All Forum Posts by: David Clay

See Joe's earlier response on this question on page 1 of the comments. He addresses this nicely with a simple 100k unit. Obviously, your numbers would be whatever they happen to be, but the example he uses shows that you won't be able to pull out all of your equity. The banks will set a cap on loan to value (70% or whatever) and then you have the cost of the loan which will eat into your equity. Effectively, you'll only receive a small portion of your equity to use for something else. There are times when a refi works or people wouldn't do it. I suppose it is also related to your specific goals and what numbers you're working with. Go back and look at his explanation, he explains it better than I just did. 

@Joe Villeneuve Great response to an excellent question. Quick f/u: I read your response and it does make sense. In short, deploy your equity that is currently trapped in the cash flowing asset. OK. Would you wait until you had sufficient equity in the asset(s) that would allow for an additional down payment for a new unit or two? How do you make the clear decision on this? When you put the original 20%, assuming traditional financing, it would take many years to double the original deposit. Perhaps you were just suggesting this action in this specific situation b/c the house already had many years of payments behind it and appears to have high equity currently. I sold a house last year b/c the margins were too tight after I'd refinanced it and taken equity out for another purchase. There was about 70K equity in the property, but monthly difference between rent and PITI was only $250 (not enough, but the house was relatively new without any major maintenance needs outside of typical A/C services). I assume that this would fit your recommendation given above. I guess my question is centered around where to draw the line for pulling the trigger on selling. Thanks.

I don’t know the right answer, but wouldn’t it be the tenant’s responsibility to prove that there’sa problem with mold in the unit? If the health department does more than send a letter shoe then the original damage complaint you recorded and the receipts from the repair. Get the contractor to sign a letter saying that there was no additional damage observed during the time of repair. That should help.  I had a serious water repair completed about 1.5 yes ago and they too the walls of where there was damage and had humidifiers placed in the unit for several days to dry out the support beams. Now keep in mind it was a ton of water. If you’re dealing with a simple leak maybe drying out wouldn’t be needed. My tenants did have to move out. I lost a tenant over this. They were new, at fault really, but needed a place to live. 

If you have to do such maintenance you can have the tenant move out until the repairs are completed and release them from any rental obligation until they move back in. Schedule the repairs for February, finish in late March or mid April and let the tenant know you don’t plan to renew her lease so she will have to find a place by the end of May - 1 month. Or just use the clause in your lease assuming that it is a legally defensible clause in your state. 

As long as they keep paying on time I would simply honor their current lease agreement. If you are more comfortable with a lease that you created (b/c you know it's a good one) that shouldn't be a problem, but a MTM would be sufficient with a note that you are waiving your normal lease requirements due to their long history of good tenancy etc. I only mention the last part to help protect you a bit. This way you can say you have always been consistent on your lease requirements, but made some allowances for inherited tenants who had a good rental history etc. 

Essentially, I wouldn't try to fix something that is already working adequately enough. If they're not causing problems and they pay on time, let it be. 

Just a clarification, he's not subleasing if he is still living there. He has a roommate in the current arrangement. I'm on the same page with you though like I said earlier. He could be in the process of helping someone in need of help. The problem for you is if you let that person in you can't get them out. 

As for the lease, you can't just cancel it. He is trying to make a substantive change and you can say that you don't approve of the change and he can accept the lease or walk away with whatever penalties you specify in the lease (loss of deposit or whatever it is) or just let him walk. Be sure that you have a clause that clearly indicates that visitors can stay for X number of days and that any stay longer than that requires LL approval. This will eliminate the possibility that he brings her in under the radar (do drive-bys frequently IMO).

Probably best to just walk away and find a reason to deny, but I can't say that's the best thing to do necessarily. If he was good before he should be good now. Maybe look at it the situation as if they were a couple. Would it matter that they had two kids then? Etc. Good luck. I hope it turns out well for you. 

Just curious, did you do a thorough background check on the original tenant? By this I mean credit check, current employer and length of employment if possible (last 4 pay stubs usually works adequately for me), previous landlords (don't use reference phone numbers check them yourself by looking up the address and getting the person's contact information from publicly available sources - if they're renting they may have something listed currently or in the past. I never trust tenants to give me good info on previous LL's after I escaped a scam someone tried to run on me.), etc. Maybe even stop past their current address and see what situation they have going on there. A drive-by at various times may be fruitful. While I would be cautious here given how things developed, I would think that if you have done all of the relevant background research on the original applicant and he met your criteria (3x the rent plus the stuff I mentioned above - you'll need standards so you can treat everybody the same) then it wouldn't matter if he added someone else as his income and credibility should sufficiently cover. What you are mostly worried about is adding a second tenant that would be a problem, thus, all the background stuff needs to happen before the move in. Do not allow them to rush you. The background is complete when it is complete and neither tenant will be given a key until it is. He changed the parameters and you have your process. If he feels like it is a problem he can go find some other apartment/house. I don't mean to sound cruel, but when people are trying to rush me b/c of poor planning on their part it is a red flag and I'm less inclined to be open-minded. In this situation, I would look very hard as he is starting off changing things and I think this could lead to trouble later. I don't like trouble. I want very few problems with my tenants. If it starts bad it is likely to end badly in my mind. Honestly, I'd want to say no to both of them, but my wife would likely have to talk me down to something more reasonable. I can be a bit over-reactive at times. 

Good luck.

I wouldn’t say callous either. 100K is no small amount of money to ordinary mortals. It would have been better if all sides were able to contribute to the policy. It seems no consideration has been given to what the property owners will do when this is all over. OK, we have a moratorium on our mortgages, but unless there is some relief for property owners on the back side there will be a massive foreclosure market. I’m not sure that this won’t happen either way as the normal foreclosures that would have hit the market aren’t processing currently. When you add what will happen to people who didn’t pay during the pandemic (assuming no relief from legislators) it will be a massive influx of properties into the market. If you have access to capital I think that would be the time to buy. I never thought we would see another market like the one that started in 2008, but now I’m not so sure. 

@Clint G.I just found this page on BP. Hope this helps. I found some of the ideas useful, but I'm still uncertain. I may just go ahead and replace the subfloor myself. https://www.biggerpockets.com/...

I have a similar issue. Old tenant in house prior to my purchase had two big dogs that did their business all over the house. Now I need to get the smell out. I was told Killz Primer would help, but I'm interested to hear other people's point of view on this before I get started on it. Worst thing in the world would be to put new flooring down and not have the smell out. I have considered just putting down new subflooring. A relatively small expense for peace of  mind with the exception that it is time consuming and I'll likely have to get some help. 

I haven't done this, but call a management company and ask them about the numbers once the property is on hand. Check for market details and so on. I think it might be a bad time to invest in such a property unless you're good with little rental activity and holding costs. The pandemic is still actively inhibiting a full return to normal economic activity, sooooo...

Have you considered a SFH instead of a condo? Maybe the monthly costs would be about the same (not sure) and you wouldn't have so many other people around your living space day and night. Management would not change at all and that HOA fee can be set aside in the same manner for capex. Rents may actually be higher, but for personal enjoyment a SFH seems nicer, but this is in my mind. I don't know where you've been or the benefits of the resort so there's that. In any event, good luck. I've been considering this myself, but we can't find a place that we can agree on and that is within a decent driving distance for weekend getaways from time to time. Sigh.