transfer the money out as soon as it goes in.

Apologies if somebody already suggested this. There were too many replies to read them all.

I had a similar issue with a building I bought. In that instance the agent correctly listed as a 3 unit but there was a 4th unit in the basement with full kitchen, bath, etc. There was only 1 means of egress so it was obviously not up to code.

We purchased as a 3 unit, got financing and insurance for a 3 unit and removed the kitchen and bathroom immediately after closing to make sure nobody tried to live down there at some point in the future.

If you can't find any evidence of permitting and think the 5th unit is illegal, then I would suggest you purchase as a 4 unit and factor in the cost of removing the 5 unit in the basement. If anything happens to a tenant in the 5th unit I could see an insurance company denying your claim.

From the Mass.gov web site - http://www.mass.gov/ago/consumer-resources/consume...

You can only ask for the following:

• The first month’s rent
• A security deposit to cover the cost of any damage to the apartment beyond normal wear and tear (which may not exceed the amount of one month’s rent)
• The last month’s rent (the month that will turn out to be the tenant’s last one in the apartment)
• The cost of a new lock and key for the apartment

So yes, you can ask for last month's rent at move in but the tenants will use that for their last month's rent so you won't end up with any extra money for damages. Avoid the temptation of trying to come up with fees that are not approved and listed above. No matter what you call them, a judge will likely consider them to be excess security deposit charges which could lead to problems for you.

I personally would not charge for the new lock and key.