All Forum Posts by: Mike Cotter

Thank you guys I appreciate all the  input .  So let me clarify .  I pay the gas and water which is not separate for each  individual unit  but rather on 1 meter.  If I replace the current gas furnaces with electric then yes they would be separated and each unit would be responsible for paying their own electric bill which they currently are. Actually that gas bill is pretty high and it's going to jump 20%. The total square footage of the building is just under 7000. When I bought the building half of the tenants have been there for 15 years plus and still are. My tenants are little old ladies on Social Security which truly I don't mind based on my lesson 1% vacancy rate that was only cuz one died.

I'm going to plead ignorance here and ask for help on better understanding RUBS. Up until about 3 hours ago that's the first time I heard that term could you help a brother out.

Looking for some advice regarding my extremely high  heating bills. I own a 14 unit apartment building located in Commerce Michigan. I currently pay the gas and water for my tenants while they pay for their own electricity. On average I see anywhere from $500 - $800 monthly heating bills during the winter months. 10 of the 14 furnaces that are in the units I've been there since 1968 when the building was erected. I don't have a whole lot of problems with them other than occasional pilot lights going out and making minor repairs.

My question is do I replace these gas units with electrical units? This way I pass the Bill back to the tenants where they would be less likely to have their heat on full blast and their windows open, which is always a joy to see. 

The price of gas is supposed to be going anywhere from 15 to 20% higher in the near future. I truly don't have a clue as to what the cost would be to take out the current wall unit furnaces and replace them with the electrical units. Are they safe?

Any and all help is much appreciated

Mike

Great Question. I live in Michigan and own a 14 unit apartment building located in Commerce Township. I have been struggling with the Insurance issue for awhile due to the lack of transparency in the business, dealing with 3 parties, and the "What If" "Will They" question if something really bad happened. 

I have a 1M liability coverage w/ a $2500 deductible, as well as several general property damage coverages. My replacement quote seems to be accurate for the building itself.  My premium is $5,500 for the year, up 8% from 2016. 

Hope this helps. 

Mike

Wayne,

I decided on my own to make the higher payment, so that I could pay it off sooner. If I choose, I could certainly revert back to the lower amoun.

PS. I am going to be at the Breakers in West Palm this Sunday to Friday, May 15th

Thanks Larry. I never thought about it that way. I appreciate the feed back.

Mike

Brad,

Thanks for the suggestions, I truly appreciate you taking the time. The LC is set just as you assumed, however, there is no balloon at the end of 10 yrs, wich gives me a little latitude if needed. 

I have been looking for another apartment, but the deals have been few and far between. Banks are a pain in the kester when it comes to commercial property, as I am sure your well aware. I would hate to have to do re-fi with a bank, just a pain. I'll be keeping my eye's out for the diamond in the ruff. My problem is that like you, I love Leverage, but like your Father, I hate debt.

Hello, 

Is my "Aggressive Payoff Plan" the right strategy, or can you help steer the ship in another direction to maximize future gains. Our goal for the next 10 years, is to create as much wealth as we can,..while not dipping into our other investments, allowing us to move out of Michigan and begin our "Life of doing Whatever we Want".

As of 1/1/15 we purchased a 14 unit apartment building. The 14 small units consist of; 4 two-bedroom and 10 1-bedroom units all within a 6900 sq.ft footprint, can you say "SMALL UNITS" Surprisingly, the vacancy rate on these apartments is and has been virtually zero..,due to the secret of" little old lady tenant selection."

We purchased the apartments from a family friend on a flexible Land Contract for $510,000. We put $200,000 down leaving us $310,000 at 5% AMT over 30 yrs. No peanalty for early payment. The monthly rents and laundry bring a monthly income of $6,890.00. Monthly expences, including my lofty $3,300.00 LC payment, averages $5,300.00 a month, leaving us $1,590.00 a month cash positive. The Tenents have not had a rent increase in over 5 years and I don't plan on increasing them THIS year. Due to the size and amenities of the units, I  only see a $20-$30 per unit rent increase available, which will keep us priced just below the competition, and affordable to the social security "Little Ladies Club" 

Here is the Aggressive Part..I originally planned on having this paid off in 10 years, hence the $3,300.00 monthly mortgage payment. However, if I was to make a $10,000.00 annual principal payment( that I will be saving from the $1,590 surplus) I could have this free and clear in 7.5 years. 

Why the urgency? My Wife and I are tired of SE Michigan and want to move to a warmer climate. Additionally, in 7.5 years we will both be in our mid-50's, which is the age I would like to have the choice to "Do Whatever I Want". 

I realize that there will be Unforeseen Expences, so we have placed a $25,000.00 buffer into our account for these swings and if absolutely necessary, we can tap into our own savings for anything MAJOR, but thats why we pay insurance, right?

So, is paying off the Apartments the right strategy or do you have any helpful  thoughts or ideas that will allow us to capture more revenues,while be able to keep our 7-10 year plan and Not have to dole out any more of our own Capital. Any and all related experience or stratergies is welcomed.

Thank you,

Mike Cotter