All Forum Posts by: Henry LiChi

I wouldn’t quite get rid of this cleaning company you have built up. I think your passion and effort in hindsight is focused too much on real estate when right now what you need is to improve your credit, which will take time. I would suggest focusing on scaling your cleaning business, growing it while your credit score improves and if real estate is your true passion, you can potentially sell the cleaning business in the future that would give you enough capital to start real estate investing. It may take years but your credit will take years to improve. Remember REI is not a race.

I would figure out the NOI first. Gross doesn’t mean much if your expenses are high. Figure out your cap rate of your current properties and if you are comfortable with that cap rate, multiply it by the sellers NOI, this should give you a purchase price that is fair to you and most of all, you can explain how you came up with it. Just make sure the NOI for the last two years is accurate and verify any deferred maintenance.

@Shannon Allaire

200-275 for completely detached new ground up ADUs. Really depends what city too.  This is strictly talking about Bay Area construction cost, when fully getting a GC to do the work.  I have seen people do garage conversions as low as the 100 per sf range but all depends on the quality.

Specifically mid range real estate rentals. Luxury and high rents are the first to get hit hard by the recession. Those that can’t afford the high rents anymore, move into mid range rentals.

@Joanna Socha

I did not know that.  That is excellent news.  Time to find some properties to kick start the new year!

Month to month, of course you can bill them. I think you are required to give a minimal 30 day notice. Check with your local guidelines. Typically 60 days is more ideal. Another option is to increase rents with water and sewer built in. Definitely check out other competitors to see what they are doing. If they include water and sewer and you require tenants to pay it, you will lose your tenants and future prospects. Tenants tend to like a fixed monthly rent even if it is a bit higher to include the utilities, as long as it is still competitive with the market.

There is quite a few people on here that build ADUs to have an increase value in flips but cannot be done legal with non owner occupants investments. I’ve see flippers turn what would normally be a 5-10% profit flip (cosmetic) into a 20+% profit once the ADU was built. ADU run about 200-275 per sf, with most homes around the Bay Area from the 400+, it pays for itself easily. Just have to abide by the regulations.

If tenants are on a previous lease where it is stated that the landlord/owner pays for the water and sewer, you have to honor the previous lease until expired.

Congrats on the acquisition. I think there is plenty of upside to this. The expenses can dramatically be lowered assuming the fixtures in that building are older and not upgraded. Rents may not be able to be raised but you can lower your expenses dramatically by replacing: - common area light bulbs to LED - if you are paying for the water and sewer, it would be wise to switch to all low flow. - kitchen and bathroom faucets can have the aerator be replaced with a low flow .5 gpm. Amazon sells these for only a buck or so each. - shower heads to low flow 1.25 to 1.5 instead of old shower heads that use up to triple the amount. - more upfront cost but it may be worth replacing toilets to low flow ones that use 1/3 the water. - less water usage = less in the sewage = less water and sewage expense. Imagine cutting your electrical bill to a quarter the amount and your water and sewage by at least half. Well worth the upfront cost as it pays for itself within months.

@Gina C.

Congrats on your first investment! Don't forget to include CAPEX and a Repair budget in that operating expense. Also, would definitely include 10% for property management fee to pay yourself or pay a professional in the future if you decide to go that route.

3150 gross rent

200 utilities

XX property tax

XX landlord insurance

157.5 or 5% CAPEX

157.5 or 5% Maintenance and minor repairs budget

315 or 10% PM fee

- 1850 mortgage payment

= 470 per month before the property tax and landlord insurance

You'll pocket the 315 for PM fee, so that's 785 before property tax and landlord insurance

Just want to protect yourself with real numbers, and conservative ones...  I typically use 10% for maintenance and minor repairs for 4-plex+ because one simply maintenance call can be over $100+.