All Forum Posts by: Mike L.

@Billy Zhao,

I make a judgment based on how much it would cost to turn the unit and if the tenants are good otherwise. I have some tenants that have been there 15 years so I’m happy with minimal increases in exchange for deferring the cost of turning it over - if it costs me 2500 to paint, carpet etc it’s take me 8 years to recoup that if pushing another $25/month causes them to move out and then I don’t know how good the next tenant will be.

@Kyle Abramov

Hi Kyle, I too chose to use a management company on my first 4 unit but at the same time I’m staying hands on to some extent at least until I feel comfortable with the management company. I think without experience you should strongly consider that or be ok with the risk that your money/property not being managed how you would like (though my default is to defer to the mgmt company’s recommendation as nitpicking/questioning everything won’t make for a good mutually beneficial relationship).

For example, I mow the grass for now to keep an eye on things/save a little money since it’s close by, take furnace filters to tenants, review repair orders over $x, review detailed financial statements monthly and go along to meet contractors for larger repairs so

I understand the pros and cons of the different options. I like that balance as I can learn faster/sleep better at night than being completely hands off without having to be at the mercy of the phone ringing. Longer term as I grow I’ll probably scale some of that back.

What's the rate differential between the mortgage and HELOC (usually HELOCs are going to be a little more)? As i see it, the benefits of doing nothing are:

1. No more closing costs

2. You can pay off the HELOC and then just have your mortgage payment left.

If you refi and pay off the HELOC, you can lock in the lower rates but will pay transaction costs and then there's nothing you can do to lower your monthly payment from a cash flow standpoint.

So ultimately I'd weigh the benefits of having more flexibility against the potential higher interest cost since interest on both has similar tax advantages.

Did they request this from you? If so, what exactly did they ask for? I've never been asked for a resume but have been asked for a personal financial statement/balance sheet. Usually the stuff about my experience/qualifications is covered in a discussion/meeting.

I use a management company as well and they charge late fees - as for security deposits, some states/cities have different rules but we keep them in my operating account here and track as a liability on the books. 

Agree with @Terry A. on seeing the price sheet for all things including signing fee, turnover fee (in addition to materials and labor), snow/lawn, marketing and the hourly labor rate as they usually make a lot of their money on repairs so a higher % with significantly lower labor rate may help make your costs more predictable. One other point to note, is that you may be able to negotiate the rate/turnover costs/signing fees etc. down, especially if you have multiple properties with the same property management company. That said, the most important thing is finding someone you can trust who comes well recommended and making sure the costs work with your numbers. 

@Zachary Paschke

Agree with those numbers but some some policies charge as high as 8% interest on the loan to pay back which is why I made the point. Also, some policies have some variability in the rate ie there’s a floor that’s guaranteed but some portion is a function of marketplace and with low rates that return may be dropping. Agree with all your points, just wanted to make sure people were thinking through the rate arbitrage as you wouldn’t want to pay 8% in interest to earn 6% in returns in an expensive market.

@Matt Camilliere

I shoot for 1.5 (blend of your choices).

In the Midwest the highest cash flow ones usually have lowest appreciation potential and highest risk (less desirable, declining areas) I think of it like the difference between risky stocks vs blue chip stocks that pay a more predictable dividend with a little lower appreciation potential.

I choose to invest where I live (expensive market) and there are very few #2s here so that's why I shoot for 1.5 and try to buy blue chip style properties (nice A- to B units in good neighborhoods/school districts) and am willing to take lower (but not zero or negative) cash flow in exchange for a safer bet in a great spot. That said I have a regular full time job that allows me to take on a little more risk/cover a shortage as I'm not depending on only my REI income to live.

@Mike S.

I also have WL policies and didn't really understand the fees until I was past the point of paying most of the commission on some of the policies. But if I count that as a lesson learned going forward they do produce a return above savings accounts and bonds so I kept the old policies and surrendered some of the newer ones still in the fee period to cut my losses and free up cash flow for REI.

@Zachary Paschke

But your return on your REI must exceed the interest rate on the WL policy for this strategy to make sense.

@David Shiling

Not a huge error but on my 4 unit I didn’t account for common area maintenance (cleaning) and utilities (I use a management company). Best to check with the utility company or count the electric meters - if there are more meters than there are doors you probably have to pay something to light/heat stairs, halls etc. each month, especially in a climate with below freezing temps.