All Forum Posts by: James Mc Ree

Your lessee might not be ready to move right now. You could offer new windows with a 5 year lease or no new windows for the 3 year lease.

I would inform Tenant the security deposit covers damage, not rent. He has to pay the July rent, move out, you inspect, charge the deposit for any items and he gets the remainder back. There will be nothing left for damages if security is 1 month which is July rent.

He may object to that saying the room is in the same condition as when he moved in. You can ask to see the room to verify that claim and have an informed opinion. I would still hold the security deposit until move out as you can never see everything in a furnished room. Moving out can cause damage.

I would be OK with not showing the room. He has a point about his privacy. I would not be OK with him putting a lock on the door that I cannot open. That is a safety issue. I would immediately require access.

The other stuff (parking,etc) is irrelevant and you should have addressed it when it started if it was an issue.

What do you do if he refuses to comply? Posting a 10-day pay or quit notice costs nothing and gets you started. Filing for eviction probably costs something and I wouldn't do that unless he doesn't move out as planned. Get his new address so you can sue if there is an outstanding damage balance, but don't hold your breath to get paid.

I suspect doing work without a permit and getting caught will top your list. I wouldn't know anything about that.

My biggest complaint is the excessive cost. Here is a real example of replacing the electric service wire from the electric company to the meter.
- $110 For 5 minute rental inspection that results in issue to replace the electric service line.

- Electrician quotes $900.

- Municipality permit is $75. "Good news", they say: "An inspection is included!"

- Electrician says another electrician needs to inspect the work as per the permit. $60 More.

- Municipality says another $60 is needed for a re-inspection due to the failed inspection. This inspection is just a building inspector drive-by. The inspector is not an electrician and might not even get out of his car.

Municipal cost: $195 on top of $900 job.

I objected to the $65 re-inspection charge and they waived it. The rationale was the original electrician is licensed in the municipality, his #2 electrician is also licensed there and the municipality's contracted electrician (#3) is also licenses there. Inspection #4, the building inspector with no specific electrical skill who is just driving by was absurd to pay for. The municipal person got my making a joke of the process as I explained this and waived it. Not all municipalities may waive it, but there does seem to be some human flexibility sometimes.

It's hard to predict tax increases beyond high cost areas are likely to stay that way relative to other areas. There are items you can research which will give you a better understanding of what drives costs, but I don't know how much that will impact your investment decision.

Check your property assessment. This is probably the best control you have over your tax payment. You can appeal your assessed value to lower your overall tax.

You have 2 or 3 taxes to consider: municipal/township (if you have one), county, school. They are assessed only within their boundaries (there can be more than 1 school district or municipality in a county). The tax increase will be proportionately the same across the tax district based on each property's millage, so if school tax increases 5%, every property's tax in the district increases 5%.

Municipal drivers tend to be EMS services, infrastructure, trash/sewer, park & rec. Police and roads are usually non-negotiable and always increase in cost. Check to see if the municipality/county is growing and has a reserve for planning ahead for future expenses. For example, do they surprise their residents with a need for a new $10M XYZ or did they plan for it and collected extra taxes as the need approached? That will help avoid surprise increases, but you are prepaying for it (choose your complaint).

The county doesn't do a lot in my area relative to municipality and school taxes. Their taxes tend to stay the same, but they occasionally want to buy land for open space. Check their future plans to see what they have in mind and if they have a funding plan. They probably have a 10 year plan, but not funding in place for it.

School taxes are usually your top cost and can jump with building new schools. All other costs are likely incremental, but the increment sizes will vary, such as with a new teacher contract. Check the condition of the schools to see if there is a lot of deferred maintenance and ask the school board about their financial challenges and plans. They will surely tell you there is never enough money to meet the need, they don't want to raise taxes, but have to in order to close a gap (or something like that).

One big catch to all of this the upcoming federal budget. Federal support is being cut dramatically as you see in the news, but services are not being cut. Governments will still need to pave the roads, pay police, etc. So, a federal cut to your area is very likely to be offset by a municipality, county, school and state increase to offset the lost funds. This will probably be a surprise to a lot of folks who think they are getting something for nothing.

After doing all of this research, I think you will probably end up with "I dunno..." since none of this is in a long term structured plan that will actually be executed as written on a reliable timeline (except the federal spending impact!).

The Section 8 cut will likely cap approved rents/payments and make the waiting list longer. They will probably abandon their initiative to open wealthier neighborhoods to S8 tenants.

I recommend you focus on getting a great investment and don't think about S8. It is just a payment vehicle. Get a great tenant after you get a great property. You won't know whether you will get a self-paying tenant or a subsidized tenant at the time you are buying a property unless it is already occupied.

Section 8 properties tend to have a longer startup time to get a tenant into them, but the tenants tend to stay longer. They also have a little more overhead for dealing with the local housing authority's regulations. Payments come in like clockwork.

Overall, I prefer self-paying tenants over S8.

@Erik Estrada I get how someone is unable to refi. How are they unable to sell on the MLS? I think any property priced right will sell on the MLS.

A property owner selling to a wholesaler has a buyer pool of 1. The wholesaler is carving out a margin for themselves and their buyer which may be fair for the wholesaler market. It is unfavorable for the property owner when compared to a large public market where 1,000s of potential buyers can see and walk the property and the property owner has the benefit of expert advice from a realtor. I think the commission will be less than the wholesaler's carve out.

What feedback is your PM getting from tenant prospects? That is what you should focus on.

Slow walk your DD for this applicant while you address the feedback to get more and better applicants.

There are good feedback and questions above about the applicant's situation. The applicant was unable to pay their bills. Are they paying them now? The full credit report shows that. If not, decline. I would be concerned the applicant might file for bankruptcy if delinqencies continue.

Answering your question requires some knowledge of your financial plan and what you would do next with the money. My rentals are part of a financial plan that supports future goals. I wouldn't sell unless there was a driver to improve my position. Appreciation alone isn't a reason to sell for me since I would likely end up buying another similarly appreciated property.

One selling driver me be to suppose one of my rentals was approaching 27 years owned by me. My depreciation is about to run out, but I want to keep the cash flow going. I would look to 1031 exchange it for another versus just selling it to keep the cash flow and the depreciation. I am about 14 years away from this scenario.

Alternatively, maybe I need the property equity as cash to do something (new house, kids' college, travel, etc). I could sell a property to support that goal, ideally if that was the plan.

Landlords might sell if they are tired landlords and just want to get out of the business. In that case, selling to cash and putting it all into an index fund might make sense if the financial plan goals are still covered.

Yes, I hate it.

Cold calling may work with desperate and uninformed homeowners. Investors are rarely both. Investors generally know (or should know) their property value and aren't going to give it away, which is the only way wholesaling works. I would think it stands a better chance with owner occupants and estates versus investors.

I get at least 2-3 per week "I'll buy your house for cash and you don't have to do anything." type postal mails, emails, texts and phone calls. What would make yours stand out? The whole strategy is based on blasting out high volume offers and catching the small percentage of responses that comes back as potential leads without being concerned about who you annoy in the process.

@Tony Christian I specifically wrote in my post to follow the NY number of days. This is an expired lease, so payment is not a concern unless OP seeks financial damages. Seeking financial damages complicates the case, increases OP's costs, will probably result in a judgement, but that judgement will likely never be paid.