All Forum Posts by: Harry M.

Overall, I enjoy being a landlord. But it's certainly not without it's challenges! Least fun things:

1) Having to evict someone.

2) When I had a management company for one of the properties, having to chase them to get any sort of communication. I fixed that one, and now they are the ex-management company.

3) Chasing late rate.

4) Vacancies.

5) Stuff breaking. Often in statistically unlikely patterns, like going through a stretch where it seems like something is breaking all the time. And then you go through a few months with hardly anything. You definitely need to always maintain some reserves.

Drew,

Earlier this year we bought a property from an estate that had foundation issues. Since we were using conventional financing, the foundation issues needed to be fixed prior to the our purchase, which the seller agreed to do. Per my lender, it was all about the appraisal, either a) it would come back clean, or b) there would be a recommendation for a structural engineer to make a report. If a) and the appraisal amount was high enough, then they were good. The other condition was that the foundation repair company issue a life time transferable warrantee and this be transferred to us at closing, so if you go ahead make sure that the foundation company you use will do this. Most do, but apparently not all.

Hope this helps!

Congrats on your new property, Bobby! Six in two years is impressive.

Welcome aboard, Teresa! I'm in Allen, also.

I agree with J. Start out with a goal return, like 10% cash on cash. Then pull rental comps to figure out what the property could rent for. Once you have a number that you feel confident you could lease the property for, then you can work out what price you would need to buy it for in order to achieve your target return.

@Brian Oney

25% is the requirement for conventional loans for non-owner occupied 2-4 unit properties. For SFHs it is 20%. You can ask the seller to contribute up to 2% towards closing costs, so if you don't feel that it weakens your offer too much, then that softens it a smidge.

This is for mortgages 1-4, for 5-10 the minimums increase to 30/25% last time I checked.

Regarding owner occupied, what Jordan said above.

Hey Andy, personally I would leave it alone and take the title insurance they are offering. $500 is not bad at all, and it seems that even if you could get it (marginally) lower, it would be a lot of effort for such a small saving.

Congrats Andy! Barring major surprises this looks like a fantastic deal.

I second what Jenna said about staying on them to make sure that the utilities are turned on so that you can fully check things out during your inspection.

Good luck with the rehab and getting it leased.

Hey Peter,

Welcome to BP!

Regarding financing, for a convention loan, the minimum down payment is 25% for a 2-4 unit properties. It's 20% for single family homes.

The numbers look good except I think the property management may be low. Typically they will charge 8-10% of gross rents monthly, and 1/2 a month's rent when filling a vacancy. If you figure an average tenancy of 2 years - therefore an average of one vacancy to fill per year, then you'd have to add 4%. Another item to add is the cost of utilities and lawn care during vacancies.

Hope this helps. Good luck!

-Harry

Hey Eran, the 50% rule of thumb assumes that the tenants pay all utilities. That's the kicker for this property - the gas and water are eating up over 20% of the rent!