All Forum Posts by: James Mc Ree

I am guessing you are not working with a real estate agent. I think you really need to work with an agent based on what I am reading between the lines in your post. An agent will significantly help you through the offer process. The agent can also recommend professionals to help you assess your costs before you offer or during an inspection contingency.

A few ideas:

I would start by asking the tenants if they really care about the utility costs since Landlord is supplying the appliances. They may just agree to cover them, especially if Landlord offers to eat the appliance costs if they cover the utilities.

If that doesn't work and it is an issue for the tenants, I wouldn't do it. However, if you want to press on, here are a couple of ideas:

Install a coin-op washer and dryer and use the revenue to reimburse the tenants. Calculate costs with inline meters on the electric and water. You will need to read them and do some math, but this would allow you to calculate costs and evenly allocate them if they go 50/50. You can do this without a coin-op feature, but then you have to bill the tenants for small amounts which is just one more thing to have to track and follow-up on. You won't know who used more or less, so any complaints about volume are more issues. You can use a card reader on the coin-op feature to address that, but you are into micro-issues at that point that I wouldn't want to deal with.

A proposal: Tenants, installing separately metered water and electric lines that I pay for, then bill you for, will cost me $5,000 (or whatever). I would then pass that on to you in a rent increase of $100/month more/less. I'd rather not do that. Instead, can you just cover the utilities or go to the laundromat. This is just a heavier version of the first idea.

Some HIs will walk the property with you for a steep discount and tell you what they see to inform your offer. This allows you to make an offer without a HI contingency which is much more competitive than one with the contingency since you are buying the property as is.

You can still get the home inspection after you settle to capture all of the detail items.

Why are you doing this, @Laura Casner? That is what you focus on.

Focus on your dream. It could be freedom from a W2, travel, new cars, college for the kids - whatever your dream is, focus on that. Focusing on cash will not motivate you long-term, especially through the trials you are facing now and will face in the future.

Keep chasing the dream. Dream on!

I think most of what you are asking is impossible for anyone here to reliably answer without more information and you should probably consult an attorney if you think it is worth it. You are disputing a condo agreement we do not have and we know nothing of your paint and vent beyond what you say.

Regarding amending the lease, it can be a simple document you and your tenant sign stating that you are amending the term of the lease to be 2 years, and the tenant has an option to terminate the lease at 1 year.

Regarding the bathroom, if it has a tub or shower and no other ventilation, I would go with the vent fan as the root cause. If the existing ceiling paint is damaged, the ceiling must be scraped, repaired and painted. Obviously, they should use the correct type of paint when they do it. I think you are both right: fix the vent fan and paint.

"Better" can be defined in terms of risk and return.

Risk - You told us nothing about the investment nor GP, so it's impossible for us to really comment beyond lower risk might be better. The agreements I've seen basically say you are guaranteed nothing, you could lose all your money, you might not be paid on time or ever, you can't rely on any representation made by the GP, you have no control over the operation and other terms and disclaimers to that effect. The GP will say that is all boilerplate stuff recommended by the attorney. It basically means you know nothing if your only source of knowledge is what the GP said and wrote. Consider getting references from past investors with the GP.

Return - 11%. LOL! Return should always be thought of in the context of alternatives with regard to risk. You are taking a risk to get 10%. Nearly risk free investing in a money market is about 4.8%. The stock market is returning 6-7% over a long term average. How much risk are you taking for that additional 3-6%? As @Greg Scott mentioned, this is on the low end of deals like this and remember nothing is promised (check you docs on that).

I own SFR homes that have far exceeded 10% returns due to their appreciation over the past 10 years or so. No one can see the future, so who knows what the next 5-10 years will bring.

10% Is not an extraordinary return, but not bad either. Find something you are comfortable with because you have done strong due diligence.

You need to know what they changed and why. That part of the story isn't here.

They really shouldn't be changing the ledger entries at all. For example, suppose they charged $100 for a fee in 2023 and they found through audit it should have been $500. They should write you a letter explaining the error and that they are going to charge you the additional $400 now. There should then be a ledger entry dated today for "Additional 2023 fee" for $400. That way, your records are consistent and they should never due something that causes you to reopen prior year taxes.

You would know what a tenant's voucher is worth for their current property as of the time it was issued. That doesn't mean it just transfers right over to another property.

The tenant's income may have changed or possibly more or fewer family members move along. The property could be more or less efficient with utilities. It may or may not have central air, deck, porch, etc. The landlord could provide appliances and you do not or vice versa.

It probably won't change radically if the tenants' income and family structure haven't changed, but probably won't be the same unless the properties are very similar.

There are 2 drivers for what you will get in Section 8 rent:

1. The property's market value in rent. This is what is governed by FMR. You are very likely to get in the range of $1,300-$1,400 if that is the market. The $2,000 max FMR is just what it says - the max regardless of the market. You can appeal it, and they will get a BPO for the property.

2. The tenant's finances determine what they can afford. Your property might be legitimately worth $1,500 and the tenant qualifies for $500 in assistance, but can only afford to pay another $500 for a total of $1,000, they won't approve $1,500.

Unfortunately, you can usually only find both of these out when you have an application and lease signed from a prospective tenant and submit it to the local housing authority. This is one of the cumbersome parts of Section 8.

@Dawn Miller That's not a problem. Your listing should say the property is being sold tenant occupied if that is the case. Prospects who want to live there will know they need to end the tenant's lease or get you to end it as part of their offer. Prospects that don't want to deal with a tenant or lease at all won't see the property, but they wouldn't see it anyway if it isn't listed, so no loss to you. Investor prospects will be delighted to know they have revenue on day 1.