All Forum Posts by: Cara Lonsdale

Nice to "meet" you, @Trent Blackwill

I am a Realtor in the Phx/Scottsdale market, and am familiar with the STR opportunities here. The key is to look for properties with good surrounding activities that will draw guests. Focus on properties with No HOA to avoid regulation issues and/or fines.

You may also want to secure a proper evaluator program that will estimate potential income.  Programs like mashvisor, or airdna, just to name a couple, are good places to start.

Square footage is usually listed based on tax records or appraiser measurements.  Most contracts call for Buyer to do their due diligence to verify facts that they deem important.  This would include square footage.  

I am no attorney, so speaking with one would be a good idea, but it is my guess that any claims you would have against the Seller would require you to prove that the Seller willingly deceived you.  Is that the case?  Or is it possible that the Seller just used the sq ft that was in tax records, or on the last appraisal, or info they obtained from the last owner, to convey to you?  In this case, I would imagine that it might be difficult to prove that the Seller meant harm, or falsely reported info.

I don't believe that AAR sells their forms to the public.  You must have a real estate license to obtain them.  They can be used electronically through zipforms for form completion.

Any lease you would be able to write would be subject to your ability to close on the property.  Additionally, this would most likely require you to show the property to prospective tenants in order to secure a lease, which requires the Seller and LA's permission.

With all of that in mind, the Lender should not be requiring this of you.  They should be able to take the average rental rate for the area and apply it to their calculations to submit to underwriting.  Usually this is calculated at 75% of the average rental rate.

Sometimes lenders don't think their request through very well, and ask for things that are not realistic to obtain.  I would push back on this and provide them with local rental comps, and time on market statistics so that they understand what to expect from the rental, and how long it will take to get it rented.  It may impact your reserve requirement, but it will eliminate the risk of taking on a Tenant that someone else places without your proper screening.

Texas is a state that doesn't have a limit on the Security Deposit, or prepaid rents collected.  So, you may be in luck there.  However, the various Cities can impose limits.  So, you will still want to check your specific municipality to verify the limits, if applicable.

Read your purchase agreement with the Builder.  See what they have the ability to do in terms of changing pricing.  Most likely, they do have a clause that covers them for an increase in materials and/or labor (like lumber earlier in the year).  However, they shouldn't be able to just arbitrarily increase your purchase price without your agreement (unless you are at the point prior to having the public report.  They may have the ability to rescind offerings before that is published).  

I would start with your purchase agreement and all the forms you signed at the beginning.  GO over them with a fine tooth comb.  Ask your agent where the sales rep told them that it couldn't be changed.  By the way, this will seem absolutely ridiculous, but did you know that most builder contracts have a clause that states that their sales rep and/or any hosts do not speak on their behalf..?!  So, anything the sales rep tells you is not something that the Builder needs to stand behind unless it is in writing.  So, make sure EVERYTHING the sales rep tells you, or agrees to, is in writing signed by you and the builder's designated broker (not the sales rep).

It depends on what your state will allow.  In AZ, where I am, a Landlord cannot require or hold more than 1.5 times the rental rate in security deposits and/or prepaid rents.  It is illegal for Landlords to hold more than that.

So, before considering, you may want to check your applicable laws.

James, I think you have continuously missed the point.  At this point, people can read.  They can determine what to pull out of each of our comments.  

I believe that you are experienced.  I acknowledge that you are local, and provide that insight.  I don't believe that you are infallible.  None of us are.  Your comments, whether intended or not, came off arrogantly.  I am not sure how you came up with your descriptions of my comments to you as they were defensive and not offensive, however if my comments to you felt bullyish, than I apologize.  

Your very first comment out of the gate toward me put me on the defensive as you finger wagged at me like a child and accused me of illegal activity.  My comment back, and everyone since, has been to defend myself, as I would never suggest illegal activity to anyone.  

There are alot of misconceptions out there about COVID and the protections that it provides to Tenants.  You are correct, that every state will also have their own set of restrictions and policies.  However, the one thing I have maintained that you will not acknowledge after many attempts to ask you to do, is that there ARE exceptions.  You even gave some for yourself of when you took a Tenant to court.  So, by your own example, you acknowledge that there are exceptions written into the policy.  You just won't acknowledge here in this forum because apparently being the "winner" is more important.

Additionally, you are speaking to your experience in the past.  The OP is talking about a situation that is happening right now.  Since things have changed, policies have changed, and the past is immaterial.  I have included links above to all of the docs, info about the new policy, AND news that the Gov's powers have been overruled.  So, clearly the experience of the past year is not evidence of it continuing now.  A new plan of phase out has started.  More and more exceptions have been added.  

I think you have a good start.  However, I would encourage you to get a little more conservative with your numbers and add some buffers.  After all, this is your evaluation.  If you are too optimistic on this front, it may lead to lost cash flow upon purchase.

Here are a few things that jump out at me right away.....

How did you get to $8 per month for insurance? That is just under $100 per year. That seems incredibly low, even for a contents only policy. I didn't see an HOA fee, so my guess is that you need walls out AND walls in coverage. I would expect that to be $650+. Double that if you have to get a vacancy policy if you intend to renovate beforehand. Also, make sure you escalate this over the years as expenses go up).

Have you secured a lender at 3% interest rate for your rental?  Not that it can't be found in our current market, but for estimation sake, you may want to consider elevating that to a more reasonable rate.  Better to be pleasantly surprised by additional cash flow than disappointed by a higher expense.  I see that you are doing a 15 year loan, so that helps.  You may consider doing 25% down instead of 20% down.  There seems to be a significant rate differential these days between the two ratios.  Also, your loan amount may come into play.  Anything sub $50K could take on a higher rate, and many lenders won't touch anything under $50K.  I would estimate 4-5% interest rate to be safe.  If you find something below that, GREAT!  More money in your pocket.

Do you have a home warranty on the property?  If so, I would add that into your expenses, and up the maintenance fee to cover the trade call fee.  If not, I would up this expense significantly.  All it will take is an appliance to go out and your budget for the whole year (or several) is blown.  Now consider an HVAC going out.  That could be a $7K expense.  People have mixed feelings about home warranties, but just like your homeowner's insurance, it can be a good insurance policy that helps level off high expenses of costly repairs/replacements.

Do you have cost of acquisition and sale figured into your analysis?  What about holding costs while you renovate and/or wait for a Tenant to be placed?  

 According to the link below, the Governor's powers ended on July 1st.  James, enough is enough.  I get it.  Your a big man.  You are the authority in all things Minnesota.  We bow to your every word, and you can never be wrong.  Although question....IF there were no exceptions, why were you in court before a judge?  You must have thought there was a REASON that allowed for your eviction action that was an exception to the moratorium.  Additionally, now that that part is over and new policies are in place, why are you still speaking to the old policies? 

MN’s COVID state of emergency officially ends Thursday – Twin Cities