All Forum Posts by: Pam R.

All - thanks for the feedback. It is much appreciated. We killed the deal. If any good came out of this, it is that the sellers updated their MLS posting to reflect these owner-paid bills (as they originally claimed tenants paid everything - this info didn't come out until I dug through their leases). Due diligence really pays off.

@Peter Lohmann - My Columbus units run $20/month for water. I did some research, and the Delaware minimum for trash/sewer/water is $45 month. The $40-$50k rentals you mention are exactly the ones I'm not interested in. I lived in Columbus for 15 years, and have a duplex on North Campus. If I could find those kind of deals on north campus, I'd be all over them! But we live in Delaware, and are trying to focus our efforts there. It's a great city with few non-complex rentals, and a growing population due to the tons of jobs nearby. As for cap/ex, I included a single bucket of 15% for vacancies/repairs/capex.

@John Horner - You are right as far as higher costs. It's Delaware - different community than Columbus. 

@Stan Hill - I agree duplexes don't appreciate like SFHs. There would be moderate appreciation in Delaware. It's practically a bedroom community of Columbus - everyone drives 20 minutes to the big city for big city jobs, and then returns to small-town life.

@Account Closed - To respond to your portfolio question, we own a couple of duplexes now, are looking to add only a couple more. That is as far as i want my real estate empire to extend. And good point if something happened to the hubby - frankly, I would probably sell our RE and get out of the business. It's setup to be his business, not mine.

I'll keep on looking for the next deal.

Thanks.

Andy - I appreciate the feedback and risk/reward analysis. I'm running more numbers based upon your insights.

I don't agree with you on the PM piece of things, although I think I know where you're coming from. In our business model, the hubby is the PM so we don't have to pay someone to do that. Yes, his time is worth something - in the case of an investment property, it's worth the cash flow we obtain by not hiring a PM, and the ongoing equity we gain in a long-term investment. So I don't count the 10% as an expense.

Corey - as far as people paying their own water in Delaware, that is not unusual. All of my tenants pay their own water, with their own meters. The market rent is $625-$700 +utilities in this area, and these apartments have both a fireplace and a garage, so I can get the higher end of that.

Steve - I'll try to make the next meetup! Thanks for the kind words - yes, I'm all about separate metering. I couldn't do it any other way. I don't like paying someone's utilities.

We've been looking for another duplex for a year, and haven't found one that works for us. We finally found one, are in contract, and received some new info today that has me ready to pull the plug. Would like some advice.

Location: Delaware, OH (north of Columbus - lots of commuters to the big city for work). As far as apartments go, nearly everything is a complex - limited availability of duplexes around the city. Between 2000-2012, the population grew by 43%.

Purchase price: 129,000

Rent: 675 + 650 (1325/month)

Down payment: 32,250

Bank financing: 96,750 @4.375

Payment: 483.06

Taxes: 216/month

Insurance: 66/month

Property management: 0 (we self-manage)

Vacancy/Repairs (15%): 198/month

Utilities: $170/month! This is our new information. The MLS ad said tenants pay utilities, it turns out that the landlord pays water, and we just obtained this figure a few minutes ago. This is a huge hit to my numbers.

Cashflow: $164 (this is the number I always focus on)

50% rule: $75/door/month 

2% rule: 1%

I would get the water metered out separately for ~$500. I'd probably drop their rents by $25/each, and make them pay the water (I'd still be ahead $120/month). I'd also do it on a month-to-month, and re-add the $25 next summer. 

Losing the water bill and dropping the rent a bit puts me at:

Cashflow: $292

50% rule: $65/month

2% rule: .94%

The property is in fantastic shape - we'd need no immediate work on it. Tenants mow the grass. I'd call it a B or B- neighborhood. The rents are right in the middle of market rate. This would be an easy place to keep rented, and maintain (I included repair costs/capex at 10%, but my husband also does all the maintenance/repairs, short of new roofs/furnaces)

I can probably talk the seller down a few thousand based on this new info - maybe $125k. 

Advice appreciated!

Thanks!

Pam

Alexis, we had a similar situation. Guy paid for 8 months, no problems, one month doesn't pay, says he didn't get his Social Security check as scheduled. We told him he had a 3-day grace period per the lease, to call and let us know what was going on, he never called. We called once more and left a message.

At 7 days late, we posted a pay or quit notice. Boy, did he call then! He really did not grasp that we would indeed evict him and his children for non-payment. His parents paid us the next day. He hasn't been late since.

So my advice is to communicate, but firmly. They need to find the money in X days, or they need to move. They will be notified of the need to move via the pay or quit notice.

In 4 years we've had 3 move-outs - we've had to deduct final water bills from the deposit, but have not had to deduct for damages. Everyone has been paid up on rent, already paid for any repairs, and left their place broom clean or better. So we've been fortunate.

On one of them we had the same situation as @Dawn Anastasi - thought we had received a final utility bill, but it wasn't REALLY the final bill, and that cost us $50.

@Marcia Maynard - can you share what is in your move-out instruction package? I've been wanting to put one of those together.

I work in a big office, and only a couple of people know I have rentals. I just prefer not to share that information. From a business standpoint, the company wouldn't care, as moonlighting isn't against any rules.

Ironically, I've had a vegetable business on the side in the past, and all my bosses/colleagues knew about that and thought it was cool. I even shared a couple of local newspaper articles about that business. But I keep the real estate activities under wraps.

@Steve Baldwin - I too would be interested. I agree with Jeremy - there are places where we can just reserve a back room at no fee. We do that at Yogi's on Hard Road for work happy hours a few times a year. We easily get 30-40 people in that space.

Hi Marc. I know nothing about Bay area community gardens, but in this part of the country they are rented by the individual plot (like 8x8 or 12x20). I assume you're looking to lease it out to someone who would run a community garden, not rent beds yourself, right? Never really thought of that idea as a moneymaker - pretty clever. In my world, plots at a community garden are $20/year, and there are plenty to be had.

Google San Francisco community gardens, and start making some calls. Looks like the city itself has a Community Gardening initiative - maybe they will lease it.

Another angle on your idea - rent it to an urban farmer. You don't want 25 hobbyists coming there if you can have 1 guy who wants to grow organic veggies to sell at the local farmer's market for $15/lb. That's your target market. Or better yet - cut flowers. God, a $20 bag of sunflower seeds could get someone $20k in cutflowers at the market. And sunflowers are weeds. I dare you to throw seeds on the ground and have them not grow.

You'll need a water source for either of those options.

What kind of money were you hoping to get annually?

Could you build garages and rent them out? Are you allowed to build anything there?

I agree with @Account Closed - there are tenants who don't like complexes, even with the pool and laundry room. There are some that do. Duplexes and SFHs appeal to a different target market than the complexes. I personally don't worry about complexes pulling renters from me.

In an urban area, it seems to me that 1/2 mile to 1 mile away is practically a world away.

@George P. - The bank didn't send me a gift, but the mortgage broker gave me a bottle of wine. It's just a nice business gesture.

@Roman Pak - I completely understand your approach. It's not about making friends with the tenants, it's about figuring out if you even want them as tenants. It's the start of the screening process, but they are already in your property. A little ice breaker gift, they get a little less apprehensive about the new owners, they talk a bit more than they were planning to, and they share how their hours were cut at work, or their girlfriend who lives there isn't the same girlfriend who is on the lease, or their son brings his dog when he visits on weekends, or their mom lives two doors down, so this apartment is really convenient for helping her out. All clues that can help you decide next steps with the tenant - do you even want to offer them a new lease?

Is the gift necessary? No, but if $20 gets you to your conclusions faster, then it's well spent.