All Forum Posts by: David Krulac

The high tax rates is one negative to doing flips. In the highest tax bracket, now 39.6%, and add on the 3.8% health care tax, and add on the state income tax, as high as 13% in CA and add on the social security tax, you could be paying what 68% of your profit in taxes on a flip at the high end. WOW!

Buy and Hold would qualify for 15% long term capital gains except for the 1 perceters who would be at 20%, that's half or less of a tax rate, and is a big difference.

A hybred technique would be to buy and hold long enough for long term capital gains. Rent the property and after the first tenant leaves then sell the property, after at least a year and sharply reduce your tax load. And some times that first tenant ends up staying a a long time or a very long time. I've had first tenants stay 13 years, then the property needs fixxing up anyway to re-rent, but instead I'll fix up and sell. One tenant 13 years, not a day of vacancy, and lower tax rates, there's only one thing better than that....

Buy, hold never sell, get the stepped up basis, and don't pay any taxes, or even add the itermediate step fo a Section 1031.

Besides the fact that most of the stuff is junk, not worth owning, and very little value if any, there is also the misrepresentation of the seller. They make claims that are blatant lies, or they leave out information that is critical to making the decision to buy or not.

Much of the vacant lots that I've seen have not been perked, are probably unbuildable, and none of that is mentioned in the on line ads. Zoning is also a big issue and is so varied among localities.

Once bought a 25 acre piece of land that zoning restricted to maximum of 1 house. Another proerty of 30 acres could not be subdivied and also permitted a maximum of 1 house. And another property of 35 acres by zoning permitted zero houses to be built there. Sometimes the seller's know this information and don't disclose it, other times they are ignorant of the restrictions on their own property.

Some of the sellers have never seen the property they are selling, except on Google earth.

And personally, it would be an extremely rare purchase that I would accept a Quit Claim Deed. One other thing that happens in cyber is that seller sell property that they don't own!

Due diligence is extremely important particularily when buying long distance.

Jerry,

I've been to McKeesport, and I don't think you have to worry about Blackstone's moving in. As you can see from NANA's list there are no places in PA. where Blackstone is going.

The Wall Street Crowd thinks of PA as rustbelt, and they're not going anywhere near the rust belt. Their focus is on coastal areas, large metro areas, sun belt places and other places where they think there will be growth in the real estate markets that will drive future appreciation and rental increases.

But if you want to see who are the buyers, and the players in any real estate market all you need is access to the Recorder of Deeds office either online or inperson if that information is not available in your county, but most larger counties have internet access.

Knowing what has happened over the last 10-15 years is nice, but as they say in the secuirities business, "past performance......

Longer is better. i have a tenant at the same place since 1984, no vacancy in almost 30 years, very sweet.

Section 8 rents are determined by market surveys of rents in the area. The Section 8 rents are the median rent for the area, 50% of the rentals have higher rents and 50% have lower rents.

As an aside I have participated in the HUD rental surveys for many years giving them input for what I charge for rents in the area.

HUD publishes those rent surveys on their web site www.huduser.org and look under the "American Housing Survey." It gives all the median rents for the entire country.

One purpose this can serve is to show you where your rents might be in relation to the median rent in your area. In my area in 2011 and 2012 rents went down according to the HUD figures. I call them and asked about that, becuase my rents were actually rising at the same time that the area rents were declining. I was told that apartment complexes were offering specials to fill units and were lowering rents to capture occupancy.

For 2013, the HUD rents increased sharply and more than made up for the declines of the two previous years. Good news for landlords.

All of that is way of background to the initial topic of this thread, 2 bedroom rents. In the latest HUD rent surveys the difference between the 2 bedroom rent and the 3 bedroom rent is $271 or 30% higher rent for a 3 bedroom versus a 2 bedroom at the median price point. To me that documents precisely the local difference between your average (median) 2 bedroom and 3 bedroom.

My personal experience of renting properties for many years is that 3 bedroom properties have more demand than 2 bedroom properties. I've rented 3 bedroom properties to single people with no kids, a couple, a parent and a kid or a family with 2 adults and a couple of kids. There is almost an universal appeal to 3 bedroom properties.

Can you make money with 2 bedroom properties, yes, for sure, and I own some 2 bedroom properties, but as the survey says, you can expect 30% more rent from a 3 bedroom property.

David Krulac

I've owned and managed multi-family properties since 1978. I've been very fortunate to have mostly good tenants, who obviously made this long journey more pleasant than not.

One of the tenants has been renting from me since 1984. He moved in on a one year lease then and never moved out. Not one day of vacancy in nearly 30 YEARS!

Another tenant has rented from me for almost 15 years and another tenant, who I just sold a house to, had rented an apartment from me for 22 years.

There's the old rental axiom that says that single family house tenants stay longer than apartment tenants. From my experience that is not always true.

One time I bought a building with an existing 9 year tenant. He worked nearby, but had a house that he owned about 100 miles away. He typically went home every weekend and only lived in the apartment from Monday to Thursday every week. Plus some times he traveled with his job and sometimes he was off work for holidays or vacation, which also did NOT spend at his apartment that I rented to him. He may have actually used the apartment maybe half of the days in the year. I owned that building for a number of years and he continued to rent that same apartment. I figured that he would rent that apartment until he retired from his job and moved back full time to his home 100 miles away. There are many employers in the area that have good paying white collar type office jobs that attract people from more rural areas, where there are not many high paying jobs. Therefore there is market niche of other prospective tenants out there looking for what essential is a part time crash pad near their employment. These types of tenants cause less wear and tear on the apartments, have good paying jobs and can afford the rent. And they save the owner from re-painting and other vacancy expenses.

At another property, I placed an ad in the newspaper about a place for rent. The first morning that the ad was in the paper, I got several phone calls. I told the people calling that the place was vacant, and if they wanted to see it to just go over there and let themselves into the property and then call me back if they were interested. One person called and said that he would look at the place on his lunch hour that day. Several other people called also and I told them the same thing, go show it to yourself, then call me.
Before noon, two people called back said they looked at the place and wanted to rent it. I told them to come by where I was and bring cash and I would rent the place. They did and I did. So they moved in and stayed for 17 years. In that 17 years I maybe talked with them 6 times and never saw them again. They paid their rent every month and the only reason they moved is that I sold the property and the new buyer wanted to move in. So saw them once, they stayed 17 years and I never saw them again.

At a single family house in an acclaimed school district, I had bought a house to rent. The first tenants who lived there stayed for 13 years until both their kids graduated from high school, even though the father had to drive 75 miles one way to work every day, just so his kids could go to this good public school.

If you have a good product, good value and in a good school district and a good crime area, it probably doesn't make any difference whether you have single family investment properties or multi-family properties.