All Forum Posts by: Dan H.

The book Landlording on Auto Pilot or something close to that has both the trick of rebating for early payment and the trick about being the "Property Manager".

We do not use the early payment rebate because we do not have an issue.  If they are late without discussing it with us we come down hard.  I have only had one tenant late twice without discussing an issue with us and they were served their notice on the first day allowed.  We have never had someone late 3 times in 12.5 years of having rental properties.  We have only once been unable to collect all rent and that is unlikely to happen again (lesson learned).

We do use the trick of being the "Property Manager". I could easily take the responsibility associated with not letting the tenant get away with stuff or doing tenant requests but I desire to have a friendly relationship. If I say no to a tenant request and the tenant is not happy it is easier to blame it on the owner rather than have any resentment towards me. It is not that I cannot handle the resentment, it is just easier to not have to handle it. In the last month a tenant requested exterior venting for a dryer. Note we supplied a dryer vent box. He did not desire the humidity in the garage (laundry hookups are in the garage in this SFH). "Sorry owner does not want it venting to the front of the unit and it is too costly to vent to the back of the unit." Of course the owner is H3 Properties which is the wife, child, and me.

I am interested why you chose Detroit.  The economy there has declined considerably and I am unaware of anything that I would think likely to significantly improve the economy. 

Poor economy often results in reduced population which increases vacancy.  Poor economy often leads to placing more people in each unit which increases vacancy.  

Detroit would not be high on my location to invest in RE.  

I do not know what they use to derive their numbers but Zillow has a 1 year forecast for price and rent.  

There are numerous resources for general economic predictions.  

The UT about a week ago had an article that indicated what rents had increase in the past year in San Diego county and implied that they were expected to continue to rise. The article mostly was about REI buying property and raising the rent and the hardship on the tenants.

I agree that often using people that either have side businesses or do the work on the side (paying less than retail) is more time consuming than paying full retail.  The savings have to be weighed against the additional time required.

I believe my electrician would not be worth using as he requires too much of my time but he is family.  Using laborers and managing them also takes time.  I find that my handyman sometimes does not do the work as good as I would if I could do all the work (ha!) so I have had to try to be more accepting of other people's work (either that or find more than 24 hours in a day so that I could do the work myself and still have a life).

Your widow AS is virtually the same as my wall AC especially because the unit being replaced was not the exact same size so it needed some work to the walls (exterior and interior) for ~$300.

Your price is a little less than what I am paying for my current smaller 1 interior location Split but it was by far my lowest quote.  I had used Thompson HVAC before but their quote had gone up a lot since I last used them for a Split (but was still far cheaper than Carini HVAC and they have done good work for me quite a few times).  I got a quote from Carini HVAC based on recommendations from Bigger Pockets and Angies List and their price was outrageous.

Here is my current quote for 2 units (so divide by 2, but does not include electrical to the exterior units) and it is similar to who you used (i.e. it is a side business):

(2) Daikin 18,000 BTU Mini split Heatpumps.  Includes all necessary piping and place into service.  Equipment, materials and labor $5850.

It does not include electrical but was my lowest quote.  So it is a little higher than what you paid especially if yours included the electrical (which is costing a fortune for these units because the units are currently on 30 Amp subpanels so I am replacing subpanels, getting a new drop from SDG&E, running new feed to the subpanels, and the feed from subpanels to the exterior units) all without any attic or raised foundation. 

What size was your split?  Also seeing your price is better than mine I would be interested in who you used (for next time).

The AC cost that I indicated in initial post is an average and meant to be all inclusive of all work. Some of the units were not splits but traditional AC. One of the splits was a much larger unit (I believe 36000 BTU) that required a panel swap) to accommodate a 4BR/2 Ba SFH.

For example the current quote is $2925 per unit but there will be maybe $2500 (2 new subpanels, runs from the drop to the subpanels, run from the subpanels to the exterior units) in electrical work bringing the cost for this to $4,175/unit and these are smaller size Splits with only one interior unit.  Of course I am getting a better electrical solution to each unit (newer everything, more power) also but the only reason the electrical is being upgraded is to accommodate the Split HVAC.

I use laborers/handymen for most of the smaller items (demolition or maintenance more than capital expense items). I pay my labor $15/hour for less than full day work (3-6 hours)and $14/hour when the work is full day (>6 hours). My handyman gets $18 hour and is only OK but the price is right and I trust him (I used to have a great handyman but now he does REI himself). My GC is reasonable (I think he and a helper are $60/hour (for both of them total)). I currently do not have a cheap plumber but I use my handyman for most plumbing issues. I think my plumber is $81/hour when I do need to use him. So I would also be interested if you have a cheap, good plumber. I have a cheap electrician but he is real slow, not very reliable, can get overwhelmed but he is family (so I would not recommend my electrician but I use him because he is family).

I have not been at it long enough to have real data.  In addition our record keeping (especially early) is not sufficient.  So far I have not needed to do a roof, hot water heater, or furnace (but have done multiple ACs).

However I have had a major foundation issue (~$27K), replaced all windows in 5 units (we use good windows (Low E**2) and cost has been ~$5K average including lowering any window sills that are too high for current code), and the non-bedroom windows in 1 unit, replaced/installed whole house Air conditioning in 4 units (~$5K unit), replaced room AC (wall mounted) in one unit (~$300), replaced/remodeled 6 kitchens, 8 bathrooms, and replaced entire flooring in 4 units.  Needless to say this adds up to a lot of money.

But for my basis I did not use the above costs because 1) Some of the units were purchased near the end of the life on the items replaced 2) I have not seen the actual life due to virtually nothing being new when purchased.

 I used the numbers from the original article referenced and looked at his price point and lifespan versus what I am experiencing (many of his prices are too low for San Diego).  The only area that I seem to be exceeding his expected life span is in water heaters.  I have one unit that has a water heater from 1990 (25 years old).  I think I will replace it when empty regardless but that unit has not been empty in ~8 years.  So my numbers have only a partial basis (original numbers tweaked to reflect more accurate cost and my witnessed lifespan) and are not based on my actual total cap expenses because I do not have enough numbers.  It is also real difficult unless you start with new properties or at least know exactly when items were replaced in the units purchased (was that roof in good shape put on 3 years ago or 10 years ago?).

I tried the Harbor Freight 20% off coupon at Home Depot and Home Depot accepts it if Harbor Freight carries a similar product.  They did not take it for a conduit bender because Harbor Freight does not sell conduit benders.  They will take it on compressors, toolboxes, most tools, etc.

I recently read on Bigger Pockets a post on Capital expenditures that included some generic numbers. 

http://www.biggerpockets.com/renewsblog/2015/10/13/real-estate-capex-estimate-capital-expenditures/

The numbers did not take into account size, number of bathrooms, etc. of the property.  In other words it was a very rough estimate of the capital expenditures.  Even noting that it was a rough estimate of the cost some of the numbers seemed to be way off for the San Diego market.  For example I cannot get any HVAC (even a split) replaced for $3K.  My foundation/structure repairs are significantly higher than the numbers he used.  My windows from the late 70s are done so I think 40 years would be a better estimate on lifespan (even though I had some casement windows from the 50s that did last 50 years).  Also he seemed to be missing may smaller items that can add up (primarily garbage disposals and ceiling fans).  Also where I own a majority of my units the city has recently mandated backflow valves (fairly expensive installation) with yearly inspections (close to $50 per valve); who could have seen that one coming?. 

So I was wondering what you use as a rough cap expense costs and will provide my rough estimates per unit realizing that my longest owned rental property is from 2003 (I have not needed to replace a roof, furnace, or water heater yet).  I have tried to incorporate the expenses that I have yet to encounter into my rough estimate.

SFH: $400/month with average size of 3/2, 1200'.

Multiplex attached (single roof, foundation, etc.): $300/month with average size of 2/1.5, 800'. The cost difference from SFH is both the result of the smaller size as well as shared structure.

A SFH larger than my estimate will typically have higher capital expenditures and vice versus for smaller. Ditto for joined units.

Any opinion on my numbers?  Too high, too low, close? 

Using my estimate of capital expenses I have one property (duplex) that is not positive cash flow (not including equity gain) but there are a couple of extenuating circumstances on that one (we have a 2-car garage that we use both to store stuff for our rental properties as well as a few personal items (Christmas and Halloween decorations) and one unit of the duplex is rented to my handyman at a discount).

I have put HCAC into 4 of my units (2 central and 2 split) after Purchase and am in the process of adding split HVAC to 2 additional units.  It will take a long time to recover the expense (~$5k average cost) but I'm still glad I did it as it may allow me to obtain better tenants or keep them longer.  When it is real hot I feel I have possibly made the tenants more comfortable.  I suspect that it adds about 50% of cost to the value of the place so true cost is reduced.  

By the way if you do not have ducting look at the splits as an alternate option. They are efficient, been used in other countries for years, are good choice for smaller units, and can be cheaper than central HVAC. 

I would try the cash to leave but I would try that even if the place was permitted.  If that works end of story.  

If it does not work I would go through the same process as if it were a legal unit.  This process varies by location but in CA you can give notice and get marshals involved without going to court.  Research the type of evictions and notices allowed (Internet search).  Follow the rules precisely and with good documentation.  Do not accept any partial payment.  With a bit of luck the fact your unit is not permitted will be of no consequence as it really is mostly an unrelated matter.  The tenant has not paid their rent and you are evicting them.  This would be true regardless of if the unit is permitted.  

Good luck