All Forum Posts by: Mike McCarthy

@Alex May it’s definitely an uncommon crack. It’s drywall, yes? Which makes it even more odd and concerning. Was it a new build 20 years ago? Or a rehab?

What’s on the exterior of the house? Any other potential settlement issues like doors or windows sticking?

@Daniel Dollar if your cash flow accounts for repairs, maintenance, capex, etc. it sounds like $200-300/mo is a good rental. Especially considering what alternatives you have (or don’t have) for that money if you sell.

Re-run your numbers and include yearly (or whatever) trimming of the tree, a maintenance contract for the pool, and split a new heater over 5 years. Are you still making money?

@Dana Tenebruso what class neighborhood is this? A/B, you should be expecting good (600+) credit scores. When you get into C neighborhoods, the credit checks may need to be a bit more flexible.

@Justin Lieber I truly believe this is location specific. Taxes vary widely, as does a host of other things. You need to run the numbers for your area/neighborhood and figure out what makes sense for you.

I know I can make money in my area at 0.8%. I’d imagine, someone investing in NYC is looking more at 1.5%. NJ or CA with high taxes and additional tenant-friendly laws might even be more (or less, I don’t know!)

The 1% rule is really a guideline - but you need to figure out what makes sense for you. But it’s a real quick way to figure out - if a property is at 0.5%, I’m probably just going to skip it. If it looks like 1.8%, I’m certainly going to dig more into it!

I’d agree. The bank really isn’t all that interested In the story or your background, it’s all numbers.

For your first meeting, if you have all your income and expenses, as well as savings - that will get them what they need for a pre-approval. Once underwriting starts, they will ask for all the documents to back up what you told them.

No real need to ‘sell’ them on anything like you might expect to do for a private investor. The bank will approve or decline you based on some very simple formulas.

Rates are important, but the process for underwriting and closing your loan will either drive you insane or be a good experience.

While I have not used Quicken Loans myself, the stories I’ve heard will keep me away. Highly recommend a bank and a broker who can work with you on the underwriting process.

@Nicolas Sanhueza one of my Philly properties had a reasonably new oil boiler, so it didn’t really make sense to replace it. The tenants paid for all utilities, including heat, but I kept control of the oil fillings.

I set up a payment schedule with the tenants. $250 for the cold months, going down to $100 for the shoulder months, and $0 for warmer months. They’d have a consistent payment, and then at the end of the heating season we’d even up. I’d give them copies of all the oil bills and what they paid and usually I set it up so I’d owe them a bit of money back. In the end, they were paying for their own usage, but didn’t have to stomach the $600 fill charge as it was only filled 2 or 3x over the season.

Lastly, I additionally gave them a $250 discount off the heating as oil is typically more expensive than gas. I don’t know if this was really necessary, but it was worth it to me to not get into arguments about the cost of gas vs oil.

And though you didn’t ask, I used Oil Patch for service and deliveries. Highly recommended.

@Maria Frant in NJ, it’s customary to have a lawyer close on all properties. (Maybe it’s a requirement, I don’t know). But for the $600-800 that a lawyer will charge to review the contract and handle things like title search, survey, etc, it’s probably worthwhile.

Here in PA, that’s all done by title companies in most cases - I would worry about diverging from ‘normal’ unless you’re experienced enough to know what you need.

Oh - and don’t forget an inspection!!

@John Lee that's the basic way I have my rentals set up. I have the mortgages under my name (for cost reasons), and have the LLC managing the properties.

It's worked well for me so far, but I don't pretend that the LLC is providing any real asset protection. Considering I'm the one managing the properties, if whatever happens, I realize I'm the one being sued. For that case, I have landlord insurance plus umbrella insurance. And I keep my properties in good repair to alleviate most of the risk of getting sued in the first place.

@Ellis Dudley it depends on your location and goals. I personally would never not collect a security deposit.

But I understand in certain areas like Chicago and others, the laws are such that make security deposits less worthwhile from the landlord perspective. So instead a move-in fee covers the cost of ‘average’ damage to the unit.

Of course, unless your state/city laws dictate otherwise, you could do a move-in fee PLUS security deposit. Unless that makes you uncompetitive in the market. I understand in NYC, apartment buildings often do both.