All Forum Posts by: Ricardo R.

Angel I think that's a good problem to have. I just want to make sure I understand your concern correctly: You cash-out refinanced on a house you own with the hopes of finding another buy and hold property and using the refi. cash for a down payment and if you do not find one that meets your needs then you're going to instead apply that cash to pay down the principal on another investment property you own which will increase your cash-flow; is that about right? 

If I understand it correctly consider; Sure you can do that but, in a way I think you're just shifting your 'net worth' it's not increasing or decreasing the only benefit is increased cash-flow from your paid off property. In this scenario you can then save the additional cash-flow from the now paid off property and build another down payment for another property but that would probably take some time but very safe.  

This next scenario depends on a few things: 1) What the average investment sale price you're looking for is; 2) The amount of cash you took out of the refi.; 3) what your cash flow on your current investment property is: 

You could, apply your cash out refi. cash and find a new investment property which would increase your net worth, and you would have another property which would begin to build equity. Even if the cumulative cash-flow from both homes with existing principals was less than the cash-flow you would receive from paying off the one investment home you currently have I think you would be in a better position in that as we kind of covered you would now have 2 properties building up equity. Here's an example:

-Average price for next properety you're looking for = $150K (@30K down payment)

-Cash on hand from refinance = @65K

-Your Current investment property monthly principal = $700/mo.

--- You could take your $65k from your refi. and purchase 2 - $150K properties/units (@60K down payment between both) which cash-flow $400/mo. each. 

--- You would be netting $800/mo. in cash-flow from both properties which is $100 more than what you would be getting if you eliminated the principal from your current investment property. 

--- Added bonus that you would now be 1) more diversified in a way; 2) building equity faster; 3) have more option available to you in the future i.e. sell, refi. etc. 

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This if of-course just a scenario without knowing your numbers exactly, but even if you could only acquire 1 property, I believe it would still be better because of the equity you are building and you're now increased net worth.

Just my ten cents. 

Alex

@Brandon West do check with your local municipality however, typically across the board it's 2 people per bedroom. So as an example a 4 bedroom home would be able to board 8 people legally; a 2 Bedroom home - 4 people and so on. In terms of length, weekly/monthly rentals maybe treated differently when compared to yearly leases, things such as security deposit, notices, fees and Tenant's rights may be affected depending on the length. Also, some HOA's or Condominium by-laws may have minimum lease length standards. Check your HOA by-laws to see if they address this and perhaps check online resources for your township, it may also be wise to stop by and ask them those questions directly; if this is too though or you're not finding what you want, call up a real estate agent which deals with leases and ask them pointed questions.

Hope this helps, 

Alex

Dino, almost forgot some where between steps 2 and 3, you could also link up with other landlords in your area with a similar unit to yours for a similar monthly rent amount and then present those option to your Tenant, relaying again that you do need her out by the agreed that and that these are similar suitable properties your would be more than happy to give her a reference letter for. --- This is absolutely going above and beyond and is definitely not necessary but it could keep your relationship on a good note and let her know that you really need her out while showing that you care -- be sure however to convey that you are not responsible for anything regarding these properties and that ultimately it is still her responsibility to move-out by the agreement end date. 

Dino, can sense your concern. Is this Tenant on a lease? ... If so you would have to wait until the six months are up to do anything however, you can definitely relay your concerns to the Tenant to help ensure she does move out. 

*** Number one on your list: Unless your parent's lease with this Tenant gives you authority to deal on their behalf something along the lines of 'landlord or landlord's agents' then get your parents to give power of attorney now in order for you to be able to deal with anything regarding this property on their behalf*** 

2 - Start a paper trail, I know you said you sent out a courtesy notice to the Tenant for the move-out date. Do it again, make sure it is mailed first class with tracking - do not request a signature...  you just want proof from USPS that your notice has been delivered to her address, you do not want it returned to you if she declines to sign, be redundant in scanning the same notice and email it to her her. 

3 - Contact her either personally or over the phone, and voice your concerns let her know why you need her out by that date and what a bad position it would you put in if she didn't. If you get resistance or push-back then be more assertive but professional and let her know the consequences if she doesn't vacate by the agreed upon date i.e. loss of security deposit, increase rent amount, court filling, etc. 

4 - Offer to do a courtesy walk-through of the unit so that you can point out items that need to be addressed in order for her to get all of her security deposit back. Tenant's typically appreciate this as it shows that you are making an attempt in giving them a chance to retain their security deposit and it will also put her in the 'moving-out' mindset. Let her know that you will be there on the day of move-out to inspect the unit and receive the keys. 

5 - If she blows through her move-out date start the eviction process immediately when allowed by your state. I'm in Michigan and I have a 3 day grace period on my lease so, I my case I would be starting the eviction process on the 4th. To initiate in Michigan I have to mail a 'Demand for possession' through first class tracked mail and then wait 7 business days not including the day it was mailed in order to file with the court. You're in CA so check now to see what you need to do and how you need to do it as it pertains to your state and then do it IMMEDIATELY when legally possible if she does not move out.

6 - Send her another tracked letter (aside from what the state of CA requires you send her) stating that you have started the eviction process and the consequences that can come with it. 

I hope this helps

Alex

@Pat Danaher I use "Cozy". Its been good thus far. 

@Dan H. thank you Dan, it's always great to see another point of view from a different location. What are your thoughts on the current market, should someone in your area be investing in buy and hold? or should they wait? -- any techniques or things to consider if one was going to purchase buy and hold now in your area?

@Thomas S. thank you for your input. I am going to use an online rental payment system which only allows rent to be pain in full, internally on their side they can divide the rent into 25%/25%/25%/25% but it will not be sent and paid until it is at 100%. They four of them have lived together for the past year and their rental history from current and previous landlords is decent, no major issues. Employers seem okay as well. I will collect the maximum allowable security deposit (1 1/2 months) and go over my concerns with them.  

@Kevin Siedlecki thank you for you input. That's a good idea; I may just offer a short non-cosigner term along with a longer term if the are able to provide a co-signer. Any one else have any further thoughts? 

@Kevin Siedlecki thank you for you input. That's my take as well which I think is great, they get to save money while living in a bigger place. I will put all four of them on the lease. However, Kevin do you think, I need to ask for a co-signer (parent or so)? My only worry is that it's a lot of different opinions, lives change and people grow, and I would like to avoid a situation where two want to stay and two want to go later down the road. What are your thoughts? Should I ask for a co-signer or in your opinion do you think 4 people on a lease with 5.4'x income should be sufficient enough for things like this that may arise?

Ying Gong, I too see a prices rising and inventory low. I guess as something to keep in mind, housing appreciation usually occurs at 3% per year as an average nationwide. Of course some areas are much higher others lower and some years you'll see a negative others you'll be positive in relation to appreciation but on the average you'll see appreciation at 3% per year when its all said and done. With that said.....

Don't count on market appreciation... Instead, if you want to get in right now... make sure the numbers work, i.e. cashflow, ROI etc. now. Ask yourself 'If my purchase price was my house value and it never went up again, would this investment still make sense?' .... In my opinion if you are cashflow positive and you're ROI is more than what you could get in traditional investments i.e. funds, stockmarket, etc. then, yes it is. I would just ensure that you have built in buffers, for instance, make sure 1) your cashflow is sufficient enough, for example, if you only cashflow $100 a month, well that doesn't leave you enough room if your numbers don't workout later down the road; what if rent rates drop? or taxes increase?....2) build in other buffers, for example, I personally include water $50/mo. in my numbers... so if for instance rent rates decrease in my area or taxes increase or any other number things, I can drop water and have the tenant pay for such in future listings. Essentially I've built in a $50 buffer before it even affects my cashflow - as it would remain the same - don't forget to include your CAPEX, maintenance and vacancy buffers as well. 3) Don't count on market appreciation - it'll probably be there, but don't count it for the investment to make sense, instead try to look for forced appreciation, such as, can you add another legal bedroom? or something of the sort? (your home value will increase, as well as what you can charge for rent), can you rehab the rental a bit and demand higher rent?

In the end market appreciation will only affect you if you 1) are trying to sell during a down turn or 2) are trying to refinance... if you don't plan on either of those or you're not pressed for those because you've built in enough buffers to cashflow well, even through tough times - then you're only concern is whether or not market conditions will affect rental rates... which is something you can reasonably control through built in buffers such as those above. Just my ten cents....

I hope this helps. 

Alex