All Forum Posts by: Jonathon Klem

Thanks.  I've been convinced.

The standard I'm using on my other properties does not allow for painting, however, ina SFH, I think I wouldnt have a problem letting a tenant paint a room so long as they had it professionally done and agree to have it professionally undone.

I bought a new house and I'm going to rent out my old house.

When we lived in our old house we painted the rooms to our liking.  Our bedroom has a light gray color with a dark gray accent wall, one of the bedrooms is light blue, another is an avacado green, and our kitchen is a neutral purple with a yellow accent wall.

I probably would paint the lime green room either way, but I'm torn on whwther or not to leave the light blue amd accent walls.  On one hand I could see potential tenants being attracted to it because they dont have the same boring white walls but on the other hand I could see them hating colors they don't like.

I want to get it rented asap, but also save time and money where possible.

Would you just paint everything white, or put it on the market for a few weeks and see if anyone bites?

I recently purchased my first property. I factored in mortgage, taxes, CapEx (at 3% per year of purchase price), and a 5% vacancy and I'm looking at a 13.69% Cash on Cash return.

When I purchased the property, there was already a tenant there, and she's been living there for about 2 years now.  I had her sign a new lease with me and so far everything's been good.

When I purchased the property, I knew there were some cosmetic issues.  One of the first things I did was replace some of the siding that was messed up (only cost me $45 in labor and $20 in materials thankfully).

Now, the only 2 things that the tenant has mentioned that she'd like fixed are the front door which doesn't close properly and has a storm door that doesn't even 'lock' into place (the holes don't line up so it never can actually close) and there's a wall in the bathroom that has a bit of water damage and needs some new drywall and the ceiling in the bathroom needs new paint.  

I got a quote for ~$400 or so to fix the bathroom and I'm calling around on the door but it looks like it could cost $500-900 to replace the front door.

I'm torn now if I should do both of these repairs the first year or if I should maybe rein in the budget and make sure I'm saving money towards long term capex items like a new roof in 7-12 years or so and other things that could be coming in.  I definitely want to fix the bathroom since that's officially broken and needs repair, but I think they can live with the door situation for a while (as made evident by the fact that she's been living there for 2 years).

I'm not too concerned about spending the actual money, but from the perspective of managing the property, I'm curious if I should try to have my first year be cash flow positive, since I've lucked out and had 0 vacancy so far. 

I'm also curious about what my play should be here.  Since I've read that a lot of people buy a property, spend thousands to tens of thousands on renovations and then rent it, I kind of feel like if I can spend ~$2-5k on repairs and renovations to bring the property value up I'm still in good shape.  But part of me feels like that's a bit of a waste since it's already rented (I guess everyone has a little slum lord in them).

I was also thinking about the spare cash flow going forward.  Would it be wise just to save this up for money to buy another property/emergencies or to budget renovations in the future to increase the property value with hopes of refinancing out my money at a later date?

A bit of background, this house seems to have the most beds/baths in the surrounding area.  I bought it for $49400.  It's 2356 sqft and has 4 beds and 2 baths and is currently renting out at $700/mo.  There aren't a lot of 4 bed 2 baths for rent in this area, but I did find one at an apartment complex on another end of town for $850/mo and there are some SFHs in that range for $1200/mo but they're in much nicer neighborhoods.  I think that I'm renting it out right now towards the top of the market for that specific area, but if I were to do about $12k in repairs I could likely bump that number up to $800-$850/mo.

The neighborhood is OK.  It's adjacent to some crime areas, but in the surrounding blocks it's not bad.  Regarding available appreciation, the houses surrounding it range are in the 55-75k range according to the county assessor.  One house across the street apparently is valued at 76900 and has 2 beds and 1 bath.  The house right next door is valued at $59400 and has 3 beds, 1 bath and about 900 less square feet.

Basically my question is the age old: "Should I focus on cash flow or appreciation", however, I feel like my situation is slightly unique given that there may be room for forced appreciation and I purchased it with a tenant already in there.  Any words of wisdom would be greatly appreciated.

I've been reading "The Book of Rental Property Investing", I've been lurking and searching in the forums, and I've been crunching some numbers.  I think I'm ready to ask to see a property and put a bid on it, but I'm concerned I may be missing something since the Cash Flow #s seem significantly higher (better) when using the SFH_Rental_Analysis spreadsheet than my own 'back of the envelope' calculations and since there's so much more going on in that spreadsheet than my own I'm not sure what I may be missing.

The Facts:

I'm looking at a property that the seller is asking about half of what Zillow estimates the property to be worth, and about $10k less than its last sold value.  It's a triplex.  2 units share a meter and are occupied.  Currently the owner pays all utilities and they only rent for $500 and $450.  There is a third unit that has been vacant for a little less than a year and the current owner's excuse is that it needs some rehab but they mention that "because of other properties needing investment, we haven't fixed this".   One of the current tenants has only been there for a couple months and the other one has been there since '99.  

They're asking $34k for the property.  I think this makes financing interesting as I won't be able to get a traditional mortgage.  I have about $10k cash. With some creative asset shuffling I think I could muster up $20k cash.  

Currently this owner is operating at a loss (they gave a spreadsheet of the financials) and I did some more digging and this seems to be a retiree that may just not have any interest in running this anymore.  So it's not outside the realm of possible that she may be motivated to sell on contract.

Aside from the financing, I had it figured this property may need $7000 - $12550 in repairs (basing this off the size of the unit they said needs rehabbing, and estimated cost of making each unit on its own separate meter)

My Question

I know I need to do some more work on figuring out the financing/purchasing, but I think I could make it work in this range.  But my question would be, are there better banks/lending devices to work with that would make it easier?  I already own 2 businesses that are organized as subsidiaries of holding companies and have decent revenue, so I'm curious of a situation like this with these small of numbers if there are lines of credit that may be easier.  

Also, is there anything specific I should be worrying about in the walk through?  I'm in Indiana.  Are there resources I can look up to see if i can wait and enact new leases that include tenant paying utilties and what legal issues I may encounter there?