All Forum Posts by: Jordan S.

Thanks @Theresa Harris and @Nathan G.  Petscreening.com looks like a great resource.  I may just do as Theresa suggests and nix pet fee and increase rent.  Also probably going MTM with this tenant.  

Hi All,

We have a tenant with an 18 month lease expiring in June.  We have had a $50/month pet fee in place for her dog since day one.  Tenant has expressed numerous times that she doesn't agree with the pet fee but has been paying it and rent on time.  Tenant recently mentioned in passing during another conversation that her dog is now registered as a "service dog" for her own anxiety so that she can fly commercially with the dog.  I know this is as easy as buying a vest and ID card for your dog these days.

I found an interesting article here on this subject:  https://www.american-apartment-owners-association.org/property-management/latest-news/pet-policies-vs-companion-animals/

Anyway, looking ahead I suspect this tenant is going to try to play this card on us somehow to get out of paying the monthly pet fee.  This is in Pennsylvania.   We may just nix the pet fee, go month to month and raise rent to the equivalent to cover the pet fee.  

Any thoughts on this?

Hi All,

Not trying to go through the pros and cons of MTM vs Term leases here, but I am wondering what other Landlords are doing when renewing a term lease as a Month to Month lease.  We have an 18 month lease coming up in June in PA and are thinking of just going month to month on it for a variety of reasons. 

Do you have your existing tenants sign a new lease specifically stating month to month or just extend the terms of your existing term leases?  There are a few things we'd like to add into the lease so ideally we can create a new month to month lease commencing on July 1 with the additional terms.  What are others doing in this case?

Thanks

@NA Miller  Taxes can definitely "be so high in a particular area it's completely infeasible to turn a profit off a rental home" but you can't change that and you can always count on them going up over time.   

What size/configuration are each of the units and is this in a nice area in West Chester?  $3200 monthly rent on a 4 unit seems kinda low for West Chester based on what I've seen recently.  $800/unit would rent out very quickly though. 

Also, I think you're closing cost estimate is very low.  Is this an actual number from a lender?

West Chester is tough as it is very competitive and the prices don't always make sense for cash-flow rentals in this market.  In my observations, a lot of well off people in the area seem to use these investments for tax reductions and not cash flow investments, making the cash flow properties even harder to find as prices are inflated by that demand and they could care less about positive cash flow.

If you can boost rents to 1% or more of the purchase price as @Rich O'Neill suggests, you'll find its probably much closer to a worthwhile investment. I do think you're going to have a tough time finding 12% ROI on a multi-unit in West Chester any time soon. That said, I think West Chester is a good market and a lower ROI can still make sense depending on your strategy and ultimate goal.

Cheers

@Omar Khan  LOL - that is exactly what happened when I initially spoke with this commercial lender (he thought it was a good investment and I thought it was so-so).  But I drilled him and he said he'd have to re-run his numbers.  He still came back saying it was a good investment but with far better reasoning on his end.  I then asked him to run a property I knew wouldn't work and asked him the same question.  He had actually already ran that one for another investor and was familiar with it and said he could get it to work at 75% of the asking price, but at the asking price there was no way, so I am starting to trust his approach.  

It would be very cool to see additional metrics in the BP calculators to make them applicable for >1-4 unit investments, or perhaps even additional calculators.  I'm good with Excel but the speed of the calculators and fast reports are a nice feature.

@Ryan D.  Good points and interesting metric I haven't heard much about.  I don't see Cash on Equity Return on the BP Calculators either.  What is the COE you shoot for on initial purchase and when do you refi to reallocate the money elsewhere?  I know this will vary from one person to the next but curious since you use this metric what your numbers are... thanks

@Omar Khan  Gotcha.  Didn't know that was a limitation of the BP Calculators....good to know.  What amount or size investment are the calculators good through?  Is this specified anywhere?

I'm not actively looking for a million dollar property but an off-market property presented itself and it seems to work at some level so I was digging a little deeper on it.  The BP Calculators were suggesting the deal was mediocre, while the commercial lender thought it was a pretty good deal.  Maybe I'm overanalyzing this one but the learning curve seems to be steep on the higher dollar properties.

Chester County too please!

@Omar Khan  Can you define "Residential" in the context you use?  Do you mean 1-4 units, or anything where people live even though the lending world calls anything over 4 units "Commercial"?

In speaking with a very knowledgable & seasoned "commercial" lender specializing in 1-10 Million dollar loans for multi-unit residential investment properties, he uses IRR as his main metric.

The reason for the question is that I want to use the BP calculators to analyze the deals accurately while also using the lender's spreadsheet to double check the calculations but with different metrics the comparisons are tricky.  The lender's system also uses an average cash on cash return metric where as the BP metric sounds like its just year 1.  

@Ryan Blake - good point about the money down...I'm using 25% as that is what seems to be required for conventional and commercial loans under 1 million. Most of the properties I'm looking at are $250-500k and its been a trick finding anything where the COC in year 1 is even double digits, let alone 12%. I think some of these investments make sense for other reasons but I'm just trying to run through the exercise of comparing deals to what folks like @Brandon Turner are doing.

Dustin, that's a pretty good price for quality concrete work.  Just make sure that you have clarified any grade changes to direct water away from building.  Once its in, its in!  At that price I'd also make sure you've seen some of their work.