All Forum Posts by: Max James

 Nice example Elizabeth!  What do you mean by you have break lease language?  Is that for current residents or future ones?

 Hey Larry, good point on the fact it's going to create some unnecessary work if you have a large amount of units.  Could this be worked into your PM business model though?  To maximize revenue?  If your objective of renting out an apartment is to get the highest rent possible within reason of the comparable market, it seems like it would be worth it to have a system in place to make the extra effort.

As for planning that far out, I think some people actually do plan ahead this far in advance.  Could it be possible this would also attract a higher quality resident?  Could it be that someone who has the mindset to look this far out would be someone who has their life together and be very organized.  Just my 2 cents!

 The unit I am referring to is in what I would think is the top three most sought after areas in Cincinnati.  I did receive security deposit, but did not request first months rent.  With the scenario you pointed out above, I do agree, it seems a bit unreasonable.  I guess it really will depend on resident-to-resident situations.  I like to provide future customers with the idea they have locked down their new home well in advance of when they want to move into it.  This eliminates stress on their end and mine as well.  I can also time up the amount of days vacant much better.

Makes sense to wait in order for current renters to make up their mind.  

With the demand of student housing for UC and Xaiver, it seems like a huge advantage to advertise your units months in advance of the lease expiring.  When I was in college at Ohio University in Athens, we signed leases 12 months in advance of moving into the house.

What are your electrical and gas bill and water expenses?

Is there a good reason why people don't advertise and market their units for rent well in advance of when it's time to turn it over?  I had great luck getting a leased signed in February for a July move in date.  I do not understand why people wait till 30-60 days to start advertising when they know the lease is going to end well in advance of that.  This way, you can also advertise for higher rent you think is within reason and if nobody bites, then drop it some.

How far in advance do you advertise and hope to get a lease signed?

This is also assuming you will be managing the property yourself, which I suggest you do.  I would not pay a property manager while you are living in the building.

While you are in there, you can expect to pay your PITI ($1254), sock away 10% of gross rents into a maintenance account, sock away 10% of gross rents into a cap ex account, pay the water bill, pay the electric bill (since I'm assuming there is common space & outdoor lighting, lets just say this will be $70/month), and that's it pretty much. So even if the units are generating $500/month:

$1500 - $1254 - $133 - $70 = $43/month

So you will be pulling in a positive $43/month while living there the routine expenses are paid.  Pretty awesome right?!  The thing you have to think about too is the maintenance and cap ex.  That is another $400/month you should be putting away for future non routine expenses.  So if you look at it in this sense:

$1500 - $1254 - $133 - $70 -$200 - $200 = -$357/month

If you want to include those items, you would be technically negative cash flowing $357/month.  The odds are you won't be spending $400/month on maintenance and capital expenditures, but you will one day.  Still, in this sense you are only paying $357/month out of your own pocket to live in what will eventually be a positive cash flowing asset.  So I wouldn't get too hung up on the negative cash flowing aspect of $357 while you are living there.  

The thing I would think about and ask around is whether or not the analysis of $102/month cash flow once it is fully up and running as a rental is how you want to run your proforma.  I know @Brandon Turner shoots for $100/door of cash flow per month.  In this case you would want to shoot for $400 of cash flow per month once it is fully up and running when you use all the assumptions I laid out in the above post.

I think it boils down to the PHOTOGRAPHER, not the camera.  I almost think if you are renting to a younger audience, anyone who uses Facebook/Instagram, using your phone might be an advantage.  They might feel more connected with your property listing if you can make them feel like they were pictures they could see themselves taking (and then posting to Facebook or Instagram).

These are all numbers assuming you do not live in the building.  Which is the main intent (for the long run) of the building.  The other important aspect to consider is the insurance is going to increase by a large amount once you move out of the building.  You will not be able to hold the same kind of insurance since the one you are getting, I'm assuming, will be for owner occupants.  I would ask your insurance agent to run the numbers for once you move out of the building.

What does the BP world think?  Are the above expense assumptions too much?  Not enough?