All Forum Posts by: Matt B.

@Ismael Ayala Jr. I think this largely depends on YOUR risk profile. There are many arguments to get a 3rd property, and many that point to the opposite. You will get opinions on both sides, and some solutions you probably didn't think of. In the end, it's your decision based on your comfort level.

If I (my risk profile) were you, based solely on what is above, I would not go for the 3rd property at this point. I would also not rent out a property for a negative cash flow. I have very little leverage on my properties, and I offset the leverage with cash invested bonds to mitigate the little debt I have (i.e. -$200K in mortgages, +$200K in bonds). I like leverage to acquire a property, however I don't keep it for long. Some would say that is dumb as leverage juices up the return, and I can make more money by leveraging, and yes that is correct. I was also an adult in 2007 and saw people lose their homes and investors who overleveraged lose their investments when tenants didn't pay rent. I sleep at night just fine knowing I make a few percentage points less than those who take on too much debt. I have my whole life to acquire assets and build a net wealth, so I don't need to take on outsized risk to race there. This works for me and my risk profile. I should also mention that despite owning multiple properties with very little leverage on them, real estate isn't my biggest holding.  

There are many who love to take risk and would get 100 properties tomorrow all leveraged 80%+. That is their style and it works for them. Nothing wrong with it if you understand the risks, and are comfortable with it. You need to find out where your risk profile sits on the spectrum.   

 Hi @Marci Stein. There are generally some negative consequences with all adults not being named on the lease as a responsible party. It's been a while since I had rentals in NY but some of those consequences (some may not apply in NY) include the following:

1. Unnamed person may not be held legally or financially liable for damages and/or unpaid rent in landlord/tenant court. You may have to pursue criminal charges and civil charges in both criminal court and civil court (different courts in NY) to go after unnamed tenants. Police reports will also be required, and someone is potentially going to jail.  

2. Evictions can be more difficult as this person is not recognized on the lease explicitly. You may be able to evict the named persons on the lease, but you'll potentially have to file a separate case for the unnamed adult. Similar to evicting a squatter as this person may not qualify as a holdover tenant under NY law (lawyer question here).  

3. Any damages awarded will be easier to collect spread over 3 parties instead of 2. For example, Judge awards $9K in damages to you, $9K for 2 ppl is $4,500 each, $9K for 3 ppl is $3K each. easier to collect $3K than $4,500. The additional person also increases the chances they have funds in a bank account that can be seized, as well as other assets that can be seized (verify bank vacuuming is allowed in NY). 

Using basic risk vs reward metrics, you're increasing your risk by allowing an adult to be in the property and not a responsible party to the lease, but you get no additional reward. There is a multitude of reasons, some of which are above, that naming all adults on the lease have become a standard practice, and most board of realtors leases have this in their standard leases. 

I wish you the best of luck in your decision! 
  

Matt 

 I have a rental out here in the LV for a number of years, and I have never heard of this 10% per year rule. Where did you see this? 

I even rent to Section 8 tenants, and last year I raised rents 18% ($1,400 to $1,650) without an issue. 

Hi James - Welcome to the LV. I live here as well. I don't have experience house hacking, but have rental properties in the LV. I can try to answer your questions if you want. Might be able to answer some of them.  

 Nick - I am a landlord residing in PA, not too far from Wilkes Barre. To my knowledge, landlords have no responsibility to accept Section 8 tenants outside of Philadelphia, Harrisburg and Pittsburg (those cities have separate rules). With that being said, my FIL's property that I manage in PA is rented to a Section 8 tenant. My experience with the process is pretty simple. List your property, find a tenant, fill out a 10 page packet (with basic info), submit to the local housing authority. It took approx 3 days to gather all the materials required and fill out the packet. When I say 3 days I mean like an hour max per day in spare time. 2 weeks later they call to schedule an inspection. Inspection is not much different than a standard inspection for a certificate of occupancy i.e. windows, doors, appliances, electric, gas etc all in working order, no chipped paint, property is safe, property is clean, noting in disrepair etc. It is in my experience slightly stricter than a C/O inspection but not at all unreasonable. A simple 20 minute inspection which our property passed the first time. Should something be wrong, you have 30 days to rectify it. 

We just started this lease with the Section 8 tenant so I can't speak to the tenant quality but all my interactions have been positive with her and we are looking forward to working with her as partners in the years to come. Yes, overall it takes 30-60 days start to finish but it is not all hard or unreasonable. I would certainly encourage you to give it a try, especially since you already have a relationship with the tenant, and she will continue to pay full rent until the process is complete. This sounds more like the ideal way to dip your toe in section 8 waters with little risk of a burn, whereas we went into this 100% blind and so far have not been burned. Worst case scenario, it doesnt work out. One thing thats great about renting in PA is that it is a landlord friendly state, and your worst case is someone in NY's unachievable best case scenario. 

Best of luck! 

I've used KPMM for a property in Allentown. They were pretty good, very quick and got the job done. I haven't used them as a property manager but that's their main business. I was referred to them by an Allentown City Inspector when I needed a plumber to pull a permit for a water heater I installed (without knowing I needed a permit). They took care of it. Talking with the employees, they handle everything start to finish with rental properties. Their site is https://rentchasers.com/. 

Again, I haven't used them as a property manager but I have worked with them on a specific need and my experience with that was good. 

@Nicolas Sanhueza I also have a row house in PA with an oil tank in the basement for heat. In my property the tenant covers all utilities, including filling the oil tank. I kept it simple in my lease by providing the property with a full tank, and requiring a full tank when the tenant vacates. However much they use is up to them. 

@Mary Ciccarelli I have an active investment property in South Side Bethlehem that I picked up last year. Family is mid-closing on another rental in Allentown at this moment. There are still some good cash flowing properties in the LV if you look hard enough and are willing to put in some sweat equity.  

@Adah N. I actually sold that property back in 2018. I rented to the cat people for 2 years and they were excellent tenants. I sold the property to a young couple as a starter home. There was no damage or smell in the property when the tenant moved out. It was a complete success and I was very fortunate to realize some very attractive appreciation on the property. 

Jon - You brought up some valid points! I adjusted vacancy to be 9%, which works out to be about 1 month per year for turnover and paint. I also increased the insurance to $1,400. I've had some bad experience with property managers so it will take an act of god to get me to use one again.

I agree the property is over priced for what it is. Our realtor brought it us and it was the best out of the bunch. The property has sat on the market for about a month now which confirms it is over priced. As of now, once I see the property, assuming that goes well, I intend to offer $175K. That will get me closer in line with the 1% rule, cash flow $117 per door, and a little over 5% COC. Although still not ideal, I think a 5% COC and 9.7% ROI isn't bad as I do still have upside potential in the rent amounts.

What do you think of the deal @ $175K?