All Forum Posts by: Garrett Christensen

The median is used in real estate instead of the average because it provides a more accurate representation of typical property values. Real estate markets can have extreme outliers that skew the average, but the median is less affected by these outliers. It gives a better measure of central tendency, reflecting the price range that is more representative of the majority of properties in the market. 

Hope this helps!

There are many ways to collect rent. The best is to use an online service. Most property management software has this service available and it's relatively cheap. Rentler is free to the landlord for a limited number of properties. 

Most software will also have a place where tenants can submit maintenance tickets and it will keep track of them for you. As far as what they are responsible for and what the landlord is responsible for it really will depend on the lease agreement. Typically, the landlord covers all maintenance. Damage caused directly by the tenant by be removed from the security deposit in most states. 

It's a very good idea to require your tenants to have renters insurance. Depending on the coverage it will cover damage to the personal property of the tenants.

I hope all this helps, it sounds like you need a good property management software. Rentler is a good free option, Tenantcloud and Rentredi are other good cheap options.

Quote from @Steven DeMarco:

Quote from @Garrett Christensen:

Quote from @Steven DeMarco:

Quote from @Garrett Christensen:

A few thoughts, 

- $2050/month on rent is a bit high in my opinion. I don't know the exact area of the property, but I'd try to be more conservative with your rent estimate

- 9% for maintenance is pretty low, obviously depending on the house. I find that almost everyone doesn't set enough aside for reserves.

- I would self-manage, you save a bunch and it's not bad at all. Budget PMs end up costing you more anyway.

Please reach out if you have other questions, especially when it comes to managing the property yourself. 

Rent projection was one of my biggest concerns. It's in the "Ballpark" area of SLC, a few blocks from Smith's Ballpark. It's got a downtown feel, with walking distance to bars, restaurants and entertainment on State St. There's a lot of new apartment buildings going up in the area.

The 9% reserve figure was my other biggest concern. And to clarify, I'm only reserving 9% total for: maintenance, capex items AND vacancy. It's way more aggressive than what I see quoted as more conservative figures. I'd be $300 - $500 negative cash flow if I put away 10% for maintenance/capex and 8% for vacancy. 

What if I moved out of state in Year 2? Would you still recommend self-managing from afar? How to handle maintenance, showings, turnover, etc.? Surely, there is still a need for a "boots on the ground" person.

 That's a solid area, still though try to be conservative with your rent estimate. Don't rely on calculators. Look up comps on Zillow, Rentler, KSL, and Facebook MP. Pay attention to how long they have been listed. 

The thing with those reserves is that you will have them, so you need to input what will be accurate or else they will just have to be paid out of pocket. 

If you are moving out of state that is more difficult. It's possible, but you do need a boots-on-the-ground person. I would meticulously research your PMs. Low price can cost you more in the long run. I can give you some recommendation when the time comes.

Completely understand what you're saying and genuinely appreciate the feedback!

Rentometer average in the area is $1650 for a 2BD/1BA. When I look on Zillow, Facebook MP, etc. I see rents in the $2000+ range for similar quality property with lots of activity and contacts. For example, here is one for $2195 that's been listed for 4 days with 20 contacts. Another here for $2500 that's been listed for 6 days with 50 contacts. The Slate apartment complex has 2BD options starting at $2100 and going up to $2300.

If I adjust to Rentometer average of $1650 per unit and be more conservative with reserves (8% for maintenance/capex, 8% for vacancy and 10% for PM) then the deal tanks. I'm looking at -$938/mo. in negative cash flow for renting both units.

 If those are similar comps to the house than the 2050 probably isn't too high. Which is great! Ultimately, just try to be as accurate as possible with the numbers. It's also good to just get into something as long as it's not a total flop. Just make sure you can make the payments and like @gregoryshwarts said, you'll be happy you did it a few years from now.

Quote from @Steven DeMarco:

Quote from @Garrett Christensen:

A few thoughts, 

- $2050/month on rent is a bit high in my opinion. I don't know the exact area of the property, but I'd try to be more conservative with your rent estimate

- 9% for maintenance is pretty low, obviously depending on the house. I find that almost everyone doesn't set enough aside for reserves.

- I would self-manage, you save a bunch and it's not bad at all. Budget PMs end up costing you more anyway.

Please reach out if you have other questions, especially when it comes to managing the property yourself. 

Rent projection was one of my biggest concerns. It's in the "Ballpark" area of SLC, a few blocks from Smith's Ballpark. It's got a downtown feel, with walking distance to bars, restaurants and entertainment on State St. There's a lot of new apartment buildings going up in the area.

The 9% reserve figure was my other biggest concern. And to clarify, I'm only reserving 9% total for: maintenance, capex items AND vacancy. It's way more aggressive than what I see quoted as more conservative figures. I'd be $300 - $500 negative cash flow if I put away 10% for maintenance/capex and 8% for vacancy. 

What if I moved out of state in Year 2? Would you still recommend self-managing from afar? How to handle maintenance, showings, turnover, etc.? Surely, there is still a need for a "boots on the ground" person.

 That's a solid area, still though try to be conservative with your rent estimate. Don't rely on calculators. Look up comps on Zillow, Rentler, KSL, and Facebook MP. Pay attention to how long they have been listed. 

The thing with those reserves is that you will have them, so you need to input what will be accurate or else they will just have to be paid out of pocket. 

If you are moving out of state that is more difficult. It's possible, but you do need a boots-on-the-ground person. I would meticulously research your PMs. Low price can cost you more in the long run. I can give you some recommendation when the time comes.

A few thoughts, 

- $2050/month on rent is a bit high in my opinion. I don't know the exact area of the property, but I'd try to be more conservative with your rent estimate

- 9% for maintenance is pretty low, obviously depending on the house. I find that almost everyone doesn't set enough aside for reserves.

- I would self-manage, you save a bunch and it's not bad at all. Budget PMs end up costing you more anyway.

Please reach out if you have other questions, especially when it comes to managing the property yourself. 

Quote from @Luke Ostergaard:

Quote from @Garrett Christensen:

I like to have a separate checking account for each property, it makes things so much more simple from a bookkeeping standpoint. With that said, don't have too much cash just sitting in there. I keep about 2 months' reserves in the checking/savings accounts and then put the rest of the cash as it grows in a high-yield savings account such as Wealthfront. The APYs are so high right now, I've made hundreds of dollars in interest.

 That makes sense! Just to confirm, you like to have a separate checking account for each property and one savings account for several properties to hold deposits and reserves?

Sorry, separate savings and checkings account for each property. Most banks will make you have a savings account in order to have a checking account. I almost never use that savings account. The savings accounts I use are the high-yield ones. It's important to keep all funds separate, especially when required by law. AL doesn't require that to my knowledge, but it's still best practice.

I like to have a separate checking account for each property, it makes things so much more simple from a bookkeeping standpoint. With that said, don't have too much cash just sitting in there. I keep about 2 months' reserves in the checking/savings accounts and then put the rest of the cash as it grows in a high-yield savings account such as Wealthfront. The APYs are so high right now, I've made hundreds of dollars in interest.

@Ben Morand Oh it's easy compared to what you've been doing. At least I'm assuming it is, I've never done STR or MTR. Student rentals are more difficult than a normal LTR. Just make sure everyone has their own contract and try to stay out of any conflicts between roommates. As soon as you open that door it will never end.

I manage both LTR and student rentals and they are quite similar, with student housing having a higher turnover obviously. I'd check out The Book on Managing Rental Properties by Heather and Brandon Turner if you haven't read that one already.

Quote from @Ryan Cousins:

@Garrett Christensen Thanks for the reply. Could you explain what you mean by debt obligation is more than 75% of the rent?

I will give you example numbers what we are looking at (Mortgage will be around 1300 with the property renting anywhere from 1650-1850).

Of course. So your debt obligation would be the mortgage at 1300 and the lender will add 75% of the rent to your income so that's 1237-1387 with your example. I don't know all your finances obviously, but those numbers are added to your DTI (Debt to Income Ratio) 1300/1237 = 1.05. Because this is quite close to 1.0 it shouldn't affect your rate much at all. Over 1.0 it has a negative effect and under 1.0 it actually has a positive effect. Those numbers you provided, put you right in the middle so likely little to no effect.