All Forum Posts by: Nancy L.

@Bobby WeaverThat's awesome! Thanks for sharing! It's on my bucket list of things to try. I'd have a hard time turning things over to a property manager, they won't watch every penny and take as much care with upkeep and tenants like I do. But it's probably easier if you set things up that way in the first place. 

Good luck!

@Elena JobsonIt does sound like the flipper might have cut corners and I think some of the advice above is good for handling it. It's promising that he is going to discuss with you. Just another perspective, I work for a developer that does their rehabs with integrity, and specifically with the goal of holding onto properties long term and minimizing maintenance costs. Even so, when new tenants move into a brand new rehab, there are often bugs that get worked out in the first few months as they test all the new systems and find any problems. We do have to spend some time going back to the contractors and warranty companies for appliances etc. 

So at least some of this is normal and shouldn't make you feel like you got a bad deal. You may want to get some analysis from a good contractor or handyman who will look things over and advise for free (and not charge $65 per visit) and go from there. The upshot is, you'll learn A LOT about how to do things RIGHT for your future investments! 

If you can get it to a condition where you're comfortable, and the next buyer will get what they expect, in a rising market you will hopefully come out okay. Good luck!

@Crystal DundasElectric heat is definitely expensive and an issue with retaining renters. I have it in a house that's well insulated and it's been high for all tenants, even those who were careful with their heat. I would get prices for a gas heater and for a heat pump (you can also check out mini-split systems, which have the bonus of providing cooling, but since you have ducts already the other options may make more sense.)

You can absolutely have one unit electric the other gas, you just can't have one gas heater serve both units and bill to one tenant.

Another option which I've been using for my tenants while I procrastinate on selecting a from the choices above, is offer to raise their rent $25/mnth and give them $100 off per month Dec, Jan, and Feb. Or give them a bit more than that off and eat the difference.

Personally I've been subsidizing the heat costs a bit with a winter rent discount, my fault for procrastinating. Combine with putting up window plastic for them, door snakes or weather stripping, maybe a programmable thermostat, and the education tactics. Also, an easy oversight, sometimes the top part of the windows slip down so that they don't latch properly, a lot of heat can be lost there without realizing it.

@Bobby WeaverI've been curious forever about living somewhere where the dollar stretches farther... How is that working for you?

On you link to your #s, can't see how you're getting from your gross rent to your NOI? 50% rule? On property manager contracts, look out for re-rent and other fees in addition to the base percentage. Also for verifying rent prices, I usually look on CL or Zillow etc.

@Clifford YunDoes your space have a separate entrance from the rest of the house? If you're renting rooms in your house don't know if you need a rental license or what. The other question is if you're renting rooms individually or all to the same person. You may be operating a boarding or rooming house from the city's perspective. But lots of ppl in Philly rent rooms in their house without this official designation, so not too sure how it works.

As for leases, try googling "PA Standard Residential Lease". That what many of us use. Good luck!

@Brandon Hall Congrats on all your successes! What stuck with me from everything in your post was the term "blue ocean strategy," which I had never heard but like a lot. :)

You might have already have done this, but I would start with casual conversation and see where it leads. People find real estate interesting in general and your enthusiasm can be contagious. Listening to their needs and interests can help you find what's mutually beneficial. 

As for compensation, one structure could be a silent partnership where you each get some percentage of the profits. This takes some pressure off you around the risk, but especially if you're dealing with friends and family, the downside is whatever conflicts could arise if you run into problems (at which point I'd imagine a silent partner might have a lot more to say). 

A loan is another possibility, which puts more of the risk on your shoulders. Assuming you personally guarantee, you'd have to go into your pocket to repay on schedule if something goes off plan with the investment. However costs to repay a loan should be less than what you would offer in a split with a partner who shares your risk level. As for how much, if the potential lender has other investments (CD's, stocks, etc), I would try adding 2+ points of interest to what they're getting on best of those, and maybe a bonus or stake in the profits if/when you sell the property.

I've heard of instances where a buyer negotiated with lien holders to pay off a reduced amount of the debts upon settlement. The cases I've heard of were in dealing with local municipalities for real estate taxes, water bills, violations etc... Is this possible with banks? If @Account Closedcould pay $10K to the HOA and some reduced amount to the mortgage company, maybe that would be a good deal.

@Account ClosedThanks! Your conversation is interesting to follow... The purpose of my post was more to make sure the original poster considered all his expenses, since I have similar multi-families. No metric is a good one if computed with wrong numbers. 

I asked around a little today too to clarify some points. I'm hearing that yes ongoing CapEx and depreciation are not OpEx so aren't included in Operating Income, therefore not in Cap Rate, however maybe some banks require a line for Reserves sometimes. I'm gathering from the above initial CapEx are included in the divisor as "made ready."

I'm not using Cap Rate as a method to value properties, just for comparing them to each other for my own purposes in a way that's independent of my financing structures.

@Chase London I think if you're planning to live there and you understand the neighborhoods, and can get help with repairs, you have some advantages. I'd go through and start to list everything that you need to make it work: How is the roof? Electric? Plumbing? HVAC? Bring ppl through and list out what the materials cost to get it fixed up and get an idea of how much time is needed on each job. Really understand what you're getting into before you get into it. 

Then if you live there for a while and turn it into a rental someday, you'll know how to rent it. Your repair work could give you some good equity in the house to sell or borrow against for your next purchase. Good luck!