All Forum Posts by: Ricardo R.

Carson, I definitely like your negotiation of the Tenant's needs, just a few thoughts: 

Option 1 - Do you really want to have an addendum for someone that will technically be YOUR tenant? You should really start with a new lease. Additionally, how will they 'paint' your rental when they list it? - they many not know where or how to list it for maximum rent potential. 

Option 2- You could always go this traditional route - just a thought however, although their situation should not concern you - I mean after all they did sign a lease with you agreeing to the terms, they knew what the ramifications would be - they did let you know ahead of time of their situation, instead of just abandoning the rental... maybe you can work some out.. see below. 

Option 3 - This seems fair as well. 

I personally, DO NOT like option 1, it leaves too much out of your control and puts your liability at risk big time. You should start with a solid lease not an addendum with a new tenant additionally you want to be able to convey that you take care of your property and relay what the ramification of breaking the lease would be. I think you Option 2 and 3 are quite fair. However if you'd like offer them one more option I would suggest. 

- 1) List the rental yourself (this way your able to control the listing and where you list it for maximum impact); 2) YOU schedule the applicants; 3) have the tenant show the rental to any prospective applicant and relay to them that you'll take off a dollar amount ($50) of the $1,450 you were going to charge them for every showing they do for you; 4) Tell them that if any one of their showings produce future tenant which signs a lease with you, you will either 1) forgive the amount for breaking the lease or 2) reduce the amount for breaking the lease ($300) -------------- In this option you would be able a) to control how your rental is listed, b) control who would be viewing your rental and c) essentially hire an 'ambassador' (your current tenant) to speak highly of your rental to potential future tenants. You could either do all the screening and signing like you normally do or forward it back and forth between your tenant and the applicant. 

I hope this helps. 

Alex

@Mike Spica I would like stay within Livingston County, do you have many deals coming across within that area?

Alex

Falak, it all looks good just one question, are there utilities you will be responsible for? or appliances you need to purchase? or renovations? --- It's really up to you and your area.... it really, really, really depends on the are. I personally like to see the COC Return above 12% and Cash flow about $80 higher... but again it really depends on your area. If you could either increase your rent to $1,400 (if you think you have that capability - $75/unit increase) you would be able to get @ 359 cash flow and @ 14.6 cash on cash return. Primarily I would try to get the price down as a first line though if you could get a rate below 4.375% and instead get a rate of 4.0% (if possible) and get the price down to 100K you would be looking at @ 274 cash flow and @ 12.2% cash on cash return ------------- BUT just remember it really is up to your area.... if that is the norm in your area and you comfortable with it, then sure, but again I would like to see your Cash on Cash return be closer to 12%.

I hope this helps. 

Alex

Jeff, yes ... you should factor in all of the above. Vacancy usually at 8%/mo which equates to just short of a month of the year; CAPEX usually at 5% but this number can go right or left depending on the age of your property; Maintenance usually at 5% but again it depends on the condition of your property. Also don't forget utilities, HOA/Condo dues, appliances, etc.

Hope this helps

Alex

Darrell, if you did the work you say you would do to this home - 14K - how much do you think it would comp for then?

@Red Peterson just remember that there are still some educated assumptions in those calculations, the projected rent is one and renovation costs and maintenance are another, so I think its wise to lock down the numbers you can just so you keep your margin of error small.  

Red.... Its good to consider marketing and advertisement but to be honest with you with, buy and hold properties I usually don't really have any advertisement costs, but then I guess it really depend on whether or not you use a paid service for such.  

@Manuel Prado I was thinking about that Manuel. The only issue is that in setting a closing date, for instance 3 months out, would mean I would have to go through most of the loan process again and then I would have put every other future deal on hold until this one closed. I know.... what a pain. 

@Jennifer Beadles yeah that's thing want to make it fair but don't want to break the deal if I don't have to. Well... my cash flow it to be honest with you would roughly $450/mo. with market rent. But I think I like your idea along with @Varma Adduri in just keeping it simple and charging 100-150 over PITI. Another option I was thinking of was to have them pay 25% closing costs ($1,000) and just have them pay PITI over 6 months... and then I would just have to figure out repairs and stuff like.

@Varma Adduri thanks Varma. What are your thoughts on the repairs if any come up during that time?