All Forum Posts by: David Krulac

Besides the HUD guidelinem we have had HUD violate their own guidelines. We had a tenant HUD approved Section 8 where we had 12 people ina 4 bedroom house. I think their logic was that a family with 12 people (parents and 10 boy children) would have difficulty finding a suitable house with say 6 bedrooms.

In addition to the Federal guideline, some local ordinances address occupants both tenants and owners.  In several communities their ordinance says no more than 3 people unrealted by blood or marriage may occupy a residence.  Some think that this is an anti-group home law, but so far nodoy has challenged this in court.

Currently we do not pay anybody's heat or hot water.  In every building, that we bought that had common heat and hot water, we seperated those units on to their own devices.  The exception being condos where the common heat was not in our control.  We have installed gas hot air furnaces, gas hot water boilers, and heat pumps.  All of thoise are more expensive to install that electric baseboard but have much lower operation costs.  We're in it for the long haul, we want tenants to stay a long time and reduce vacancy.  We've had 30 year tenants, and currently have a 25 year tenant, and several 10 year tenants.  Our average tenancy is 12.5 years.

For the longest time, I almost always bought locally.  I like the feeling of being close by to my rentals and managaging myself.  On the journey, I once sold properties that were 30 minutes away as being too far, and also managed some properties that were 200 miles away.  I know thats a contradiction, but a matter of growth.  Subsequently I ended up buying property in 8 states, and a couple weeks ago bought 5 properties in 5 days in 3 states. Now I've sold all my properties in 4 states and of the remaining I self manage in 2 states and have a large property management firm in the other 2 states.  I've self managed property for a long time and I belive that no manager does as good a job of managing as I do.  My quick response time and attention to detail is not matched by many others.  This winter we had a no heat call on a Sunday and I had the technician out there that day.  In the past there were other cases with no heta on a Saturday night and we had somebody out to fix that night and get the heat back the same night.  Last year we had a water leak on a Friday night, we had somebody out immediately Friday night and came back on Saturday to do final clean up.  The overtime is not a consideration when there are emergency situation.

I've owned a bunch of condos, so I speak from experience. There are several factors that affected my decision, the first being the rising condo fees. Some of the condos here have extremely high condo fees. One place is $8,000 yearly condo fee. As I posted recently on BP, some of the units that I've owned included heat and hot water in the condo fee, which increased the condo fee such their fee was in the $380 monthly range. And in the same complex later built units had individual heat pumps and hot water heaters which the unit occupant pays. We had units that had heat included and units where heat was not included. In my experience owning units there for 20+ years, we were not able to get compensatory higher rents. Tenants were unwilling to pay the higher rent for units which included heat and hot water. They might pay a little more but not enough to cover the extra condo fee. A second consideration is that condos locally have become more adverse to rentals. So condos have gone so far to totally outlaw all rentals. Other complexes have put in a quota systyem of allowing only 10% rental and every one of the copmplexes instituting those rules already have at leats 10% rentals. In that case when a rental lease expires or a condo is sold, its rental exception is extinquished. A third consideration is that FHA has rules for limiting rentals in developments. If the number of rental exceeds the FHA standard then nobody can get a new FHA, owner occupant mortgage. At one condo development where I owned property, they did not exceed the rental limitation, but none the less were not certified for FHA financing. I spearheaded the movement to get the devlopment FHA approved so that owner occupant buyers could use FHA financing. I felt that it benifitted the community expanding the buyer pool and increased the value of all owner's property in that development both owner occupant and investor owners. The fourth consideration for condo owners is special assessments, which re have been hit for, parking lot paving, new roof, and new siding. These special assessment were thousands of dollars, and there was no sufficient reserves from the monthly fees to cover these large biggers, so the owner were required to cover the shortfalls out of pocket, what a great way to ruin your cash flow and ROI.

There are benifits to condos, including tennis courts, playground, swimming pools, club houses, and fitness facilities.  And when we had those amenities we used those ammenities in our pitches to both renters and buyers.  And we owned a bunch of rentals in condo developments with swimming pools which was a desirable appeal to many, becasue most condos did not have pools. The best pools are where somebody else does the maintenamce and has the liability.  

@Greg M. Point well taken!  I have seen studies that show that when the utilities are paid by the tenants themselves directly, that the costs are reduced by 20%.  When its included in the rent, tenants naturally think its free.  When I was a tenant, admittedly a long time ago, I would turn off the air conditioning when I went away for a weekend in the summer, even though I was not paying for the heat/air condtioning.  I thought that I was saving the LL money.  Ironically, I later foud out that the thermonstat in my apartment was the only thermostate for the central air conditioning of the whole building.  The other tenants would call the management company on Saturday to report the air conditioning failure and were told that a service person would fix the problem on Monday.  When the service person came on Monday, they could never found anything wrong and the AC was working fine.  I only found out later what the results were of my energy saving actions.  No good deed goes unpunished! 

local REIA groups are filled with investors looking to buy properties.

@James Hamling  Agree 100%, in my market the number of owner occupied buyers versus investor buyers is sometimes 9 to 1 or higher.  Much bigger buyer pool and particularily is in a single family neighborhood with mostly owner occupants, appeals to owners.  One particular property that I looked at was converted from single family with a one bedrom unit on the first floor and two single room apartments on the second floor.  The buyer ended up buying and reconverting to a single family, and doubled his purchase price.

@Mark Cruse  We've owned condo units in a development where the first build units included heat and hot water in the condo fee, among other charges.  When the second phase was built, the units have the same floor plan, but they added individual heat pumps and individual hor water heaters in each unit, so that they were on the occupant's electric bill.  I thought that we would be able to charge more rent for the units which included heat and hot water.  But over many years of owning units in this development (have owned 7 so far) the tenants and prospective tenants are no willing to pay extra rent for the units with "free" heta and hot water.  I know it defies logic, but many things in life defy logic and the evidence I've experienced follows suit. 

You make the deal, not find the deal. I just bought 5 houses in 5 days in 3 states, 1 of the states I never bought property before. I look at asking price as a suggestion. One of the above houses was a foreclosure, now bank owned and on the MLS. It was apprised in its current condition at $378,000. But it had been for sale on the market since July, 2024. Right of the get go that tells me many other people have looked at it and did not offer the asking price. The house is sitting there vacant and all banks want to do is get rid of the property. Then they lowered the price to $340,000, a step in the right direction, but not as big a step that I liked. All things considered, on the market for months, its now winter time, cold weather, holidays, and dark at 5 pm, not prime selling time, I offered $250,000. They rejected my offer; I was neither surprised, hurt or insulted by the rejection. I waited a few days and raised my offer to $255,000 and they accepted. Therefore I just bought a house with $123,000 worth of equity when I walked in the door. Another of the houses I just bought is appraised at $250,000, they reduced the price to $225,000, and I put in an offer but they accepted a higher offer from another buyer for $197,000. That buyer didn't close and they came back to me and offered $197,000 price. I said that was too high for me and offered $170,000. They said that was too low for them, so I offered $175,000 and they accepted. Same basic structure they asking price is a suggestion, I offer what I think is a workable number for me and we negotiate to the "middle"; though the middle is not halfway, we never "split the difference". My "middle" is close to my bottom price and I picked up another $75,000 of free equity, for a total of $198,000 free equity in 5 days on two properties in 2025. And I bought 3 other properties with a different deal structure, but also profitable.

@Lincoln Waite In none of our rentals are we paying heat or electric within the units. We also have some buildings that are single family conversions not built with seperate utilities. We didn't do every building all at once but over time converted one building then another. The first multi that I ever bought was also 3 units and had 2 electric meters and 2 furnaces. We seperated the electric and each tenant had their own meter which they paid. Then we added one new gas furnace and then each apartment had their own furnace and also paid their own heat, as a result. The first round of tenants we got paid the same rent as before and also paid their own heat and electric. Over the years the rent was increased, and the rent when I sold the building was 4.3X what the rent was when I bought. Inflation is your friend when you're not paying the heat and electric bills. And I always thell the tenants you have your own thermostat and you control how much your heat and electric bills will be. As a side note the "Median" rents for the whole country are on a HUD website and is updated every year to the new rent levels, so you can see how your rents compare to the HUD Median rents. At one 2 unit building there were seperate gas lline, seperately metered but the only appliance was a gas range in each unit. We changed that and added 1 new gas furnace and 2 new gas hot water heaters to the tenant's meters. We reduced their rent by $50 to cover their additonal utility bills. Then in the next rent cycle 1 tenant moved out and the new replacement paid the old rent sans the $50 discount, and in the second year the other tenant's rent was raised $50, so we were back to the original rent. We've added natural gs lines where there were none in the building and got assistance from the gas company who paid for all the excavation and street repair to get the gas line to the building. At other buildings we switched heat source away from oil heat, too expensive. At one single family house there was an oil haot water boiler with domestic hot water. Because of inefficiencie s and the fact that the boiler rans 365 days to supply domestic hot water the tenant's oil bill the first year was $5,900. Of course they complained, and I said that I would replace with a gas hot water boiler and a seperate gas hot water heat, so they would stay. The gs company paid for the excavation, I paid for the equipment and the next year the tenant's gas bill was $1,700. Much more resonable than $5,900 and the tenant stay for severl more years until they bought their own home through me.