All Forum Posts by: Henry Murray

So I'm just about to sign a contract with a PM company and noticed a sentence in their terms that says: " IN THE EVENT OF ANY TERMINATION BY THE OWNER, OR EXPIRATION OF THIS AGREEMENT, BROKER SHALL RECEIVE THE BALANCE OF ANY MANAGEMENT FEES DUE UNDER EXISTING OR LEASES THE TENANT RENEWS." 

This isn't part of the standard South Carolina PM contract as best I could find, so is this in line with what anybody else has seen in standard PM terms??  If I decided not to renew the PM contract at the end of the year term we initially sign (I don't expect this to happen, but just want to understand how this will work) but the PM has renewed a lease with a tenant for another year why would I be obligated to pay another year's worth of management fees but the PM wouldn't be obligated to continue to provide the services when my contract with them has expired?  That just doesn't seem balanced, or is there something I'm missing? 

Maybe I'm over thinking the details here but I like to fully understand a contract before I sign it.  What has anybody else seen in their PM contracts?

@Theresa Harris Thanks for the suggestion! I've got one PM from a personal recommendation and found two others online I'll be calling to interview shortly. I found out about the lease violations two weeks ago and my first course of action was to try to get my tenant to deal with them but thats taken some time and I only got worried now she wouldn't be able to deal with them.

I'm a new landlord renting out the single-family house I lived in when I lived in Ladson, South Carolina and I think I’m going to have a problem with a “Designated Occupant” coming up. I rented a room in the house to my current Tenant for 4-5 months before I had to move across the country for work this past summer and signed a year lease with her for the house before I moved so I figured it’d be okay to manage myself for the first year since I knew her.  As part of the lease, she found a roommate to split rent with and, at the advice of a real estate investor friend from the area with much more experience than I have, I listed the roommate as a “Designated Occupant” instead of as a Tenant. This was because if she didn’t end up getting along with them, she would be free to ask them to move out and find a new roommate she got along with better.

Well turns out a couple of months later, the designated occupant has invited his friend to live there too and also gotten a dog (which are both not permitted without written landlord approval and are lease violations). They’ve also been harassing my tenant at the house by doing things like taking off the AC control from the wall while she’s sleeping (and AC is essential in SC!). So she informed me last week that she intends to break the lease at the end of this month because she can’t live there anymore. I talked to her and convinced her that she could tell them to move out and that I’d give her a discount for the next month while she was looking for a roommate since if she breaks the lease I’d be using their security deposit for associated expenses and she’d be on the hook for the rent until I found a new tenant. She initially said she’d take this approach but then came back a couple of days ago and said she’d talked to her roommate and he and the guest said they’d move out by the first rather than show the insurance paperwork I asked for the dog and pay her for their share of utilities.  My Tenant is still planning to break the lease at the end of the month though and move elsewhere.  

I’m not convinced these guys are actually going to move out by the end of the month and if she doesn’t take me up on the reduced rent offer or pay rent for October my plan is to file for an eviction for all of them on the 6th for non-payment of rent (they've been notified in the lease). 

So, does anyone have experience with a Designated Occupant refusing to leave? I’m going to call and talk to him in the next day or two to let him know that I know about his lease violations, that my tenant is planning to break the lease and move out, and so his best shot at getting his security deposit back is by moving out by the 1st.  Any other advice/suggestions?

The designated occupant is subject to the same rules as my Tenant by the lease but if my Tenant doesn't pay for October, I don't have to accept rent from a designated occupant right?  

Hi Danny,
Are you hosting any events in the evenings or on weekend mornings?   I've just moved to the area and am looking to meet and connect with other real estate investors but weekday mornings are a little difficult to make due to early work obligations. 

Thanks!

Thanks for the tip about Berkeley county vs Dorchester county in Summerville @John Semanchuk ! I hadn't realized the city was split like that... 

I'll reach out to you when I get there in about two weeks @Russ Scheider ! If I could find something off market that might be a better deal but require a little more rehab work on my end I think that would be ideal!

Thanks very much everyone for the warm welcome and the feedback! @Joel Good I'll send you a message but any feedback you have will be helpful for me!

@Jay Hinrichs I've heard good things about Park Circle and the North Charleston area would actually be more convenient for me location wise for work but I was concerned about the quality of schools not attracting families to that area and that eventually limiting my potential renters... How does the magnet school system work in SC? Would families purposefully move nearby a magnet school? 

Hi Bigger Pockets!

I've been a member for probably about a year now and have done a lot of listening to podcasts and reading forums and books in that time. I very much appreciate all the knowledge so freely shared on the forums! They’re seriously a gold mine for an aspiring investor like me!

I'm moving from Long Beach California to Charleston, South Carolina very soon for about a year for work. I've been saving up for a house for a couple years so I really want to make my move in REI when I get there. My plan right now was to look for an affordable 2-3BR/1.5-2BA single family house in a nice area with a good school district to buy. I don't really want to do a total remodel but I'm excited about putting in a little bit of TLC and sweat equity to do some basic stuff (painting, trim, flooring, replace appliances, outdoor cleanup, etc) to make it nicer and more appealing for myself (since I'll be living there for a while) and also for my future tenants after I move out.

I’ve been doing a little bit of looking around on the mls (via Zillow) just to try to get a feel for some price ranges in the different sections of the city and surrounding cities/towns and I think I might have found a pretty good deal but wanted to get some feedback on it and see what I’m missing and what I should be looking for.

Here are the details:

Location: Trailway Dr, Summerville, SC

List Price: $149,000 (assuming it was purchased for list price)

Down payment (20%): $29,800

Closing costs: $4,000

Total amount out of pocket: $33,800

Assumptions:

rental rate: $1,550/month (median rent for that area from rentometer.com)

Insurance rate: 0.50% of sale price (estimated, I haven’t gotten a quote on this)

tax rate: 2.03% for rental property (from Berkley County Website)

Vacancy/Loss %: 5%

Repairs %: 5% of Gross Revenue

Cap Expense rate: 7%

Prop Mgt fees: 10% of Gross Income

Mortgage interest rate: 4%

I have an excel calculator that I built to learn how to evaluate deals like this but I'll summarize the numbers below.  My gross revenue (after vacancy loss) is estimated to be $17,670 / year.

My total expenses (including taxes, insurance, maintenance/repairs, saving for cap expenses, property management fees, tenant placement fees (assuming new tenant every 2 years), annual inspections, and lease renewal fees) are estimated at $8,925 / year.

This leaves my NOI at $8,745 / year.

Assuming a 30 year fixed mortgage at 4.0%, my yearly debt service (interest and principal) would be $6,829.

This leaves me $1,916 of yearly cash flow or a cash on cash ROI of 5.7%. Including equity with the debt paydown this would be a ROI of 11.9%.

The home is advertised as in the finishing stages of being refurbished/upgraded with some finishing touches still needed on the outside (although it sounds like they intend to finish the work and have it move in ready before selling, I’m just going from a Zillow post here).  

It also looks to be in a good school district. From what I’ve heard the schools in Summerville are significantly better than North Charleston a few miles south.  It looks like its in an “Area of Minimal Flood Hazard” from the FIMA map but I’m not sure how to estimate flood insurance yet.  

Any and all feedback for me on this deal would be very much appreciated!!

Thanks for reading :)

-Henry

 Thanks for the detailed response @Sam Barrow!!

 Hi Sam, thanks for your insights and suggestions!! Long Beach is very block by block too so what you're saying makes sense.. although I don't know Long Beach nearly as well as it seems like you know Indy.  I saw that someone had put together a map of neighborhoods and their ratings but I hadn't had a chance to go through it yet.  I had only been looking at the crime map on Trulia and yeah like you said, most of the high "cash flow" areas looked like they also had much higher levels of crime.

When you say suburbs, do you mean areas like Carmel and Fishers? Or do you mean areas like Broad Ripple, North Central, or Glendale?

And how do you think that people who bought on the fringes are going to be in a bad spot when the market cools off?  I understand that if they bought a property in a bad area it wouldn't appreciate but if they're positive on cash flow after expenses and vacancy and don't want to sell, how do they lose?  

I was also curious about why you think so many of the C neighborhoods are declining?  Is the city not trying to grow them or are there other economic forces that Indy is struggling with right now? Or do you mean that a lot of the areas that look really good on paper (and would be marketed to out of state investors) are just simply in bad areas that people don't want to live in?

 Hi Stone, Thanks! Yeah I'm feeling it for sure.  And that's a good suggestion, thanks! Macro-location wise, I feel like I got lucky when I moved out to Southern California for a job... I don't want to live anywhere else now haha. But I see what you're saying, looking at it like I was moving to a new city, and asking myself where would I live and what would be important to me seems like a good way to narrow down to a neighborhood level.