All Forum Posts by: Payton L.

@Thomas S. does it count if we have a text from her saying that she is giving notice of breaking the lease and a further text confirming that we will accept this on this one occasion as 30 day notice? I will have the paperwork ready to file on October 5th if she is not out. That is very good advice. 

@Mindy Jensen I will check my state laws for sure. My understanding is that unless it's an emergency, 24 hour notice is required. I have yet to run into the issue of a tenant refusing entry for maintenance, so I was unfamiliar with the protocol. I think you may be right though. If so I will be sure to let my PM know that we can make repairs without the tenant present. 

@Brian Ploszay When I last toured the property previous to purchase there was no odor, however I am currently out of the state, and haven't been by personally since. My PM went to have the lease signed on September 5th, and didn't mention any odors. I will admit, the threat of a potential lawsuit had me anxious for a while. However, I am doing my best to document everything, and to treat the tenant with respect. 

The silence coupled with the combative nature of the tenant is something that concerns me a bit, but hopefully it's just a case of a bad tenant fit and will pass quickly. 

@Jay Hinrichs The home was in a more rural area that has a lot of hunting dogs etc so having "outside dogs" is actually very common and they are well cared for. I personally have never had an "outside only animal". Unfortunately I made a very poor mistake in allowing them to continue in signing the lease when I was blindsided by them having a pet so close to signing. It wasn't my suggestion that they keep the dog outside but how they described the dogs living arrangements. It's a mistake I do not plan to make again. I would even be likely to turn a blind eye to the dog being in occasionally (since it was my mistake to allow it in the first place)  if I hadn't had multiple complaints about the strong pet odor. Obviously these particular tenants, didn't care to abide by the pet policy or care for the home as they quickly brought in yet another animal. 

I apologize for the jumbled subject line. 

So I am posting just in case anyone else is new and having the same/similar issue(s). We inherited a tenant with our last purchase. She was on a month to month lease so we agreed to keep her on. We had her sign a new lease, received rent timely, and everything seemed fine. When we purchased the home (SFH 4/2) she had complained about squirrels in the attic. No, problem we had a pest control person come out and found out there were roof rats and squirrels. Pest control sprays and says they will be back out in a couple weeks to check on the progress, etc. Well the tenant then claimed that the home was no longer inhabitable. We have had this property for 2 weeks, have been actively updating the home, and she has been living in the home for almost 3 years. We said per our lease, she is welcome to break the lease and suffer no penalties, and that we would prorate her rent depending on move out date. I felt like this was fair to everyone. Unfortunately, at this time she started threatening to call the health department, saying that the pests were causing her son to have asthma, that we paid people under the table to have it pass inspections...it was a lot that was relayed to me via our PM. I told her that I was sorry, but our lease specifically addressed her issues and that she had signed the lease that the home was in good condition and that was our best offer she would receive. She had asked for us to give her money back for living in the home in that condition, for us to move her to one of our other properties, or to just give her money to leave.

 Eventually she said that she would like to break her lease, We agreed that we would waive the obligatory 30 day written notice that the lease requires in this instance due to her feeling the home was not in good repair, and that she would have to be out by October 5th, or be liable for all of October's rent in addition to losing her deposit (all spelled out in the lease). 

This was about a week and a half ago. During that time we have tried to arrange for other maintenance appointments, but she will cancel at the last minute, or say that she is unavailable all day. Over the past two-three days, we have messaged her numerous times and have received no response. At this point should I just bide my time until October 5th? Or should I continue to reach out?  

*I checked with the pest control person and the HVAC maintenance man and neither mentioned anything egregious in terms of mice, maintenance, or otherwise*

Just wanted to update. We ended up evicting the tenants. I sent them a notice to quit. Very next maintenance call, this time there was a kitten in the house. The upside is the eviction went very smoothly. Downside is now it's looking like I'll have a month's vacancy. Thanks for the help. 

@John Leavelle These are all great points. The 30K was rehab for all 4 so about 7500 per duplex for repairs, so the 87500 is still below comps. These are also newer than some comps in addition to being brick and having a nice parking area so I believe they will fall somewhere in the middle of the pack as far as comps. The original listing was for one duplex, but when we had our agent set up a look see, found out they actually plan to list all four. We can put an offer on all of them or individually. We will not be "house hacking" on these units so we expect to get a commercial loan that requires a 25% down payment. All units are currently leased. We usually run the numbers for maintenance together when running initial numbers but it is good to know that they are in different tax categories! I wasn't aware. All of our purchases include a ten day inspection period with an option to extend, so we will definitely be getting that done as well. Repairs are based on our first walk through and then I pad those numbers a bit because something always comes up. If during inspection we find something crazy we renegotiate or pull out of the deal.

I am discussing with my agent going in at 75K per duplex so 300K total. I don't expect this will be accepted but I'm feeling comfortable with this as a starting point. 

What do you think based on the additional info?

@Michael Farrugia They were built in 1986. At 12% Maintenance and Capex we would still be a little over $1000 cash flow per month. The good news concerning the Capex is that the AC units are all relatively new (2-5 years old) and we would be replacing the roofing. (figured into the 30K repair budget)

Also just I'm not sure it is relevant, but the reason the seller is selling is because they are currently depreciated out for him so  he's planning to sell these and reinvest. 

@Michael Farrugia I was including the 30K for repairs in my cash expenditures for a total of $110000. Are repairs not included when finding your cash on cash return? I didn't do a separate line for Capex I typically just run everything through maintenance. 7% (wear and tear) + 3% (big repairs). Should I bump this number up? I could change that number to 12%. I'm still new, but with every purchase I have the electrical, plumbing, major appliances and expenditures checked and repair them if needed so moving forward (hopefully) the 7% will be an accurate representation of what to expect.

Hello BP! I am hoping you can help me analyze this deal. On paper my numbers are okay-good. It's my first multifamily purchase, and I am in the process of working up an offer on four duplexes. Here are the details: 

Currently asking $84K per duplex

Comps for similar duplexes range from 90K-125K per duplex. 

Estimated mortgage: $1259 per month. (4.8% interest, 30 year mortgage, 25% down based on an offer of $80K per duplex) 

Taxes are: $300 per month (based on 2016 tax assessment) 

Insurance is: $236 per month (quote from insurer) 

PM@ 10% $400 (I currently self manage) 

Maintenance @10%: $400

8% Vacancy: $320

TOC: $2915

All Units are currently rented at an average of $500 (some units have long term tenants and the rents have not been raised in a while) 

Total Rent Revenue: $4000 (We plan to rent the units for $525-$550 once the current leases expire)

All units have newer HVAC units and come with (older) appliances. Units all will need roof updates soon. Estimated money for immediate repairs/updates is $30K (roof and some flooring, painting, small repairs) 

Average rent for a 2 bedroom unit is $600 so these units have room for a rental increase. Also there is a new shopping center in the works near this street, which is currently a dead end. Eventually they will connect this road with an access road to the shopping center (positive near to new shopping and restaurants, negative more traffic) The area is currently a C+ area with some single family homes to the left of the property, and a small apartment complex to the right.  

The purpose of the purchase would be a buy and hold with positive cash flow. Based on my estimates I'm looking about about $1100 per month cash flow with a little over a 11% Cash ROI

Am I missing anything? Typically I try to follow the 1% (though I try for 2%) rule and these would meet that.