All Forum Posts by: Kathy Henley

@Marjo Naci Partnership: Combining skills or resources to make deals happen. Roles and responsibilities are memorialized on an operating agreement.

@Ye'Chiya Harper  It sounds like you are very disciplined couple, striving to save a six figure nest egg. You will go far. I know nothing of an out build or loans for such a project. I do know that investing in real estate can be a boost to family wealth and will off-set the tax obligations of your current W2 income.

Why not invest in a multifamily property before breaking ground on your custom built primary home? Or a measly SFH? It would improve your credit worthiness, for you would own an income producing asset. One advantage of using leverage (loans) for real estate investing is that a 25% down payment gets ownership of the property yet one gets to claim 100% of its current value in our net worth.

Might you consider temporarily living in an investment property and later rent it out when you move to your custom built home? There is a book which explains the fundamentals, 'Investing in Duplexes, Triplexes and Quads'. I don't know where you live, how you live now, or anything about your budget, but the method worked for us. Our investment properties pay for themselves and have increased in value. I cannot say the same about my mutual funds this year.

@Elizabeth Scheivert Talk with a commercial leasing agent in your area, they have the pulse of the market. It is a perfect capitalist system in which supply and demand sets the rates. If occupancy rates are high, businesses must compete to secure the desirable locations. What does your business need? Parking? A shipping dock? An attached warehouse? If you need what others need, and there is a shortage of such spaces, you will have to compete. No outrage, it is a market economy.

OR maybe the business can stay in its current location?  Read the current lease. Are you buying a business with a solid lease? One that doesn't fulfill for a few years? The answer in how to negotiate new terms are laid out in the current lease. There might be rent bumps spread over the next few years. Or, the Tenant may have an option to negotiate another period of time. The renewal section may give both parties an option to consult a seasoned commercial leasing broker to determine market rate, if negotiations are at an impasse. Our commercial lease agreement states that rates may adjust with market rents, after a certain time period (years). This is a safety valve, of sorts. The ones we're writing this year have a clause about inflation!

Read the current lease. Has either party given proper notice to renew, or to exercise an option to renew? (often 4 - 6 months before renewal date) 

Read the current lease. Is there a clause covering the sale of the business? More elements may come in to play. 

@Anne W.  Tell us more. It sounds like you want to hold the property for the cash flow. The school district will attract renters, no doubt. What is the area rent rate for a 3 bedroom home? How much money do you need to put into the property to ready it for market? Dishwasher is a must for the family with school kids. Hire an engineer to give you a report of the 'big crack' area. Can the repair wait 2 years or should it be tackled today? Sewer lateral and any electrical repairs will be today. Roof will be today, if water intrusion is visible or if there is a tarp on the place. Maybe patch/repair would get you through a season or two, but get a bid so that you know what your future looks like. Plumbing? How is the water pressure? Get a plumber's opinion of the condition. No need to touch the faux wood. I don't know enough about insulation or ceiling tiles. If not flaking and it passes the occupancy inspection, do nothing. Every home older than 1978 has lead paint. If it has been painted over nicely (no flaking) it is ready to rent; admit it's presence in the lease. 

What is the condition of the HVAC?

Divide the investment capital by the annual income. The answer will give you an overview of how long it will take to get all of your original capital back into your pocket. Let the money talk.

@Account Closed Who do you want to serve?  Go with what you know. I wanted a town full of college students because they are a stream of potential tenants. I started by visiting university towns close to me and touring potential listings. I narrowed the list and widened the search when market analysis showed CA to be too pricey for my nest egg. Used zillow rents for studying market rents. I used City-data.com to study out of state locations, where census info is culled.

I returned to the midwest of my youth and viewed neighborhoods with google street view. Called property managers for background info, by reading reviews on Yelp. Visited the college towns and talked live to people. Attended investor night get-togethers by listings on Meet-Up and Bigger Pockets.

@Josh Thomas Ask your local city inspector or real estate agent. Where I live, the city says that a bedroom must be minimum of 700 sq ft; it must have a door, a closet and a smoke detector.

@Brian Zaug If the remaining tenant's income qualifies, let her fulfill the lease on her own. You mentioned 3 kids, which sometimes challenges the move-in conditions. Why not have a move out inspection on Monday? See if the adults need to pay for any damages or repairs that arose since move-in. The guy leaving is responsible for half of any repair charges and should be paid for now.

After inspection, you can talk about security deposit. What does the lease say? Mine says that the security deposit will be held until all parties vacate and will be returned according to the law. If your records show that they each wrote a check for half and no repairs charges are immanent, the departing person may be owed money IN AUGUST.

Amend the lease original with a one page Addendum. 'This Addendum is made by and between X (Landlord) and X and X (Tenants) made on (date of the original lease agreement) for the property located at (give dwelling address).  The LL and Tenants agree to amend the Lease Agreement. The LL and Tenants agree that X may be released from all obligations of the lease signed on (name the date of the original). X will no longer be responsible for rent or damages from this date forward. X will be solely responsible for monthly rent and charges that may arise from renting the property at (give address). The security deposit will remain with the LL until all parties vacate the premises and will be refunded according to the law. All other terms of the rental agreement remain unchanged.'  All parties of the original lease must sign the Addendum.

In July, inspect again (3 kids) and decide if you want to amend the term for another year, or not. Repair charges must be paid in full, along with signing the renewal, for the new term that begins Aug 1, 2022. 

@Moira McKee  Hi Moira, Eviction is a court action and NOT the first step. With a MTM lease, either party can decide not to renew and the how to give proper notice will be described in the lease agreement. Local laws are also source for whether 30 or 60 day notice to not renew. But what is the rush?

There is a tech gap with some seniors. You are in the housing business, why not help them out yourself? You describe them as good tenants. Given the chance to search online and fill out an application, they will find new housing. Help them find phone numbers for moving company and let them leave behind the junk they no longer need/want. You could sell or donate it to charity. Your gentle prodding will get the job done. 

The lease terms for their new place is not you business (deposits and pre-payment of rents). Lead them to the rental listings and they will qualify with their own merit.

@Brian Langstrom We faced this challenge. All marital assets will be measured into the pot before the soup is divided - IRA and retirement accounts, stocks, savings account, cars, value of the primary home and other real property. Each asset will have a value and they will be divided up equally. If you want the properties, she might get the assets in the retirement accounts. Or maybe future rents for a few years? You two will come to an agreement. Each party needs legal representation so that neither gets screwed.

Changing title on the properties is easy enough in the divorce proceedings and it is not a taxable event. The challenge for us was the bank loans. Both people were on each loan as a borrower and on a certain date only one would be named on title. Therefore, we have to trust each other to continue to make the loan payments and stay in good standing with the lender. In time, some of the loans were refinanced and the spouse's name dropped. 

Work with your lawyer and CPA for their guidance on how to hold title. As a solo member LLC, my tax filings of the rental income and expenses appear on the Schedule E of my personal 1040, even though my LLC collects the rent and manages the properties.

@Courtney Kelly When investing, one never assumes. One verifies the income and the expenses. 

If you are investing in properties that qualify for housing vouchers, check out the rent rates set by the county housing authority overseeing the area. It varies by location and its poverty level, but most have landlord information on their website. What is the top rent that they would authorize? If you buy a property with existing leases, the leases run their course and the new owners get income from day one. When the lease fulfills, LL can choose not to renew. It is painless. (Terminate a lease means something else.)

If you find properties that are rented below market, the first question might be: how much work is needed to refresh the unit to earn market rents? 

It costs money and time to reposition a building.

Who lives in the area and what are the local expectations - are dishwashers and central air worth the upgrade? Decide if the purchase price, plus the needed upgrades, make the investment 'a deal'.