All Forum Posts by: Greg Atwood

Very good thoughts.  I just emailed my banker b/c I do have a 20 year mortgage on it and asked if my loan prohibits me removing it, or if I am required to have replacement insurance on the property.

So I need some advice on a rental property I just purchased 2 months ago. It consisted of 4 duplexes (8 units) and a mobile home. The duplexes were all 3 years old in a newer part of town, but built on a property with an existing old mobile home with a long term renter. The seller would only sell the property with the mobile home included and made it sound like they were looking out for this renter friend of theirs. I found out that it takes about 4 months rent from the mobile home just to cover the insurance and insurance is much more expensive on mobile homes. The place is not crumbling, but not in great shape either. The duplexes, however, are in good shape, new, and the area is growing, surrounded by $300-400K homes, and they cash flow well, so I went for it despite the mobile home.

Fast forward to today, and I just spoke with my property manager who said that the mobile home renter just gave his 1 month notice. The mobile home was renting for $600/month. It costs about $2200/yr to insure it. Our options are:

1) to try to put some money into it to fix it up and rent for a bit more.

2)Find a renter to take it as is for around $600/mo again.

3)Tear it down with the thought that it's presence may actually decrease the value of the other properties----possibly could build something in it's place, but I would have to check into that.

Which of these 3 options would others do if they were in my place?


When the renter moves out, we will do a walk through and see how bad of shape it is really in with everything out of it. We did inspections on the duplex units before purchase, but the mobile home was thrown in "as is" so we didn't bother.

I am new to RE investing and about to become a landlord.  I am a dentist and am set up with a couple of business entities; one owns the practice and another owns the equipment and furnishings and leases it to the practice.  Apparently there are some accounting advantages so my accountant set it up this way.  When I told him I was looking to buy some rental property I asked him if I should set up a separate entity or if I should just buy it with the company that owns my dental building and equipment.  He said it would be best just to buy it with the existing company.  I am set to close on 9 units next week.  I am also seriously in negotiations about a 16 unit property.  As I was thinking about it, I started thinking that his advice may strictly be from an accounting aspect, but from a legal/liability aspect, is that the best way to go?  

Would it be better to set up an LLC for owning the rental properties?

Should I have a separate LLC set up for each property?

It may be too late to get an LLC set up for the first deal set to close on June 1. If I close on it with the existing company, how difficult is it to transfer it to an LLC afterwards?

If an LLC or multiple LLCs is the way to go, what is the simplest/best/least expensive way to set these up?

I appreciate any insights on this.

For those more experienced than me.  I am looking into insurance on 4 duplexes and a mobile home I am set to close on.  Each side rents for $950/mo on average.  Without Loss of Rent coverage, the annual premium for the property is about $6562 and with it is $7500 ( so the difference is about 1 month's rent for one of the units or about 1% of the total annual expected rental income).

Obviously if I add it, I guarantee I am paying out the extra money.  The duplexes are in pretty good shape right now at only 3 years old.

Do most of you add this feature, or do you take the chance and plan to save the extra premium money and deal with the LOR if you have to?

Just through google earth and google maps.  I would definitely go there before committing.  I am just trying to see what others thing of this prospect before I get that far with it.

I asked the realtor for the contact information of the property management company so I could discuss things with them.  I'll know more about how confident I feel after that.  As for tenant prospects, I think the town is still growing and people will need a place to stay.  The place is definitely nothing fancy, but it fills a need.

Thanks for the input so far.  Since I posted, the realtor just got me the March 16-Feb 17 income/expense report (last 12 months as of end of February) and it looks to match what he posted in the prospectus.  Obviously there is some likely deferred maintenance.  Based on the 12 month report it was fully rented all of the last 12 months.

Apparently the current owner self-manages, but the realtor refers potential buyers to a property management company in the area that manages some other properties he has sold.  They charge 6-8% of collected rent.  He used 8% in the expense estimate in the prospectus.

The rent roll shows that some of the units rent for 450, some for 500, and some for 550.  The total is 8250/mo for an average of 515/unit.

Property tax was $9721 (yes it is in Texas).  Insurance was $4730.

What are the concerns with the long distance if I basically want this to be hands-off/ passive investing?  I would go do a walk through with the inspector before closing, but are there other concerns?  Would you have your property manager send monthly pictures of the exterior, stair wells, etc. to make sure things aren't crumbling?

Does anybody have experience in apartment buildings several hours (9) away?

There is a B-level type apartment, 16 units, all 2 bed/ 1 bath, built in 1985. New roof done in 2016 and "recently upgraded interiors". Brick exterior, pitched roof. Building square footage is 9856. Currently fully occupied at $515/mo/unit. Electric is individually metered and tenants pay their own.

Prospectus numbers listed as "Actuals":
Gross Scheduled Annual Income: 99,000
Less Vacancy (4950)
Less Expenses (36,630)
Net Operating Income $57,420

The prospectus claims that expenses include all taxes, insurance, utilities, maintenance, pest control, lawn care, and property management. That seemed kind of low for all that. I have requested a detailed income/expense report to verify.

Asking price is $565,000. 20 year mortgage after 20% d.p. (mortgage of 452K) at 4.75% is $2921/mo. If those numbers are accurate, this should cash flow nicely, leaving room for the inevitable bigger repairs and maintenance. I have a feeling the numbers are tweeked, but even if they are close, it still looks pretty decent.

I am just about to close on my first property (4 duplexes) on June 1, so I am a newbie at this. The challenge with this one is it is 9 hours away, so I would have to put complete trust in the property management company.

Has anyone ever done a project like this?

What should I watch out for?

New investor here, looking at a multi-unit property located in a college town of about 200,000, approximately a 2 hour drive from where I live.   The deal consists of 4 duplexes built in last 3 years with all new features, all electric HVAC/Heat, on acreage with septic system/well. It's located in one of the most desirable and fastest growing school districts in the area.

Each of the 4 duplexes (8 units) have a 2 bedroom/1 Bath/1 carport with nice wood vinyl floors, upgraded kitchen and bathroom. They are fully occupied and easy to rent whenever vacant. They are getting $925 per moth per side $1850 per duplex building.  In speaking with the management company I would use if I do this deal, that is the upper percentile for rent for these type of properties in the area, so there is not much room for rent increases.

Included in this package next to the 4 duplex properties is an existing manufactured home that has long time tenant paying $600 per month. This must be included in sale but has great cash flow on it.

Very little maintenance/repair on this package because of age and all electric HVAC/Heat. Total lot size is 1.5 AC.  Cap rate is listed at 9.16%.  Asking price is $750,000.  The tenants pay their own utilities, but owner covers the electricity for the well and dumpster $85/month total as well as $50/month in lawn care service.  Each duplex unit is 925 sf and the mobile home is 1500 sf.

The NOI is listed at $68,692, but I would hire a management company locally that would take about 10K off of that. I would just like it to cover itself on a 15 year mortgage, then use the rent to help cover my retirement in 15 years. The next step is a letter of intent after which I should have access to the P/L statements to verify everything.

Any red flags right up front?

Any other advice for a new investor?

Any more thoughts on this possible opportunity?  

From the Income expense statement for the last 12 months:

First on each 4Plex:  1) $2450/yr  2) $100/month  3)  I have great credit and good net worth (own a business, home, and the building my business is in) and should get the lowest rate available.  4)  Water and sewer last year for the year were $2924 (it looks like renters cover the others) 5)Total rents were 2450/month for each 4plex.

6Plex;  1)  $2940/yr  2) $100 3) Same as above 4) Landlord covers all utilites:  $7482 for the year  5)  Total rent was $3375/month