All Forum Posts by: Hilary Hageman

We inherited a long-time tenant at our quadplex, which we purchased last year.  At the time this tenant was our paid groundskeeper and ran a lawn business of his own.  He pays for an extra garage stall and thus is allowed an extra vehicle in the parking lot.  

Now, however, this tenant has experienced some major medical issues and is no longer running his business, but is collecting unemployment.  He still pays his rent (usually late, with fees), but he has accumulated THREE more pickup trucks than are allowed per his lease.  We pointed this out this year upon the renewal of his lease (6 months ago) and nothing was done.  The other tenants are complaining because it's hard for them to park or have guests over.  The garbage can't be collected half the time because his trucks block the dumpster.  

We sent him a (text) notification again last month regarding his trucks (and plows, scrap metal, etc.) and he replied "okay."  As of today, nothing has changed.  

What do we do?  If we charge him a fee, it'll probably still be cheaper than renting a storage unit and he'll probably just pay it.  We want him to get rid of the junk.  But we don't want to evict.  Any ideas?

Thanks for the input!  @Candace Ellison we are not yet factoring property management, but we're willing to cut into our profits sometime in the future (once we own about ten doors.)

@Anthony G the best we have in a roofing master from Germany who spoke with us on the phone and viewed GoogleEarth views of the roof.  He was speaking from experience with this type of roofing and echoed what you have said regarding the longevity of the materials used.  He was hesitant to give a firm estimate, but did put out $5-10k as the upper range for repair of the valleys.

Hey friends,

My husband and I have a SFH rental that has been cranking for us for 2 years now and we love it. Looking to step-up by purchasing a quad-plex and found a property we love. The property is certainly unique and my husband has some misgivings due to its age and complex construction. Care to give your thoughts?

Construction: Stucco.  Roof: Clay tile.  Year built:  Approx. 1870.  Heat:  Boiler, owner-payed.  Immediate repairs needed: Bathroom re-mod (new tub in one unit), several broken windows.

Income: $3000/month.  

Vacancy rate factored @ 5% (although the previous owner never had a vacancy longer than two months in 4 years of ownership.)

After expenses, including a $400/month cap-ex, water and heat expenses, taxes, insurance, debt service, etc. we expect to net just over $12,000 per year. This is a nearly 25% ROI for us (not including debt paydown.) Sounds great, right? Now for the catch:

We are under contract on this property, have an appraisal in-hand, and are ready to close any time we'd like to.  However, there are several small areas of water damage to the plaster (in 3 of the 4 units).  These have not been repaired as per our purchase agreement.  Additionally, upon further investigation, it was revealed that the valleys underlying the tile roof are in need of repair and/or replacement soon.  The contractor we spoke with told us that some areas of the roof had chipping tiles and he thought the whole roof might be bad.  We got an estimate on repairing the valleys, which could be anywhere from $200-$10,000.

The seller agreed to put $10,000 in escrow towards any repairs that may be needed come spring, when a thaw will allow a roofer to assess the condition of the roof.  

The seller also had a full roof inspection 4 years ago, at which time the roof was said to be in good condition.

My husband is anxious because we can't verify the condition of the roof as a whole.  If the entire thing needs to be replaced, we're looking at up to $30,000.  This is unlikely given the information we have in our hands, but again....we don't have all the information because it's winter and no one can tell us whether the roof is working!  Sorry for the ramble.  Hopefully you can imagine our pickle.  Let me know what you think.  

Thanks!

This is the exterior.  Is it worth it to do an exterior face-lift (as far as forced appreciation and better renters & rent rate?)  By face-lift I mean scalloped siding on the front above the porch and/or sandblasting the brown paint off the concrete.  My husband and I are having a difference of opinion as to the value of these improvements.

@Jay Dewberry I'm trying really hard to figure out if a 15-year or a 30-year is the right way to go. Both yield nearly identical total ROI (including equity payout and cash-flow). The 30 year obviously cash flows better - more than $100/mo better.

I just read the Millionaire Real Estate Investor and he talked about 15 year loans being more advantageous in the long term (allowing for more wealth with fewer properties owned).  What's your opinion on this?  Should I take the cash flow now so I can buy more properties more quickly?  

When it comes to 25% down, that's not my preference, but I know that many lenders prefer a higher down payment for investment properties.  If I can get someone to let me have it at 20% down, I'll do it!

Great tips, guys.  Thanks so much.  We'll be more conservative on the vacancy rate.  After looking at the property today, we saw that it needs new flooring in the kitchen and bathroom as well as new kitchen cabinets and appliances (it's a very small kitchen).  Not sure what these costs would run us but we're definitely interested in getting a contractor to give us an opinion.

Hey guys!  Mind giving this deal another pair of eyes?  It needs a face-lift exteriorly but doesn't need much at all inside.  Needs an update on an ugly brick porch (ideas?) and a small area (100 sq ft?) of shaker-type siding to make it cuter.  No clue what these rehabs would cost.

Otherwise, here are the numbers:

- $69,900 asking price.  Offer $60.  Accept no higher than $65.

- 3B/1B, 1,080 sq ft

- Up-and-coming semi-urban neighborhood with lots of city plans for high-end retail and apartment development about a mile from Notre Dame University.

- Taxes: $500/yr

- $850/mo = market rent

- 10% property management = $1,020 (we currently manage ourselves but plan to hire-out management when we get to about 10 properties - we currently have 2.)

- 2% vacancy = $204/yr

- Insurance $500/yr

- 5% repair budget = $510/yr

- Cap ex of $120/mo = $1,440/yr

- Mortgage terms: 25% down, 15 years at 5% interest.

I tried to be conservative with these numbers and cover our rears. Is there anything I'm leaving out? Should we make the offer of $60K? I figure the above numbers to yield a $112.58/mo cash flow and a total ROI (including equity pay-down, but not tax incentives) of 18.9%. Again, this is figuring on property management which we won't use for at least 5 years and a 15 year loan.