All Forum Posts by: Nick K.

So valid point...but there is still the cost of having someone run it if I want to automate it. Eventually I would like not have to phsycially touch stuff anymore, and have all of it hired out....at 10-20% less rents...thatd be impossible....except maybe without a mortgage? Or at least less of a mortgage?

I am right on, or a little less than the other newly renovated ones around....but my first tenant...which was there when I bought it....was paying $400 for rent, vs the $475 I am getting now. And she still left in the middle of the night due to the neighborhood.

Maybe on the next turnover I can be more selective at like $425 vs $475? I still think the neighborhood might deter quality tenants...

I could float the property indefinitely because I do make enough to cover it...but at what point does it become a not so great investment if I continue to float it...one of the beauties of real estate is cash flow right?

Im also afraid if I lower the rent itll discount the fact of how nice they are compared to who I draw in.

Thanks for the responses so far too by the way

I guess at this point I am not sure how to get quality tenants in place. The type of tenants I want, do not want to live in that area. 

If I market it for rent, even with putting something about no felonies, I get 10-20+ calls/messages the first week asking if a felony is ok.

This leads me to think maybe its not my forte and where my time/energy should be spent...but then we lead back to itll put me in the red...how long do I stay in the red?

I just have the one unit. I believe it is partially due to the area. For example right now I have a tenant that pays on time every month, and in full. Out of the blue she tells me she wants to break lease because she no longer feels safe there due to the neighborhood...before her I had a guy that got a great job here. Paid up in full the first month plus deposit, moved furniture in, etc, etc, etc...then 3 days before rent was due tells me hes moving to Hawaii....it feels like one after the other.

In 1.5 years Ive had...5 tenants I think? That includes 2.5 months of zero vacancy.

I do think a lot of the issue might be management (myself)....but Ive hired hundreds of quality people...found out its a bit different for a tenant (haha).....

So what do I do? I can't scale out overnight...do I go into the red for someone else to manage it...if i am in the red it takes out of my personal savings which will make it harder to scale out....or do I sell it and try to BRRRR a couple of properties to scale out?

I am going to keep this as short as possible because I feel I could write a book at this point.

I bought a duplex for $60k 1.5 years ago (my first and only property so far). It was ripped down to the studs and remodeled. Brand new everything. The property is in a weird spot, a block north is solid C neighborhood, two blocks south is solid D to D-.

The property has been nothing but issues for me...between tenants being tenants, crappy potential tenants wanting to view, I cant even count the amount of time wasted. Yes partially my fault in the beginning, I was a little anxious to get someone in place and probably should have held out longer. Also the guy who remodeled warrantied nothing and used the cheapest stuff from online he could find, so I have had a heater go out that I had to track down a part online because no one carries them around here, and now I have an evap coil out, and have to replace the entire unit on the other side. Its a write off though right? :)

Lets talk about finances now for a better picture.... I took at loan on $45k of the $60k currently my mortgage/insurance is $425. The unit is full, and I make $475/side ($950 total).

I am at the point of going with two options...trying to hire out the work I find stressful, or selling the property and taking the cash and going after a BRRRR strategy. My goal is for my wife and I to retire in the next 8-10 years.

On the Property Management side I am having a hard time justifying numbers on it...how do you guys make money while paying this? 

Lets say I take $100/side pure cashflow. Thats $2400/year at full occupancy. That leaves $3900, or 34% for capex, repair, vac, and prop mgt. 34% should be plenty right?

Around here, property management fees are 1 full months rent to place a tenant, then 10% per month. So if 1 tenant is needed on each side per year, which I feel might be realistic for this property, thats $950 plus $1140, so $2090 a year to run this property.

$2090 in prop mgt fees drops the $3900 to $1810. Thats without me getting a lawn service to take that off my plate, currently I do all the yardwork on the property. Thats probably another $50-$100, though I havent looked into it for sure. At $50/mo that drops the $1210/a month for capex, repairs, and vacancy....Ive spent that on repairs alone in the last 1.5 years...not including vac, capex, etc.

I feel like if I go someone else managing it I will be in the Red....am I missing something here?? I do know I probably bought either high or over-leveraged...but the ROI is PLENTY with me managing it.

My other thought is the market is still over-priced, I could sell it and move towards a single family house I can BRRRR to grow my portfolio. This was my plan for the next property I buy anyways..having that extra cash from selling this could aid it.

I am in the Wichita, KS area if that helps at all.

Looking for any and all advice here.....

Thanks!

Hey Sam, welcome to BP.

While doing my research and prepping to purchase my first property. Came across this for Kansas (I'm looking in the Wichita area).

This is written by the Housing & Credit Counseling, INC out of Topeka. Some good general information for Kansas specific.

Hope this helps someone.

Kansas Tenant Handbook

:)

-Nick

I am considering borrowing as an option. I could just save for a down payment, but I really want to get started as soon as possible with REI.

I know the vehicle can be slow moving, so I want to get my feet wet as soon as I can. Regardless I will be saving up and paying down debt.

@Mark S.

Thanks for the response. I do still work for the employer. One of my goals with real estate is to be financially free enough to quit my job to REI full time.

I might wait and re-explore a self IRA for REI at that time.

Thanks,

-Nick

Hey Patsy,

Sorry for not being as clear as I should have. You kind of answered my question though. 

I more meant to ask, how do items like repairs work from an SDIRA on real estate.

Do you just withdraw like a normal account, submit estimates, how does that work?

Also, how long does the cashflow have to go back into the IRA? Is it until the house is free and clear?

Borrowing from my 401k and paying back is definitely an option, however this creates a monthly payment which kind of hits against what I am hoping to do with extra cash (reduce debt). 

I do plan on re-investing any cashflow from my first rental, but I really am trying to not add an additional payment each month to my current bills, even if it's making 4% back on itself.