All Forum Posts by: Jim Peckey

Hello good folks of BP,

My wife and I will be closing on our first owner-occupied rental property (duplex) in May 2019 and I'm trying to do as much up front leg work as possible to prepare for us being new landlords.  We have some questions around the best way to accept rental payments and how investors are separating/storing funds for future repairs, vacancy, capex, cash flow, etc.

After doing some research on accepting rental payments, it looks like there are a few popular options:  cozy.co, buildium, google payments, paypal, certified funds (money order & cashiers check), cash, personal check, etc.  

As an IT Pro, I'm much more inclined to automate/digitize rental payments.  Cozy.co looks to be quite attractive and I've gone through their initial account setup, linked my bank account and all seems smooth so far - but I'm curious as to how the service functions in practice and if there are any "hidden" fees that the tenant or the landlord would potentially run into and be cause of shock/disappointment.  Least favorable would be cash, due to the hassles of accounting & writing receipts.  We're open to accepting personal checks or certified funds, but would having those sent to a PO Box be the best bet, as opposed to having that stuff sent directly to our primary residence?  Initially our tenant will be living above us, so this won't necessarily be an issue at first, but we'd like to setup a system now that scales as we purchase future properties.

After doing some research on where to keep funds, it looks like the common response is to either keep them in either an interest-bearing savings account, checking account, CD, etc. and largely to keep the funds liquid, so you can access them on demand. That makes sense for the most part and we have a Business/LLC-based Checking & Savings account that we plan on housing the funds & transferring any deposits into (e.g. cozy.co), but I suppose our question goes a bit beyond this and into the accounting side of things. How do you separate out & account for the monthly funds going into the future repairs, capex, vacancy, etc. categories? Do you use separate accounts for each category? Do you separate the funds going into these categories from your "monthly cash flow", or do you keep them all in the same account? I suppose I'm a bit confused with seeing the different categories listed on our numbers listed on the Rental Property calculator for the property, and trying to visualize those numbers being separated & accounted for over the long term.

Admittedly, my wife and I don't plan on touching any of the rent money and letting it build up in the business account being deposited into.  I feel like this is the safest and probably the laziest approach to it, but I feel like there's probably a more realistic/practical approach to organizing funds into various different categories.  While I'm sure the likes of quickbooks or other accounting software apps would be helpful, I'm curious as to whether the cost would justify the benefit for our first investment property and only renting out 1 unit @ ~$600 per month.

Apologies in advance for the newbie questions - any insight, advice or reading materials covering this would be much appreciated folks.

Thanks for reading and have an awesome day!

@Mark Bookhagen , very much appreciated sir!  We'll look into reaching out to Maryalice later today.  We've received several referrals at this point and quite thankful for the super quick responses!

Thanks again and have a great day!

Good morning BP,

My wife and I are newbie investors here in the Buffalo, NY area and looking for referrals for a good Real Estate Attorney - preferably local.  We submitted an offer on a triplex last night and while our Real Estate Agent has an Attorney they typically use, we would feel better about a referred Attorney here on BP and with a good reputation rather taking a chance on an unknown attorney for our first investment property.

We're also looking for referrals for good, local licensed contractors to have the home inspection done.  I'll submit a new thread for the contractor referral if this thread doesn't do the trick.

Thank you very much and have a great day folks!

@Jon Crosby & @Khaled Morad, thanks again for the feedback gents!

After coordinating with our Real Estate Agent, we were able to visit the property earlier this evening to walk through each of the units.  The tenants were welcoming and quite talkative about what they liked & what they didn't like about their apartment, which was all great information.  1 of the tenants has been in the apartment for 10 years, another for 4 months and the other for 2 months - the last tenant took over the lease from her daughter in January and seems the most enthusiastic about her apartment.  FYI:  the main unit is listed as a 3/1, but we found that it is really a 2/1 - the 3rd "bedroom" is technically a den and is a walkthrough to the 2nd bedroom upstairs.

As we looked at the property late(r) in the evening, we weren't able to view the exterior/roof of the property very well.  I'm planning on returning this weekend, during the day time, to put our drone up in the air and get some proper footage of the roof, gutters, etc. - assuming weather/snow has dissipated by then.  

Prior to the walk through, we put together a list of 20 questions for the seller and their agent.  Some of our questions were answered during the walk through, but the majority were emailed to our agent and we're hoping to get more verbose answers to the remainder of our questions.

Pardon the lengthy post, but I'd like to share our list of questions and the answers we've received thus far:

1. Are there any HOAs/CAMs?  None

2. What utilities does the owner pay, if any? If water/sewage, what is the typical monthly bill(s)?  Owner pays utilities  (we've requested copies of the recent utility bills)

3. What is the laundry facility situation?  (Laundry in 2/1 unit, no laundry in the two 1/1 units)

4. What do the comps look like for the surrounding area?  (Larger triplex in the area in nicer condition, sold for $107k.  Foreclosed property in the area, vacant and in rough shape, sold for $55k.  Duplexes in the area, similar square footage, sold in the range of $59-125k.)

6. What ‘class’ of neighborhood is the property located in?  'C' class neighborhood

7. Have there been any recent renovations/repairs done to the property?

8. How old is the roof?

9. How old is/are the furnace(s)?  (2/1 unit furnace looks to be older, with newer pressure system, located in the basement.  Both 1/1 units, no basement, have internal furnaces - big boxes bolted to the walls, which look to be electric)

10. How old is/are the water heater(s)?  (2/1 unit has a hot water heater in the basement, replaced in July 2017.  We didn't see hot water heaters in either of the 1/1 units - there is no basement under these units, so I would assume they are either in the closet/under the sink or perhaps somehow hooked into the hot water heater in the 2/1 unit)

11. Are there any lead paint/asbestos/environmental issues?  (House was built in 1920, I would assume there is lead based paint and my father seems to think the siding on the house is definitely asbestos-based)

12. Are there any problems passing inspection, such as work done without permits?

13. Would the seller consider owner financing?

14. Why is the owner selling the property?  (Husband died 8 years ago, owner is liquidating properties)

15. Are there any registered sex offenders nearby?  (Agent told us that we should check with the county on this one)

16. Do the current tenants have leases or month-to-month?  Can we get copies of tenant leases?  (Tenants are on month to month leases.  We've requested copies.)

17. Is there information available on the current tenants?

18. What repairs, if any, is the owner aware of that are currently needed for the property?

19. Have there been any deaths inside the property?

20. Can we get copies of the last 3-5 years of Schedule E tax documents, or tax returns, showing profits & expenses?

Issues identified during walkthrough on 4 March 2019:

3/1 unit - actually 2 bedroom, 1 bath - ‘3rd bedroom’ is actually a den. 2nd floor bedroom has sloped floor.

1/1 down unit - water damage in bathroom ceiling, no bathroom sink, no bathroom light fixture, pipes recently froze

1/1 up unit - low water pressure, possible water damage in living room ceiling, damage around entryway from living room into kitchen

As the property isn't of the quality we would like to live in ourselves, in addition to not wanting to ask the 10yr tenant to leave, we're looking at this as a full investment property that we would manage ourselves.  All that being said, given the widowed owner is not interested in being a real estate investor/landlord (and is liquidating properties) and there are no offers currently on the property, we decided to make a low offer of $75k with 3rd party inspection contingency.  We're hoping the inspection comes back without any major repairs needed and enough room to negotiate on the price even further.  We're also a bit worried about the owner-paid utilities, as this could definitely eat into cash flow.  Short term and even with a $300 per month utility expense, we would still be cash flowing ~$300 per month, so it's not a huge concern, but as this is a dynamic expense, we would be looking to transfer utility expenses back to the tenants.  I'm inclined to think this would best be done 1 unit at a time and should there be turnover due to the lease modification, we would only be turning over 1 unit at a time as opposed to 2 or all 3.

Any questions, thoughts/ideas are always appreciated and thank you once again for your time & feedback.

Cheers!

Hi @Khaled Morad, many thanks for the helpful & local response!  It's awesome to meet another investor from the Buffalo area, by the way.

My wife and I were thinking the same thing with respect to just simply positive cash flow/all house expenses being covered while we're house hacking, which should make the property that much more profitable once we move & rent out the unit we were living in.

While we have a lot of family originally from the Buffalo area, we're relatively new to the area (approx 1 year now) and quickly finding out the areas that we should stay away from - we're certainly steering clear of the inner city areas.  The particular property we're looking at, thankfully has a driveway & a 1 car garage and is not on a major thoroughfare.

Thanks again for wishing us luck and we'd be glad to DM you the details should we decide to pass on the property! 

Hi @Jon Crosby, many thanks for the informative response!

Great point on the HOA/CAM fees - we're not seeing any mention such fees on the property listing, so we haven't figured those into our numbers (as of yet), but certainly need to be determined. We're working on scheduling a showing in the coming days and will definitely get answers/numbers to those fees.

We've re-run the report with bumping up the CapEx/Repair percentages to 7% respectively, as well as with the property fully rented out, including 8% allocated for property management. Do you think 7% for CapEx/Repairs is still too low for a triplex?

I'll try attaching the updated .pdf report to this reply (fingers crossed), and include a screenshot/.png just in case the .pdf doesn't make it:

I've also plugged the property address into rentometer.com, although I didn't see a way to specify a triplex vs a SFH, but it looks like the average rent in the property area is $1,366.00. I'm hoping that would imply there's room to increase the rents via improving the quality of the units.

Thanks again for the response and educating us on what DSCR & CAMs are about and how those figure into the numbers, we really appreciate your input.

Cheers!

Jim Peckey

View report

*This link comes directly from our calculators, based on information input by the member who posted.

Hello folks,

My wife and I are new to real estate investing and are looking to buy a primary residence, as well as invest in our future by building a real estate investment portfolio.  We're quite fortunate in that we have zero debt, I work in IT and the wife works in Education.  We have approximately 20k in savings and trying to do our due diligence in analyzing good "buy and hold" properties.

We currently live in the Buffalo, NY area and recently came across a triplex for sale at $85k.  

While the triplex is currently fully rented out, grossing $1,725 per month in rent, we would be looking to occupy one of the units for at least 1 year, primarily as a way to reduce our down payment from 25% to the 10% range and keep more available capital on hand.  With us occupying one of the units, the total gross rent from the other 2 units would be $1,065 per month.

I've used the rental property calculator to plug in some numbers and trying to determine if this is a good buy, long term.  With us living in the property, we're looking at $62 monthly cash flow and a 7.10% cash on cash return.  We plan on moving out of the property in 1-2 years, and without us living in the property, we would be adding another ~$700 to the rent roll as well as property management fees.

We're thinking this looks like a good deal from where we currently stand, especially if we can purchase the property for less than the asking price, but we'd very much like to run this by our more experienced peers and make sure we're on the right track before we jump into our first investment property.

Feel free to ask us any questions, I'm sure we've missed a thing or two in our analysis.

Thank you very much and cheers!