All Forum Posts by: Matt Gehrls

Someday, I hope to be a landlord and that is why I'm on the site. Right now, I'm a tenant. Because I have been reading and seeing things from the other side I don't want to be a pain. However, my apartment is a dump. The toilet runs for minutes, the fix they gave me was turn this knob on top (really, really old toilet) but that doesn't work. The shower has terrible pressure and is never warm, and it's getting worse. They've told me, that's just how it is. Everytime we use the incredibly old gas stove, the knobs fall off and they are clearly not the knobs that were originally on the stove. It makes cooking difficult. They won't do anything unless it's actually broken.

They raised the rent on this building 50% last year and basically just painted and put new flooring down. Is it my fault for not doing my due diligence and figuring this stuff out before, or do you think they are just slumlords who don't care? And is there something I can do to get these things fixed?

Disclaimer: I haven't actually used BP's calculator so if I'm missing something, let me know.

People generally like to use the 50% rule for cap ex. It basically says that 50% of the rent on a property will be used to pay for things like maintenance, property taxes, insurance, ect... That does not include debt service. I've heard other people say they use that same rule but instead of using 50% they use 60%. You're right that really cuts your profits and could take them out entirely.

For example, using the 50% rule if you can rent it out for $1000/month you should put $500 in the bank for cap ex. You may not, and probably won't use it every month, but when a big thing comes up you will have that money there. Say you pay $400/month on debt service. You are cash flowing $100/month. Of course don't forget vacancy rates and account for those. That will depend on your area. I'm just generalizing.

As for your question about the two different fields, I would imagine the repairs field is for repairs you know you have to pay for before you buy the house. Say you know the roof is bad or there's a hole in the wall that you will pay before a tenant is in there.

Hope that helps. It is a bummer.

Welcome. I know a lot of people beat up on Detroit here, but having friends in Royal Oak and spending time there and other places near Detroit, you won't hear any of that from me.

It is fascinating that you were a pro online gambler. What is your tolerance for risk in your real estate investing?

@William Johnson That's an interesting way to think about it. I like that. Thanks for sharing.

Is that how the 70% rule works normally? Told you I'm inexperienced. That kind of money sounds fantastic to me.

Hi Ronnie,

Welcome! I think you've come to the right place. I haven't started yet either but in my 3 months or so on this site I've learned a ton. My suggestion is to start listening to the biggerpockets podcast. There will be episodes that don't interest you at all (you will still learn from them), but some that sound really appealing. It's a good way to figure out what you want to do. You will learn a ton. That's where I think anyone should start, the learning I mean not specifically the podcast. There are lots of good books out there too. Best of luck sir.

Disclaimer: I have no experience with flipping. You sound like you know what you are talking about, but just so I can feel better I would like to mention, to meet the 70% rule you would have to get the house at under 500k for sure. Your offer is at ~80%. This guy is asking you to buy the house at closer to 85% ARV. You still make a good profit if your comps and renovation budget are close to right even at that 85%.

I've always heard people say, choose a number you will not go higher than and stick to it. You choose that number at 550k to start and have raised that to 558k (because of the 4% seller financing.) The question is, do you want to chase the deal and is it worth chasing? If not, put your foot down. He seems to be playing games. You aren't.

Like I said, take it with a grain of salt. I'm a newbie.

There are a lot of things missing here. How much is he paying in debt service (mortgage payments?) How much are his insurance and property taxes running him? What is fair market rent in that area? Is it normally for tenants to pay for all of those things in your area?

Full disclosure, I'm inexperienced. From what I've read and heard from others, it depends on the questions I asked above and a number of things I probably don't even know about yet. There is a website I use to run the numbers on different deals I've played with. What I would recommend is use this, and if you have a question about what one of the numbers is it's easy enough to google and learn what it means. It's not a promise that things will work out that way, but it will give you a more detailed picture.

http://deancraneproperties.com/rental-property-cal...

Hope that helps.

What's the expected rent for that kind of place in your area? Or are you planning on living there?