All Forum Posts by: Dan H.

Besides just being wrong on humanitarian reasons,  I consider this high risk for multiple reasons: the primary reason is the tenant is in a nothing to lose position.  You taunt them and your ac gets stolen, cement down the sewer, cabinets busted, flooring ruined, etc.   they know where at least one of your properties is and they can likely find out where others are.

Assuming you will collect from an evicted tenant is not something I would suggest even if you have all the evidence and are fully in the right and get the judgement.   The tenant may have nothing to collect.   They usually do not choose to not pay rent and get evicted.   What can you collect from someone that has virtually nothing?

I try to treat my tenants right.  I try not to screw people in any way.  I do not believe in karma but I do believe relationships sometimes pays dividends.   Right now I am having an issue with a slime ball.   i suspect he took on someone that has much more bite than he is prepared to handle.   I hate slime balls, but I cannot take on other people’s slimeballs.   Do not be a slime ball.

Good luck

Our lease allows up to 4 inspections a year.   If the tenant is taking proper care of the unit, we do one inspection a year.   This inspection breaks the findings into 3 categories 1) not normal wear and tear which is fixed and charged to tenant.  2) normal wear and tear that will be fixed and paid for by LL 3) items that are normal wear and tear but will not be addressed at this time.   Mostly these are items that will not be addressed until unit turnover.

By addressing the first two on this list it implies things like broken windows, vanities, counters, cabinets are paid for early (leaving more deposit for items that happen near end of lease).   It also allows us to address items that help protect the unit.   Why do tenants lose so many fire and CO detectors?    So at least once a year most repairs are done to the unit.

Besides saving the deposit for late happening breakage, it also helps with the tenant turnover timeline.   I do not do as @Wesley W. suggested as I do not show the unit before the tenant flip.   Doing so would make it challenging to get market rent.   But I can often start showing a place 3 days after move out (I start advertising about 2 weeks before move out but no showings until the unit is in a state to allow me to get market rent).   I usually place a qualified tenant in the first open house.   My experience shows that each open house in general gets less turnout (virtually only happens to me if tenant breaks lease in off season - all of our leases are written to not end in the off season).  Note that finding a tenant in an open house does not imply only a 3 days after tenant leaving vacancy.  Our vetting of tenant takes around 3 days if tenant is responsive (a week if not real responsive).   The new tenant usually cannot move in immediately.   I suspect my median vacancy for tenant turn over is about 3 weeks.

Good luck

You cannot change a lease mid lease to include the trash fee if your current lease states the trash is included.  So you will need to wait until the lease term ends before changing the lease to have the tenant pay for trash.

I have 7 units affected by the new trash fee.   I have tenants pay all utilities that they can impact the cost (water, gas, electricity, cable/internet, etc).  Seeing that the tenant does not impact the trash cost, I have included the trash fees in the rent.   This works well seeing that the city is collecting the trash fee as part of the property tax bill.

I am not sure why this was unforeseen as the voters passed measure B in 2022.

Good luck

My last large project (i have done 3 smaller ones since the large on that finished a year ago) I had approved plans for the work that required permits, but the inspector had his own thoughts on what was required.   He was inconsistent in being a pain in the a$$ and letting stuff go.  

I was putting in a flush beam due to the removal of a load bearing wall.  The approved plans called for a significant sheer wall but nothing in the attic space.   The inspector required the wall to extend through the attic to the sub roof (basically to the shingles).  Note the load bearing wall did not go through the attic space

I was adding an eyebrow porch (there had been one originally but long ago (the house is over 100 years old) had been removed). The approved plans called for significant cement column foundations on either side of the door, but the inspector wanted a sheer wall to go between the column foundations under the door.   He also required a slightly expensive test of existing cement because anchors were going into it (I found this request reasonable but the cement verifier made bank, he was there less than 30 minutes and it was $400).

This was a little unit with an expensive rehab.  The same inspector required me to install integrated wired fire alarms such as when one goes off they all go off even though I had no permit related to anything with fire alarms (unless you count removing a wood burning fireplace).  Note this unit is ~600’ and if any alarm goes off, it will be heard throughout the unit.  But now 3 go off at the same time (both bedrooms and the common room).  I was not planning on changing the fire alarms to wired, powered fire alarms.  Fairly minor cost/effort, but not necessary.

Same inspectors required me to add a double ground at the unit even though there was a double ground at the drop.   A different inspector came for this final inspection of this work and asked why I did it as it was unnecessary (which was my belief also but codes are constantly changing so I was not going to argue over this).  I indicated the other inspector required it.  He was not surprised.

My issue with the inspectors is that I do not believe they are nearly as qualified as the architect I used to create the plans or the city engineer that approved the plans. The inspectors arbitrarily increase the requirements after plan approval. Note I am not stating that either of these inspector required structural requirements did not further strengthen the structure . What I do claim is they were more than what was required and added to the cost.  I went way over budget on this rehab; my most over budget ever (I was expecting less than $70k and I spent over $100k for various reasons) and I have enough experience that I should not be significantly busting budget.   These inspector items just added to my over budget.

Enough rant on inspectors 

Different project and rant on permit process.  I opened 2 permits (which I probably should have separated out better).  One was to permit some electrical and mini split condenser that was done without a permit and a gas run that city claimed was done without a permit but I suspect pre-dated need for a gas permit and the other was for a large patio structure.  Patio structure went fairly smooth.   The other permit I submitted a plan for each of electrical, gas, and condenser. I got back comment submit a plan.   I did not understand the comment.  Talked with someone who indicated that they did not like that it was 3 files and indicated what if someone submitted a hundred files.  I pointed it out it was not a hundred files but 3.  I appended the files together.  This really is a case of tribal knowledge and the value of using contractors familiar with the local permitting idiosyncrasies.  Then I got complains because I used pictures of the existing work to clarify the plan.  They inquired about it and I indicated the text of the plan states it is to get unpermitted existing work permitted.  They told me to remove the photos and let the plan describe the work without photos.  Doing as requested would be more effort than using pictures. I asked why I could not use existing pictures and literally got no reason.  more tribal knowledge. So I removed the photos and the reference in the plans to the photos.   Next was HER issues.  I found this so frustrating that I stopped working the approval process for multiple months.  I finally got someone at or near the top of the planning and permit department to take pity on me and open the permit without satisfying all the current HER requirements.   Whole process was 11 months with me not working it for a few of those months (due to frustration and I have a fair amount of experience).  So active working it maybe 7 or 8 months.  Crazy for such a little permit.  You would think I was building a new building; likely would have been less frustrating.

Good luck

I have 4 STRs in the city of San Diego. I assume you are aware of the STR quotas in the city of San Diego? Mission Beach is at quota and you cannot get a STR license for mission beach.

In addition to the city of San Diego attack on STRs, there is regularly statewide STR regulations proposed. So far those have not passed, but the political sentiment to STRs leans negative.

As for the financial performance of STRs in San Diego, I believe the RE market is challenging virtually everywhere. Having stated this, I believe an STR in a good location with good management can do alright especially if you can purchase it below market or do a value add. For example I recently considered buying a trashed 1 BR coop in hillcrest recently for $360k and do MTR (STR was not allowed by HOA), ARV around $450k. The return for all cash purchase was decent, but I achieve better in my RE investing. I could not find reliable financing because of the coop so someone else purchased it. Good location and I have good STR management. It could have worked out pretty well financially, but I do not invest in RE to do pretty well. I can do pretty well in the stock market with a lot less work.

STRs take more effort than LTRs.   however, in a good location with good management they can provide the additional return to justifies the additional effort.

My highest occupancy STR has 6 nights of vacancy until the end of August. 2 of those nights are single nights so may not book. The other 4 nights will almost certainly book. So 2 nights vacancy over the next 2.5 months, >$400/day average rent for this period (not including OTA or cleaning fees). This is my best performing, but does show what is possible.

https://www.airbnb.com/rooms/743466187461028591?adults=1&...

Good luck

I assume old linoleum has asbestos.   I always cover, usually with a LVF equivalent (PVC based).   Carpet needs to be replaced more often than LVF and is not good in high moisture areas.  I want to mess with asbestos as little as possible   LVF equivalent should last at least 2 decades.   This is a long time without having to deal with the asbestos tile.

Rules change over time.   You do not know what the rules will be the next time the tiles have to be exposed.   If carpet is used, the next time the asbestos is exposed may be in less than 10 years.   The rules may require removal of the asbestos at the next exposure, you should strive to have this as far in the future as possible.

Good luck

 Are you BP pro member?   If so, they have forms for each state. https://www.biggerpockets.com/landlord-forms

If you are not a BP Pro, the large RE networking groups often have forms appropriate for their jurisdiction.  Joining one of these can get you the forms you desire as well as a network of local investors (vs BP is national with a smaller presence in most jurisdictions).  They also have regular meet ups on various topics.   They also can get discounts at various retailers.  It is definitely worth joining at least one (I am currently a member of two and used to be a member of 3 (cca, sdstr and used to be member of sdcrei).

Good luck

I do not know the condition of the unit but6 weeks for a tenant flip is a real long time.   It is rare for my tenant flips to take more than 2 weeks.

>Should I be looking for another property manager?

yes.   Not necessarily because it has been 6 weeks but a PM that does not communicate has to be replaced.  I also suspect they are spread thin and that the tenant flips is taking much longer than it should.   Seeing the tenant flip is not complete, you have zero idea of how long your unit will take to find a qualified tenant.  In addition, if the PM does not have the means to do a quick tenant flip, what confidence do you have that they will properly vet the tenant?

this is from @nathan gesner on how to find a good PM:

Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Try interviewing at least three managers.

1. Ask how many units they manage and how much experience they have. Feel free to inquire about their staff qualifications if it's a larger organization.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, a leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.

4. Review their lease agreement and addenda. Consider all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. A tenant complaining online might indicate that the property manager handled them appropriately, so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything possible to expose properties to the broadest possible market? Are their listings detailed with good-quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start.

good luck

 I want to correct that this extraction of vale would be tax deferred and not tax free.   Granted you can forever defer (own to death, 1031), die, get stepped up basis and never pay the tax.

Now to your question, for me this is an easy decision.  I have 100% confidence that I can achieve far better than 5% return with $235k.  Any return achieved above the 5% is return you would not be achieving without the refi.

In addition, with the lower equity position, your return from appreciation is increased. You have achieved $220k of appreciation so far but with the initial 90% LTV, the return is significantly amplified. A the equity increases, you return on equity (ROE) diminishes.

Final arguement is that cash flow is taxed annually.   Extracted cash is tax deferred and if done correctly no tax will ever be paid on this extracted cash.  Obtaining cash tax deferred and minimizing the annually taxed cash flow should be a goal.

Before the rates rose, my goal was to maintain higher than 70% LTV across my properties. It was a challenge. This extraction of capital to maintain a high LTV provided capital to continue to increase my net worth while simultaneously keeping my tax low. This is exactly what I was striving to accomplish. Unfortunately no one has made me a similar low interest loan offer and my LTV is lower than what I desire and my cash flow is higher than I desire but I used accelerated depreciation to reduce the tax on the cash flow (so I still paid virtually no tax on my cash flow). If I had that loan offer, I would jump at the opportunity.

Good luck

 I would send to collection agencies that ding the tenant’s credit. Last I checked (which has been quite a few years) both Rent Recovery Service and AOA Debt Reporting Service had the option to report to credit agencies.  

Good luck