All Forum Posts by: Wesley W.

I would check your competition in the market and see what requirements they have and if yours are congruent - things like pet fee (do NOT call it a deposit ) and pet rent, application fee, etc.

When I started, a charged an application fee, thinking it made good business sense, but after 35 showings and not a single application,  I discovered that other landlords serving my demographic were not charging.  Once I removed that requirement,  I rented it in short order.

GOOD LUCK!

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My lease stipulates boats and other vehicles may not stored on the premises.   I suppose if I had the space and desire, I would draw up a lease addendum,  outlining the conditions by which they could store the vehicle and what the compensation would be for providing that service.

Remember,  you are running a business and this request comes with some risk, time, and hassle.  You should charge for this.  Your property is a commodity. 

Good luck!

Not to be cynical, just prepare for her not to follow through.  I learned pretty quickly not to pay much attention to what a tenant says, but what they actually do.

@Nicole H.

Net cash flow with both units rented is, conservatively, $250 positive monthly. It might be a challenge using a PM for this property (we self manage at home) but we could do it and probably would (built into pro forma) and in our long term plans of moving south we would be turning our entire portfolio over to a PM or selling it, which is also an exit strategy here.

The tenant base would be non-traditional graduate students, or white collar commuters to two nearby MSAs (the property is a tenth of a mile from the Interstate).

@James W.

I did not include that.  However, if we sell (see above) there would be recapture.  If we held, it would be an extra tax shield as you mentioned.  I also neglected to account for the tax deductions on 50% of the expenses as well.

So, the purchase is looking better given those factors, but I guess what I am attempting to answer myself (with your help!) is it good enough to be worth it given our mid and long term plans?

Thanks for your continued feedback!

Hello all,

I've got a bit of a financial puzzle I'd like some input on.

My wife is going away to school for 3 years, so she will need housing during that time. As budding buy and hold investors, we thought this might be a great opportunity to add to our portfolio and get some tax deductions to boot. I'm distilling this problem down to two choices based on actual numbers I have gleaned. My pro forma is pretty conservative, so I'm pretty sure we can hit the mark.

I did not account for rental increases in either scenario, as I assumed they would be at the same rate given both options would occur in the same market. I used 10% management, 10% repairs, 3.5% cap ex, 10% vacancy. I also did not add in any ancillary expenses (e.g. Cable) since they would be the same in either scenario. The property is not in a market that will appreciate much over this time period. I tried to make this as “apples to apples” as possible.

OPTION A: Wife rents an apartment

Rent & utilities: $800/mo.

Housing expenses after 3 years: $28,800

NET EXPENSES AFTER 3 YEARS: $28,800

OPTION B: Buy duplex, wife lives in one side

NOE when renting out one side: $465/mo.

Housing expenses after 3 years: $16750

Initial down payment for purchase: $19600 (including $10k in closing costs/repairs)

GROSS EXPENSES AFTER 3 YEARS: $36,350

Down Payment Equity after 3 years: $9600

Debt Service Loan Paydown: $4650

TOTAL EQUITY AFTER 3 YEARS: $14,250

NET EXPENSES AFTER 3 YEARS: $22,100

Difference between Options A & B: $6700, or about $186/month.

So, understanding that “anything can happen” in landlording, is the $6700 savings worth the extra responsibility and PITA factor?

Your thoughts and feedback graciously appreciated!

@Carl Fordyce Yes, but it might be a logistical challenge for you. There is a very strong and active REIA in the area (Action Investors Network) of which I am a member. Through the group I have met many tradesmen (also members) that I feel comfortable using for those services. They are vetted obtusely through the group (because their reputation is established by experiences other members have with them), and I've come to know them personally after attending months of meetings with them.

Since RE investing is a big commitment, I might suggest planning a local trip to our market around one of the monthly meetings and get yourself connected a bit.  Real estate is a relationship business, and it's really hard to get a feel for someone via email or phone that you can trust with your investment.

Your utility provider may have such a service, even complimentary.

@Carl Fordyce Honestly, no.  Most of the people I know self manage.  Even those with large portfolios.  If there is a reputable company in the market I would be interested in hearing some testimonials.

Good luck!

Just casually ask the "PM" when you call them who the owner of the property is.  If the tenant is running some funny business with a friend, they most likely won't be prepared with this information. 

You, on the other hand,  can find this info yourself through the municipal tax rolls before making the call.