All Forum Posts by: Greg L.

Closely related to this is filling vacancies.  I'm having a very difficult time finding qualified tenants.  This is mostly in a B/C area.  The tenant pool is such that a rent concession wouldn't help.

I own a small (9 room) rooming house in northeast PA.  I've owned it for 6 years and am happy with the investment.  Rooming houses operate differently here where you don't have to go to court to evict.  I'm not sure if that applies to NJ.  I own regular apartments as well and I've found that I don't spend any more time managing the rooming house than I do with regular apartments.  The key is tenant screening.  With rents being up, folks are priced out and demand for rooms is high.  My tenants all have jobs and I don't deal with druggies and etc.  The folks I have in the rooming house would be in apartments if they could afford it.  But coming up with a couple of months security plus the rent is a steep climb for many people.  To move into my place, they pay a non refundable move in fee of $ 250 plus the first week's rent.  Weekly rent averages about $ 175 per week and I provide internet, utilities and a coin-op laundry.  I have a cleaning crew in to clean the common areas every other week.  I collect my rent via cash app.  I think demand for rooms will remain high as inflation impacts people.  I get very little turnover and when I do, turning a room is far quicker than an apartment.

Ran across this discussion string I started six years ago.  I still have this rooming house and it is a superb investment.  Here's what I've found:

1) Dealing with the rooming house takes only slightly more time than I do with apartments.  I've hired out things like cleaning which is done every other week.

2) I did set up a coin operated laundry.  It makes enough to cover my water bill and is a great convenience for the tenants.  Helps keep the turnover minimal

3) Demand is high and tenant turnover is low.  The spike in rents has driven the demand for rooms. It has changed the demographic of those looking for rooms.   

4) I screen thoroughly.  No druggies or criminals.  Residents are employed and working. If a bad one slips through,  I get rid of them quickly.

5) I got rid of stoves after one of the residents caused a stove fire.  I provide a hot plate in the shared kitchen and microwaves and dorm refrigerators in each room.  Getting rid of the stoves remedied the fire risk, heavy duty cooking and cleaning.

6) Room are single occupancy only.  I have one studio that is occupied by a couple

7) All rent is collected via cash app. 

8) I have room rental agreements in English only (majority of tenants have been English speaking).  I would not provide a Spanish translation.  It's the tenant's responsibility to handle the translation.  

I'd start at 750k as well.  I don't like to go above a 9 cap, so my max would be around 850K.  I'd be doing a deep dive on the numbers and have a thorough inspection done.  

I own a small rooming house of 9 rooms and am just finishing up my second year of operations.  I also own apartments, so I'm in a good position to compare the two.   A small rooming house will require only slightly more work than operating apartments.  I spend anywhere between 1 to 4 hours a week dealing with various things at the rooming house.  A much larger rooming house (i.e. 20 rooms plus) will definitely require more work.  My tenants are either working people or older folks on a fixed income.   Both groups have been priced out of the apartment market so they aren't as transient.  I think the economic situation has created a  new market for rooming houses that aren't the criminal or drug addict types.  I don't deal with the latter because I don't have to.  I've had a mix of men, women, parents and children, and couples--in other words, normal people.  It's important to have a good set of house rules and be prepared to enforce them.  I do get some short term stays (i.e. less than three months) but my average stay is 6 months or so with about half of the residents being there over a year.  One of the longer term residents recently "graduated" to one of my apartment units.  

Thanks all. Maximizing the NOI remains a huge focus, so thanks for emphasizing that again. My credit union is holding these loans on their balance sheet but the longest term I can get is 7 years. There's another local credit union who will give a 10 year lock, but the interest rate is about 100 bp over what I'm paying now. My credit union has done well by me on rates and terms, but have personal and business guarantees from me. I have another business that has accounts with them as well as personal savings.

All of my properties are  mixed use or multi-family over 5 units, thus the commercial mortgages.  I just refinanced two at the same time two months ago and am closing on another in a couple of weeks, so I had no opportunity to stagger, so 7 years out, they'll balloon at the same time.  I don't need the income as much now but plan on retiring within the same time frame.  I'm thinking my best bet is to pay them down as much as I can.  

I have mixed use buildings as well.  All of them were financed by my local credit union.  Credit unions and local community banks are the folks who deal with commercial loans of this size.  

Nearly all of my rentals are financed with commercial loans that balloon in 7 years. I have a very good interest rate of 4.75% and with a 25 year amortization. All of these loans will balloon around the same time as I just recently refinanced two of the buildings and will be closing on another one later in the month. I've generally purchased properties that had the potential to generate additional NOI and I've managed them such that I've forced quite a bit of equity, however, my main focus is cash flow. My concern is what level interest rates may be at 7 years from now and the best way I can manage that risk. My thought is just to pay down the mortgages as much as I can. Commercial loans are a fact of life if you play in this space. How are you guys managing interest rate risk associated with them? Also, how much do you think interest rates will rise? It seems to me that there's a hard limit on how far they can rise without tanking the entire economy given the level of public and private debt as well as the impact on financial markets. I realize that the Fed doesn't control all of that however.

This is another of a series of questions about a six unit commercial building I'm buying.  There are 3 apartments and 3 offices.  My bank is not requiring a commercial inspection.  I had thought about doing one myself if the cost is reasonable.  From what I'm reading, for a small mixed use building like the one I'm getting, a commercial inspection may not cost anymore than a regular home inspection, although there's a post here that indicates the opposite.  Does it make sense to retain the services of a commercial inspection company or would just getting a regular home inspection company be the thing to do.   Commercial inspections seem more appropriate for huge commercial buildings like strip malls and etc rather than an urban mixed use building.  My bank isn't requiring it but I'd like to have one done to cover me.  Thoughts?