All Forum Posts by: Kevin S.

@Thomas S.@Mj Schindler I would say "it depends". If the property is hot and getting a ton of interest but you have someone asking this then yes I tend to question if they can afford it. However if the property isn't moving quick or getting a lot of interest this could be a sign that you are listed too high and need to reassess your rent.

@Rob Golob no need to try and shame @Mj Schindler for her question, because about half the time yes I'd consider this a red flag. The rent is spelled out in the ad and most landlords don't negotiate unless they are 1) desperate to fill the unit, or 2) the renter is some amazing renter. If anyone has a holier than though attitude here it's you. 

@Dylan Mehsling welcome to BP! I'm sorry to hear about your father, but it's always good to look to the future and start planning. I guess my first question would be, how extensive would the repairs/updates need to be on the house in Tulsa? Also, what is you basing your $175k value on? The Tulsa market is pretty hot right now so it may be worth more than you think.

I can't speak much to the short-term rental business as I have no advice there, but regarding long-term rentals you'll want to assess the benefits of keeping the property and renting it vs an up-front cash gain of selling it. Run the numbers, do research on local rents in the area, budget for expenses (repairs and maintenance, cap-x, vacancy, etc). BP has a ton of resources and a lot of knowledgeable people, if you get lost/confused/stuck just ask additional questions or search the site, odds are someone has already asked it. Good luck!

@Brennan Hale I'm in O&G too, my recommendation is to stick with it, as others have said it will help you save for a down payment and you will have a W2 job to help you get the mortgage you need. One of the other things to consider is that realtors are commission based, so you don't get a flat check amount every two weeks, which makes planning for the future harder without a nest egg.

I will say that if you're working 60-70 hours per week maybe you should look around for another O&G company, there are plenty of them in Oklahoma where you won't be working more than a normal 40 hour work week most of the time.

Good luck

@Chris Aronson Oh and one last thing, you might shop that mortgage rate around a bit, I'm closing on a house (owner occupied) tomorrow and I was able to lock in a rate of 2.625% with Quicken through Lending Tree and Morty Inc.

@Chris Aronson congrats on getting started in RE. A couple of things, first off I think your vacancy % is a bit low. I always use 8% because 1/12 = 8.3333% so if you set aside 8% per month after 12 months you will have approximately 1 month's worth of rent saved up.

Additionally, you're probably trying to be conservative in your estimates but why budget for a property manager? When you are house-hacking you can easily manage it yourself and even if you decide to move, you should be able to fairly easily manage it yourself. To me property managers only make sense if you have so many properties that it would be a large amount of work to manage them all. When you only have 2, 4, even 10 properties I would be fairly confident that you can self manage without it being a huge hassle and you'll save yourself significant $$ (property managers typically run 9-11% of rent plus additional costs for replacing tenants).

The last thing I would suggest is that you check out how saturated your rental market is. Right now a lot of housing markets are red-hot which can also lead to a shortage of rental properties. I know here in Oklahoma we've seen both housing prices and rental prices on the rise. So if historically the area has been renting in the 900-950 range but now inventory is low, you may be able to get higher rents and therefore actually cash-flow (if you had the whole thing rented). 

@Garrett Hollenbach I'd say it depends on what your long-term goals are, however personally I'd sell and take the $80-$90k as down payment for a couple of other properties. I guess I look at it like "how many years would it take me to make $80k on a monthly profit of $175?" The answer being that you would have to hold the property for 38 years to make the same $80k in profit based on rental income.  

@William Coet So you're saying that in option 2 you pay a downpayment of $20k and finance the remaining $80k over 10 years? Then you'd have to include the interest paid over those 10 years: lets say, for simplicity sake, the interest rate is 3% and the loan term is 10 years on $80k. That means your payment is $772/month x 120 months = $92,640 in cash you paid over the life of the loan. Add in your original $20k and the total cash spent is $112,640 in cash and therefore your profits would only be $87,360

@William Coet how is example 2 only 100% return when you only invested $20k? $100k profit on $20k investment is a 500% return

@Austin Takeda looking at the report you ran, I think some of your parameters are set wrong. You said you're wanting to use a VA loan but the report shows you only financing $12,500, which is why your mortgage payment is only $51 but the cash you must pay at closing is $237,503. I'm guessing you meant that to be a 5% downpayment in cash and financing the other 95%. That's going to increase your expenses dramatically. Additionally, if you're living there, and therefore paying the utilities yourself you need to include those, right now your fixed expenses are $0. Also you are probably light on Vacancy and CapX expenses, Vacancy is usually set at 8% since that gives you one month set aside for every year the renters stay (1/12 = 8.333%) and CapX is normally around 10% of rent. Also, if you are living there and just renting out rooms why do you need a management company? You should be able to self manage and save yourself the cost.

Regarding rents in the area, I'd use the website rentometer.com or something similar, they can get you a fair estimate of what you could charge. 

@Austin Martel this is more me being curious than trying to make a point, but I thought small multi-family properties (4 units or less) were valued in the appraisal process based on comps, not on rental income generated. Is that wrong?