All Forum Posts by: Kyle Kipka

That's a reasonable take regarding the lack of used home inventory keeping prices elevated and I agree. I do have a hard time visualizing a case though where the new construction numbers work in a market where the used home numbers don't even when factoring in builder incentives (unless they were massive). Can you expand on that? 

I think anyone would prefer new construction but when I look at the numbers here in my market you're right around break even on a monthly basis or actually loosing a couple hundred $/month. If I have to tie up 20-25% in a down payment how do I see a return on that aside from banking on appreciation and tax deductions or is it different somewhere else? 

I get that take but it seems like you'll always have that to some degree even just with your state and city laws. They can and do change the rules all the time and some after reading through the multiple pages of hoops you have to jump through to rent in some cities I just avoid them in favor of the next town over with no or much fewer hoops. No different then an HOA.

To date all my rentals are located in HOAs. I don't like that it is a variable factor I don't have control of and things like the HOA fees can increase with little recourse or warning but so far I haven't had too many issues overall. What I do like is that I don't have to worry about how the yard is being kept up, the other perks like snow removal for the tenants and how some of the bills are essentially automated as part of the HOA fee and one less thing I have to worry about such as the trash and water in a few of them. When I reviewed the numbers it seems like typically when factoring in those expenses and saving on the insurance policy (since I'd only need a separate "walls-in" policy) it wasn't actually cutting into the cash flow as much as it might look on the surface. YMMV

 Makes sense, thanks for the reply. The market kind of seems like a sliding scale of cashflow/appreciation and how much crap you're willing to put up with haha

In your opinion, is it therefore not possible to automate the process to the point that you're removed from the day to day risk and stress and still take in higher returns on the cashflow or would the extra expenses of incurred with that type of management negate that? If not then I fail to understand why people invest in those areas at all especially when they may be sacrificing long term appreciation when stable returns can be had in better neighborhoods which might be better real returns. Do you have to be a Perry to make it work? 

I will be closing on another unit in about a month which will need all new flooring. This unit is suburban townhome built in the mid-2000s that I'd consider a higher end rental for the area and I need to decide what I want to do for flooring. 

The main floor (bathroom, kitchen, family/living room and entryway) will have some type of hard surface either vinyl plank or ceramic tile (wood plank look) but the stairs, upstairs hallway and 3 bedrooms will be carpeted as that is expected in this type of property in Minnesota. 

I'm in the process of getting some bids and need to decide what type of carpet and pad makes the most sense. Doing some reading it seems to that getting a decent 8lb+ pad will allow me to use a cheaper carpet and still have it feel nice underfoot and extend the carpet life somewhat and allow it to be re-used a few times if I do need to re-carpet. Is that the general consesus? I see they now sell some moisture barrier type pads that claim to be even more durable and longer lasting. Any experience with those? 

A flooring guy also told me to check out the Triexta material from Mohawk that is supposedly completely stain resistant and comes with a 25-yr warranty claiming that "you'll eventually end up replacing it because it's an outdated color, not because the carpet failed". I did some reading on the material and it sounds really good for rental properties but it is more expensive and I don't want to buy it if it ends up being kind of a gimmick. It supposedly has been sold now since 2009 so I'm wondering if anyone has any experience with the material and their thoughts. 

Thank you for all the suggestions. I found a local contractor specializing in this type of work who will be writing up his own bid to bring the property back to the original condition (without seeing the estimate from the insurance company). This should get things moving as he can negotiate with the insurance company and after reading through the contractor's restoration contract I'm not to be personally billed for the work aside from my deductible, any depreciation I'm unable to recoup (still have to read through my insurance policy on this part) and any upgrades I'd like to make above and beyond the repairs (like vinyl plank flooring instead of carpet). 

Best case scenario, everything gets fixed and I'm out just $500 and whatever upgrades I want. Worst case, I could be out several thousand in depreciation depending on the language stated in my policy. 

The contractor was confident things will go smoothly when he gets in there and starts the process of working with the insurance company although as a back-up plan I could hire a 3rd party adjuster as some mentioned above. 

I have a rental property located in Minnesota and recently got a call from my tenants informing me of a severe water leak from the hot water heater that was going on for up to several weeks while they were on an extended vacation.

It appears that a part of the hot water heater broke and was allowed to pour out water continuously until the water was shut off. After submitting a claim with insurance on my HO6 policy (this is a town home and the outside is covered by the association's insurance). I had a remediation crew come out to remove the water damaged areas, suck up the water and dry everything out.

The insurance adjuster then came out to record everything and just sent me an estimate for the damage of about $4700 (minus the $500 deductible). I was surprised it was so low as there is a lot of work to be done and having remodeled two other homes in the past I feel that it cannot be brought to the original condition for that price especially considering labor costs form a licensed contractor.

What kind of recourse do I have to contest this low amount? As of right now my plan is to get 2-3 bids from licensed contractors (which I estimate to be in the 8-10K range with like materials) and then submit that to my insurance company but I'm still not sure what my rights are in a situation like this in my state since they plugged everything into their formulas to calculate price. Any ideas on how to handle best handle this?

I don't intend to cash any check or sign anything agreeing to this amount until I know more although they are also required to cover lost rent so I do intend to cash that separate check since that amount is clearly defined.

@David Moore Thanks for the advice, I've heard of those books but haven't read them. I'll make sure to pick up a copy and do some reading. To answer your question about the goals I have regarding my interest in real estate investing I would say that I'm most interested in building up enough of a cash flow to cover all my bills and enable a greater freedom in the way I live my life. I've also wanted to be my own boss so to speak and build something up myself instead of relying solely on a paycheck. 

@Marc Jolicoeur I've thought about the capital gains tax but I've had this property homesteaded for 2 years (since I lived there during my remodeling) which I thought would eliminate that tax although I'm not to knowledgeable since I've yet to sell a property and go through that process. As far as the HOA I don't foresee any problems with this part of it since the one for this building has a decent surplus of funds in savings and likes to get repairs done for the best price possible. I also am familiar with the association president and it's really laid back.

I am definitely leaning toward keeping it and renting it out since that seems more in line with my personal goals but I'm still somewhat hesitant to take the plunge and need some more info first. Any suggestions for resources I could use to help me get started as a landlord (basics of finding good tenants, rules/laws I must follow for this Saint Paul property, etc).

Thanks for the welcome and for the advice! 

Marc Jolicoeur, I've been working the numbers and I think I am in pretty good shape to try renting. My condo is paid off (have about $50K into it in total) and everything inside is now brand new after my remodel so all I have to pay is $175/month for the association fee plus property taxes (which are extremely cheap). In the current condition I'm realistically hoping that it would rent for $900-1000 a month which would should leave me about $500 profit a month assuming additional fees that come up and could be closer to $700 profit certain months if everything goes well. 

Seems like a good situation for renting but I go back and forth with selling it instead. I could realistically get $70k for it according to what similar units have been selling for on the MLS and end up with around 20K profit for my efforts (around 3 yrs profit if renting).

I purchased my house for $170,000 (currently the mortgage is 166K) which makes the mortgage payment just about $1300/month. I currently rent out the lower level to a friend for $800/month which certainly helps with my payment. If I sold the condo and used the money (plus the 20K I've currently saved up) I could pay down the mortgage and refinance to get the monthly payment down (saving me about the same each month as the profit from renting the condo). 

I guess my question is to the strategy I want to use moving forward. Does it make more sense to purchase more properties to rent (I see you mentioned holding rentals for 10 or more years) or flip properties to have money to use for future investments in my case? I don't know anything about the types of financing available for investment/rental properties but I do know that since I can't use rental income for at least 2 years it might be difficult for me to get enough money to make my next move just going off my income and debt ratio. Any suggestions?