All Forum Posts by: Kelly N.

Hi,
Can they insure it for your cost instead of replacement cost? That should reduce the premium a bit. I had them do that for our 100 yr old house- the cost to rebuild it to original spec would be WAY more than what we paid for it (like 4X) and one insurance agent said they'd rather do that anyway.

Any chance you'd live in one of the units? From what I've heard, owner occupied brings the insurance down.

Is there something they see as risky in the property or is it just the replacement cost that is driving the price up? I know our company gave us discounts for smoke detectors, dead bolts, fire extinguishers too I think. If there is something you can change to lower their risk, it might be worth it.

Good luck!
Kelly

--Bill & Steven-- Sorry I wasn't clear about the security deposits- maybe this will help:
The seller transferred this money from their security deposit account to us at closing, which lowered the funds we needed to bring to closing. I put the same amount we were credited (double checked with the leases) into our non interest bearing account which is labeled 'Security Deposit Only' and notified the tenants where their money is being held as required by law in MI.

What I meant by 'adding that amount to our cost to obtain the property' was this: Say we had to bring $15k to closing, where we were credited $2k for security deposits and $4k for prorated rent. After I put $2k in the security deposit account, and $4k for the rent in the operating account, we've put $21k into buying the property. Of course, it is broken down into what was paid for taxes, insurance, principal, interest, and the various other fees like appraisal, title insurance, inspections, etc.

Hope that helps clear up my fubbed explanation :)

Kelly

Thanks guys!

Yes, we were/are the buyer. We were credited with prorated rents (16 days for 2 apartments, the third had paid his rent in full at move in so we had like 90 days rent for him) and so we had less money out of pocket at closing due to that. I put the prorated amount into an account for the LLC we created for the property. I was pretty sure this counted as rental income since that's where it came from, it wasn't like we got a discount on the house.

We also received a credit for the security deposits. I opened up an interest free account and put the money for those in there, adding that amount to our cost to obtain the property.

Thanks for your input!

Kelly

Hi,

We closed on our first rental property last month and had prorated rents deducted from our closing costs. The amount deducted is considered rental income, right?

Thanks,
Kelly

Hi,

That sounds completely fair to me, especially since you have past bills and the water company's info on the average bill. Obviously, you'd have it all spelled out in the lease. I have been looking into multifamily properties for about 6 months now, and have only seen 2 where they bothered to have separate meters for water.

Kelly

Hi,
We've got the same deal available here- they find a tenant for 1/2 month's rent, sounds very fair to me. Then again, for 8% gross rents they'll manage the whole year, so that's about 1 month's rent for less headaches... I haven't done either yet, but I am new to this and the property we bought has tenants already.

Kelly

Hi-
I'd be tempted, if I was comfortable with my own ability to inspect the property.

For the most part, I think it's worth the small price for the inspection for my piece of mind. I've been paying $350-$550 depending on square footage and # of units here. We're in the process of purchasing a house and expected to fly right through inspection (house is prime, currently rented, occupant certificate just issued in October) and our inspector found SIX gas leaks around the water heaters and boilers. These items were installed in 2008-2010, so relatively recently. What i'm getting at is even with a newer house like yours there may still be problems like that. Then again, you can buy a gas sniffer for $40-$500 depending on the quality :)

Hope that helps,
Kelly

Hi-
Can you bill them for the electric? Like, split the bill for that property in half, or by square footage?

Otherwise, if you have an idea how much the electric is going to be for the whole year, adjust the rent accordingly, meaning average the cost over the 12 months and make sure your rent incorporates that. This might be difficult without already having a year of bills to go by, but this is my favorite option since it gives your tenant a steady rental rate and I'm betting they'll like that.

If your leases are month to month, maybe you can up the rent if they begin causing sky high electric bills? This is risky since you'll always be basing it on the prior month's bills, so I'd make sure there was a little padding built in so you only have to use it in extreme cases.

How much is it to install a separate meters? Maybe that'd be an upgrade to consider over time, and then either have them put the electric in their name or you pay it and bill them for their usage.

I'm sure others will weigh in with what has worked for them, I'm still new at this!

Kelly

Hi Thomas-
Welcome! I'm a newbie too. We bought our first MF property last month, waiting to close on a second. We're investing in a college town too, so I'd be happy to trade advice. :)

Kelly

Hi-
I'm a newbie too, so take this with a grain of salt. So far, I've found zillow completely inaccurate, but then I am also dealing with multi family properties for the most part.

I am compiling a database for my use containing rents and as many property details as I can get- square footage, condition, location, utilities, laundry location- on comparable properties. I've found a lot of this info on line from local property managers' websites, craigslist, and calling locally advertised rentals. It can be time consuming, and it sounds like you've already been working along that line, I'd be trying to get as much data as possible. How many comparable properties do you have info for?

Kelly