All Forum Posts by: Mike McCarthy

@Adam Craig I’d imagine you’d need demising/fire rated walls between apartments. Having an open plenum above the ceiling probably wouldn’t fly.

Once you’re cutting tracks to install new walls, the ceiling might as well come down.

But of course, that’s a building/fire code issue that you may be able to work around (?).

@Kyle Witham my recommendation is that it depends the direction you go.

For 1-4 family long term rentals, an LLC will hurt more than it helps. You'll need commercial loans, which will cost more and be harder to get as a new investor. It's better to buy them in your name, get a conventional mortgage, and protect them and yourself with landlord and umbrella insurance.

For larger properties, you'll need a commercial loan anyway, so you should start an LLC.

For flipping, an LLC is probably worthwhile, but out of my range of expertise.

Unfortunately many people get caught up in the details. The most important part is to find a good property and get started!!

@Danial Qureshi most of my insurance is through my local Allstate office. The prices have always been competitive and the (few) claim experiences have been overwhelmingly positive.

I’d always recommend a landlord policy, and a $1M umbrella policy over your home, auto and rental properties. The Umbrella policy is an inexpensive way to cover yourself for the hopefully rare liability claim.

@Lena Hanson my experience with loan contingencies is you never remove the contingency. By whatever day the contingency states you (the mortgage company) need to provide the seller with a commitment letter.

The commitment letter basically says that the lender plans on closing your loan. Of course anything can happen, but they’ve done the initial underwriting and everything looks good to them.

The contingency stays in place until you actually close, because who knows what might happen. But with the commitment letter, the seller should feel pretty comfortable that the loan will go through.

@Sam Leon as long as he’s paying rent, I wouldn’t worry much about it. I don’t know why people don’t reply, but it happens.

As for maintenance, I rarely ask for access to the house. My communication is always ‘I will be there at 10am on Friday for xyz, let me know if you have any questions.’ So there’s no issue if I don’t hear back.

@Mark Millich I know I couldn’t afford a catastrophic event. If the house burned down, could you afford that loss?

If it’s a $50K house... maybe property insurance isn’t fully necessary. But you still should consider things like liability insurance. What if a local kid ends up on your property and hurts themselves?

I don’t usually believe in insurance for things that I can cover myself (new washing machine). But for things that would put a real dent in my financial situation (house burning down, personal injury lawsuit), I absolutely have insurance.

To put it a slightly different way, charging the top side of market rent isn’t always in your best interest.

1) Do you really want to lose a good tenant who takes good care of the property over $50/mo ($600/yr). A new tenant might not be as easy on the house not call when something goes wrong.

2) you’ll most likely have 1-2 months vacancy on turnover, which is way more than the $50-150/month increase.

3) You are going to spend your own time to turnover. List the property, showings, coordinate the cleaners, etc etc etc. That is additionally worth some money.

4) even if this tenant moves out and you re-list for top-price, you’ll likely sit on the listing for an extra week or two, or only get 1 or 2 applications where you’re deciding if they are the right fit. Drop the price $100-$200, and you should have a handful of applicants which you can now choose the best one.

All in all, a bit under market rent is the way I always go.

I completely agree with @Carl Millsap. If you’re planning on doing 5 deals this year, your priority should probably be finding and closing the deals. But if you have some time, there’s nothing wrong with doing things that save money and you’re good at.

My two thoughts on it though are to make sure you can do a good job. Everyone notices a bad tile job... and if you’re not trained, you shouldn’t be doing electrical/gas/etc work.

Also, understand which items are worth your time and which aren’t. My first flip, I hung, taped, and finished a bunch of drywall. I did a fine job, but later realized I could have gotten a pro in to do it all in a few days for maybe $3K. That would have been money well spent - as opposed to the 2+ weeks it took me. My time could have been much better spent on areas that would have been higher value.

@Albertinny Colin it’s possible... but can get expensive. Mortgages (whether commercial or conventional) have decent closing costs. Appraisals, application fees, title policy, points (if needed), early payoff fees, etc etc. Having to effectively pay those twice can eat into profits.

But if you account for them appropriately and still make money, then no issue.

@Eric Admati I would suggest asking your realtor if they’ll help you with an off-market purchase. You’d have to pay them out of your pocket, as opposed to the seller for an on-market deal. But the upside is you get their expertise in walking you through the process. Offer, contract, inspections, loans, utilities, closing, etc etc.

you can of course navigate it on your own with a title company doing some of the work - but with any profession/process, it’s often the questions you don’t even know to ask that’ll get you.

IMO, a few thousand dollar fee to a good realtor is well worth it - especially for your first few deals.