All Forum Posts by: Account Closed

@Nicole W. He has been living there for 8 months, was recently picked up by the State Marshal's Task Force for bail jumping, and is said to be getting out of incarceration soon. The unit is well taken care of. The only trouble I have had was the call I got from the Task Force saying they are going to pick him up. He fled but did not get more than a couple houses away before being arrested. If he turned himself in I'd feel somewhat differently.

@Mindy Jensen My tenants lease is up May 31st, but we both already signed the 1 year renewal that will begin June 1st. When I told them he could live with her months ago, there were no terms and conditions but it is my understanding that he has rights because of the verbal agreement. With the renewal already signed, is he also locked in for another year? Is it too late to have him fill out an application and deny him because he technically already lives there?

Unfortunately there's more to the story. My lease states any roommates need written approval to live there. This man has been living there for months. I did not initially do a roommate screen (yes I know now, my mistake). He was recently incarcerated but possibly coming right back out. This caused me to look into his record when I realized it's not good. I did give verbal approval for him to live there when he first moved in. I don't really want to let him back in. But does he have rights to live there since I gave verbal approval and he has been there for months? Even though he's not on the lease and there is no written approval.... Can I simply state that he cannot live there? Or would I need to start the eviction process even though he's not on the lease? Lesson learned to screen all roommates and better yet put everyone on the lease. And no, he does not meet my criteria. Thanks for any helpful pointers.

I owner occupy a one-bedroom duplex. I have a nice tenant that just renewed a 1 year lease. What I just found out after her renewing is that she is a couple months pregnant and wants her boyfriend (babys dad) to move in with her. Her boyfriend has a police record a page long and it's not pretty. Literally it's a page long and some of it is current. Normally I would not allow him to live there, but she is due in 7 months and her 1 year renewal starts next month. What's the best way to allow him to live there? I'd rather just her be on the lease so I don't have to deal with both of them. But I want him to sign something to obey the rules and regulations, without being on the lease. Is this possible? Are there better options? Thank you.

I owner occupy a duplex and would like to do an inspection on the rental unit as the one year mark is approaching. 

How much advance notice do I need to give the tenant?

Do I need to give the tenant the option to be there?  Or if they cannot make it to the day/time that I set can I still inspect without them there?

What are things that I should look for or check when performing a routine inspection?

I would like to give them a deadline for responding to if they are going to renew the lease that is up in May.  What type of forms do I need for lease renewal and for making lease updates?

Thank you much for any responses,

-Joe

Originally posted by @Matt Moldenhauer:

Here are some things to remember when financing an investment property:

You'll need 20-25% down.

You'll need to pay the closing costs. I believe you can work 1-1.5% of the cost into the loan. 

You'll need to have six months reserves in the bank or a retirement account you can cash out if need be.

I personally try and shoot for a COC return of 20% or higher AND monthly CF of at least $250. This works well in my area. I would think it would be pretty close for the midwest as whole and probably way off base for the east or west coast.

I would be somewhat hesitant to keep buying homes with FHA loans in hopes of the value of your property increasing and interest rates lowering or staying low in five years to refinance. I just refinanced my primary from an FHA loan to increase cash flow for when i buy another primary house. It worked out well for me because i had paid down my loan enough that i was able to drop PMI, due to buying it right and got a lower interest rate. I would NOT buy another property right now with the same intentions though.

Hope this helps!

This does help thanks! Although, I still don't completely understand the COC return. What would be the COC return and CF of my current duplex that I owner occupy? I had a down payment of 20% or $23k, repairs of $16k, my mortgage is $745/month which include taxes/P&I/insurance, rent for the tenant is $900/month and the tenant pays their utilities, I pay my utilites which equal about $100/month, I do yardwork/snow removal.

I'm not sure how to properly calculate the COC return even after doing some research....

Would the CF be $155?  Or would I need to subtract the utilites of $100 that I pay out of pocket for my side, making my CF only $55 minus yardwork/snow removal expenses.

Thanks for the help!

Originally posted by @Matt Moldenhauer:

Without knowing the numbers, it might be a decent cash on cash return, but over the short term it might eat your lunch. What happens when the unit sits empty for several months or needs a new roof, HVAC system, water heater or a tenant destroys the floors because of an unreported water leak. If the one duplex was paying you $600/month, to me it might be worth it. For just $200 though i'd rather not have the headaches. 

I personally would not look at your investment as "in 30 years i'm going to have a pile of cash". I'd rather buy an $80,000 single family home, spend $18,000 on the down payment, closing costs and minor repairs, that's going to cash flow $300/month.

 Great response and I appreciate the examples and your opinion on cash flow now versus a pile of cash in 30 years.  Thank you. 

Originally posted by @Peter Mckernan:

Hello @Account Closed

I would first find out the true numbers prior to going into the deal (i.e. what the numbers truly are for the duplex). This will give you better knowledge and confidence to make a better decision on the topic, and I think that you should either save over and above the FHA down payment for an emergency fund, or wait a little bit longer to pile up more cash. Either one would help you make the decision a lot easier.

Thank you for the response.  My calculations were actually based off of taking out a line of credit on my first duplex, which would cover the purchase of the second duplex.  If I use my personal savings for the second purchase, which I could since I have the funds (barely), than my postive cash flow would amount to $265 instead of $200.  I'm also looking for opinions as to why I should or shouldn't use the line of credit if I were to move forward with the purchase.  I guess I could always use the line of credit later on if I needed for repairs and maintenance, so I should probably use personal savings for the purchase which would give me the higher positive cash flow of $265... 

Originally posted by @Matt Moldenhauer:

I'm by NO means an expert, but i would probably wait. It sounds like you might over extend yourself. To me the risk for reward isn't really there, cash flow wise. Now if you think the duplex might experience some major appreciation over the next few years it might be a different story, but i don't really see that happening in the midwest. 

I asked a very similar question a week or so ago but wanted some more input so I appreciate the response, thank you.  Being 26 years old, I guess the thing keeping me interested is that I plan on keeping the duplex for 30+ years.  So with only investing ~10k now and expenses along the way, I'm thinking the return in 30 years will be worth it, but I understand that is a long wait for return.

I own just one duplex that I purchased with a conventional loan and owner occupy. The mortagage is covered by the rent, plus I have $155 positive cash flow. I'm considering an FHA loan on a second duplex that I will owner occupy and rent both sides of my current duplex. All together if I were to purchase the second duplex, my positive cash flow would only increase from $155 to $200. With 30 year fixed rate loans, the $200/month would amount to 72k over 30 years which I believe would cover the maintenance, repairs, vacancies, etc for both duplexes. My concern is that the loan is going to cost over 60k more in mortgage insurance and over 40k more in interest over the 30 years due to using an FHA loan with just 3.5% down. Should I wait until I can afford another conventional loan (2+ years)......or should I use the FHA loan to be able to acquire a much nicer duplex that will increase my cash flow and is just 2 miles from my current duplex?