All Forum Posts by: John Daley

That looks like a better deal for the seller than the buyer. If ARV is $260k and it needs $23k in work than she is basically going to net the same selling it to you than doing the repairs herself (out of pocket) and listing with an agent and paying 6% commission at closing. I think you should get a bit more of a discount if you are making the repairs and she is saving the cost and hassle of making it ‘retail ready' and putting it on the market. And definitely have tenant be responsible for lawn maintenance, snow removal and utilities.

Cornerstone Bank & Country Club Bank will both do commercial type portfolio loans. Anywhere from a 10 - 25 year amortization with a 5 year balloon is what you’re usually looking at for this type of loan. I’ve used both and been happy with them for the most part. As long as you have revenue on the properties and decent credit they should be able to take care of you. 

This can certainly be a difficult call, but I would follow the terms of the lease.  Legally speaking I believe that is what would prevail in this situation.

If they were new tenants and there was a possibility that there were bedbugs there when they moved in I would treat them, but since they are long term tenants the only way that bed bugs are there now is if they brought them in, making it their responsibility. 

We have terms in our lease stating that we perform general pest control twice per year, but tenant is responsible for treating pests with the exception of termites.  The majority of the time pests are there because of the tenant living conditions and should not be the owner’s responsibility.  If our tenants complain of pests we inspect the unit and take pictures. Nine times out of ten we can show that living conditions are the cause and put it back on the tenant to remedy.  Once you make that argument and have evidence to back it up they will usually concede and take care of it. Tenant usually first try to make things the owner’s responsibility and not their own. Be kind but firm.  If logic and the terms of your lease back your position, tenants will usually accept the verdict. 

It’s great that you have found a property manager that you like, but don’t make an investment that only works if you are getting (what seems to me) to be below industry standard pricing on management.  What if they do a bad job or go out of business?  All of a sudden your operating expenses have gone up.  And I also agree with some of the previous comments...there are much better investments in the KC area than what you’ve described here.  I’m also wary of renting out large houses as make ready costs can be significantly higher. 

Not a deal I would pursue, myself. 

Wholesaling can be a great way to start, but you have to treat it like a business and be familiar with the laws.  There are also several ways to wholesale and you need to find the one(s) that work for your situation and customers.  Do a lot of reading on this forum.  There is a ton of good info here and should be enough to get you started.

Happy hunting!

I think it all boils down to how much you enjoy 'working on' your real estate investments.  Is it really a passion of yours?  If so, go value add every time.  Those of us who do this not only want the higher returns, but love the process and seeing the fruit of our labors.  Taking something that's run down and old and making it desirable again...it's just satisfying all around.  If you don't enjoy working on your real estate investments and the process is just a huge hassle or frustration for you, go the other route.  You can still find good investments and returns without taking on a big project.  Instead, spend your time doing something else you love.  Just my .02 ;)

Fire damaged homes can be difficult to buy in lower priced markets/neighborhoods.  The level of rehab needed is usually pretty intense and between having to used licensed contractors, dealing with the city inspectors, and, in many cases, having to bring everything up to current building codes is incredibly time consuming and expensive.  Contrast that with a normal rehab where you can often get certain aspects of the home grandfathered in and usually only need one or two specific tasks done by licensed professionals.  Much more streamlined of a process. 

If you want to make that your niche, go for it.  I'm sure there's money to be made there, but you are certainly going to work hard for it.  Buy deep. 

I have certainly seen a difference when changing the furnace filters on a regular basis.  My previous PM did this monthly and I have adopted that model in my own property management business...although we do it every 60 days.  It's always a good idea to get the HVAC serviced, although I think twice a year might be a bit much.  Ideally you should have it done that often, but as an investor I don't know if that is significantly more beneficial than once per year. 

As far as yard work...that expectation should be put on the tenant unless it says otherwise in your lease (or it's a multi-family). 

Deciding what to pay for and maintain as a landlord can be tricky.  You can't pay for everything yourself if you want a cash flowing rental property...but there is also the reality that the tenant is probably not going to keep things up very well, which can hurt the value of your property.  It's a fine line.

You can request a rent roll and payment history from the seller.  The more info you can get regarding the current tenants, the better.  Inheriting tenants is tricky and there are always surprises.  You want to minimize any surprises on the front end and discover as much as you can about the property and tenants.  Be sure to ask about security deposits and have them conveyed to you at closing.  The tenants will be wanting those back down the road...

One thought I had was regarding the vacancy rate and associated costs (touching up paint, occasional new flooring, replacing worn features, etc). In my experience, tenants generally stay an average of two to three years...but with studio apartments and smaller units that is often closer to a year. You only factored in roughly 1 full month of vacancy between 3 units. I think that's low and your turnover costs will probably be higher than you anticipate. Between that and CAPEX expenses, I wouldn't be very excited about this deal. The only real upside I see is that the tenants will be paying down your mortgage in the coming years, but with a 30 year mortgage that's going to take a very long time...