All Forum Posts by: Mike Hottinga

First off this is a pretty hard question to answer. From what I have read an average minimum would be 5% capex and 5% maintanence. Just to be clear capex is large repairs like a replacing a roof/painting the building/unit remodels etc. Maintenance is replacing a water heater/range unit/light turn over. The figures you use are really dependent on the age and condition of the property. Where I am, a 1980s property is considered old and will require more maintenance and capex set aside. I would use 10% each. A lot of other properties in my area were built 1990-2010 and the building construction is much better in terms of materials(copper/pvc pipe vs steel, ect) and I would use 5%. It is really case by case and your best estimate on the life left on the components of the building. Enviorment has a huge factor on that. San Diego has much more moisture exposure than Phoenix, but Phoenix has more sun exposure. Both enviromental conditions affect the buildings exteriors differently. Water bills in San Diego are higher than other cities. 

This is just my take on your question.

@Myka Artis Right now is snow bird season here and they typically have rental agreements done in the spring time/early summer for winter rentals (4 to 6 months). Snow birds tend to be creatures of habit and will stay with the rental for a long period of time once they choose one. My cousin bought a house that has the same retired Canadian couple renting in the winter for 13 years. The weekly rental stuff will start to pick up around April when it starts to get warmer out here.

There are lots of STRs in LHC, just look on VRBO, AirBnB, etc. This is a very unique market in that it is very seasonal tourist. Summer is boaters and party goers and winter is the snowbird and off road crowd. AirDNA has a lot of useful data on STRs by location. It was an option I considered when I bought my SFR in LHC that I am house hacking. It just to involved for me and the market is fairly saturated here for me.

My company uses a 3rd party financial wellness company called Financial Finesse. I get a free advisory phone call once a year for free for attending the class, but I have liked their advice so far. I attend the same 401K class every year just to get the free call. I have never inquired about one on one advice with them, but I am sure they have a recommendation if they will not do it.

https://www.financialfinesse.com/

Could you give more information on your current living situation and REI knowledge base?

My recommendation for you is to:

Save your money and educate your self before you do anything.

Learn the different niches of REI and which one is right for you. (Buy and hold, flips, notes, hard money, house hack, etc)

Carefully look over the fees associated with this "no PMI" loan. I was offered a similar loan and a competing lender explained to me how they do it. Traditional PMI can be removed once 20% principal is reached. The "no PMI" loan pays an insurance fee over the life of the loan, once 20% is reached the PMI goes away for the lender and the insurance fee money goes right into the lenders pocket. This was the quick and dirty explanation that I was given, I have not verified it as I did not used the "no PMI" loan so verify.

I was looking to HH a duplex here in AZ as they are quite popular in my city. I ended up buying a 3/3 SFR, more options for me, and am HH it by renting out 2 rooms. It is a different set of sacrifices with roommates vs tenants next door. All of us in the house work a lot so we rarely see each other. PITI is 1248 and I get 525 and 575 for the rooms plus utilities are split in 1/3s. I am now saving/buying stocks aggressively, reading books, and preparing myself to buy a 2-4 unit property in the next 1.5 years to HH again. Find a deal that you are comfortable with and do it. I was afraid to buy but extremely happy now that I got started. I have learned 10x more than what I could have from reading books on the sidelines. Take action and MAKE IT HAPPEN!

@Michael Evans I would be interested to take a look at the info. Black Meadows or Havasu Palms?

I have a roommate that delivers pizza and  the majority of his income is cash from tips. I just have him go to the bank and deposit it into my account. 1. I have prof of transaction/payment and 2 I don't have to deal with going to the bank, he does. Cash is ok if dealt with correctly, it just raises a red flag that they may not have enough credit to open a bank account. Just look into that issue further.

As for making the storage shed a laundry room, it could work. You could always do the service that takes 50% of the money earned to maintenance and provide the machines and the other 50% goes to you. Extra income with no headache. You would then just need to look into the cost of fixing up/readying the shed. It could be an amenity to keep better tenants around.

I have made a few offers like you describe. In my area a 2/1/2 duplex goes for 250k-325k and rents for 1200-1400 (< 3% cap rate). I have offered less than 200K on my offers because I based my price off the income like commercial properties. I still have no properties besides my SFR, but I have learned a few things running the numbers and making offers. Make the offer, if they want to sell they will consider a justifiable number. Most likely they are fishing for some sucker.