All Forum Posts by: Nik Corbaxhi

@Kenneth McKeown, 

1. look into her job and whether there is job stability (how long she has been there..etc). 

2. Why is she moving from her current place? (this could be a red flag if there is no explanation). 

3. Ask to speak to 2 prior landlords and make sure that when you talk to the landlords, you are actually speaking to the landlord and not some relative of the potential tenant, so that they can tell you what you want to hear. 

4. Also, somewhat odd that the security deposit is $1500 on $925/month rent. You seem to have a lot of interest in this place. Stick to the rules, 2 months worth of security deposit ($1850). Don't sell yourself short in case things go south. 

5. I wonder how the utilities work with ITINs. Do the utility companies accept them (electric, gas, cable). How did she do in the previous places. that is another lead for you to see if the electric company, gas, or cable wont connect service for that ITIN (if ITIN is accepted). 

I hope this helps!

@Courtney Cleveland, congrats on your first step to becoming a landlord! as you evaluate your options, there are a couple of things that you can do to justify your decision and to avoid the major mistakes and make sure the condo is a worthy investment. While you are asking for questions to your agent, the agent will not be able to tell you whether this is a good investment for you or not, as you are the one to make such determination. Keep in mind that the agent's job is to sell the unit in order to make their commission. Below are some areas you need to consider:

1. ask yourself whether you are purchasing this condo to hold and buy, or just to hold for a short period of time and then sell for a profit. If short period of time, you need to look at the market trends whether your property will be increasing in value in the near future and whether this is worth your time. Generally, Condos do not appreciate as quickly as SFH.

2. If you are purchasing in the hopes to buy and hold/rent, make sure you check that the condo rules do not prevent you from renting the unit. You don't want to complete the transaction and afterwards find out that the unit is owner-occupied only or the rental cap has been reached. That will force you to sell, and potentially at a loss. While most condos dont share their Rules with just anyone, you can ask your agent inquire whether there are any limitations on renting the unit. If there are, then this is not the condo for you.

3. work with a loan/mortgage agent to make sure you have a clear idea of how much your PITI + Condo association costs will be and compare that number with the potential rent that you will be collecting. This should allow you to calculate your return and whether this will be worth your investment. When calculating your return, make sure you account for vacancy rates + maintenance costs to the unit. My rule of thumb is 10-15% of your your monthly rent should go to that bucket, however everyone has their own. However you decide to do it, just be realistic about it. For example, if you anticipate that for 1 month of the year the unit will be vacant, subtract the amount of rent for that month from your income, before you calculate your cash flow. do the same for your maintenance cost, so you get an idea of what your true Cash Flow would look like.

4. Just like you inquire for the rental limitations, ask if there are any special assessments coming up for the condo. If the condo is preparing to change the roof, the cost of it would be distributed equally to the condo owners, which could mean thousands of dollars. While it might not affect your decision, it is good for you to be informed and anticipate. 

5. Have your real estate agent run comparable units that are rented in the complex. While you think you can rent the unit for a certain amount, the rental amount is dictated by the market and similar units that are listed for rent near yours. your calculations should be performed with a realistic monthly rent that you know you will not have a hard time renting your unit. 

I hope this helps for you. I am sure there are other things that you could be asking about, but these are the main things that you can ask to give you a feel for whether this is worth pursuing. best of luck.

@PJ Kolnik, it does happen sometimes, and it is unfortunate that they all come at the same time. However, look at it this way, your water heaters most likely dont need replacing between 7-10 years, so that is said and done. 

Refrigerator, while you cannot predict, the fact that you bought it new, you would expect it to last a while. 

The roofing issue seems like something that needed to be done, it was just put on the back burner. 

My rule of thumb is to always account for 3-6 months of PITI in a savings account as an emergency fund. (this is for SFH).

No regrets and move forward, hopefully this was the end of it! 

@Shane Braunworth, you have gotten some very good advice here from everyone. renting to college students is pretty risky, therefore you should not settle for anything other than GREAT returns. 

I do own SFH near college town and rent to students. I don't rent by room (to avoid strangers living together), but rent the house as a whole, so groups of students who know each other. You mentioned its a not a party college. No such thing in my eyes. Statistically when comparing to other colleges, maybe, but there is always the wild side of every college, you just try to avoid it. To put things in perspective for you, my Cash on Cash return is averaging 25% between the properties, that is using a similar formula as @Tim Herman used above. You always have to account for vacancies and stuff breaking all of the time. Keep in mind that most of these kids have never lived by themselves before, so automatically there is a level of negligence that comes along with them as tenants.

Jumping at your numbers, definitely not worth your investment. one thing to keep in mind is that Students are very high risk investment, which should be yielding high returns. Your insurance alone will jump almost double if you rent to students, which will eat away from your profits (if there are any at your numbers). 

you are no where close to the 1% rule. saving $200 per month for maintenance is definitely not enough. Just your lawn care maintenance, snow removal will most likely cost you about $200/month, let alone putting money aside for a big expense that comes your way. (Just replaced the heating boiler in one of the houses and that was an $8500 expense). at your $200/month expected maintenance bucket, you would need almost 4 years of savings to be able to cover a similar expense.  

Definitely not trying to ruin this for you, but I would start looking elsewhere and apply the 1% rule, at the very least. if you decide to go with student rentals, make sure you make the parents co-sign. very hard to screen students with no credit and this will most likely be the first time living on their own. 

@Olvin Ramirez, First of, congratulations on your achievement of being 23, debt free, with 80k in liquid cash. 

The best course I can advise you to take is the course of life. I would recommend for you to start network and build relationships with a good real estate agent to discuss property investment opportunities in your area where other people have invested in and they are successful. Successful being, people getting a good rate of return on their investments (that being single family home, multi-family, flipping..etc).  

To me, buying the first property was always the hardest, mainly because 1) I didn't know what to expect and how to deal with the pains that come along with being a property owner/landlord, and 2) fear of failure (completely losing my investment). 

Number 1 comes with time, and you will make mistakes no doubt, but you learn from your failures and you become very knowledgeable very quickly. 

Number 2 - you just have to live with it and comfort yourself to say you tried. If you truly want to do real estate investing but not sure how you would do, only one way to find out. I always went with the mindset that if I broke even or even lost my initial up front investment, I would be OK with it because at least I tried.  I am not recommending to just go in without doing your homework, but being super cautious and not willing to take ANY risk, will not work in this scenario. 

Do your homework on what type of investment strategy you want to go with, (buy and hold, flipping, condos, SFH...etc), then check to see that your investment will generate the returns that you expect it to.

Best of luck and don't be afraid to just go with it. You are young, debt free, and assuming you are working. I am sure your investing will pay off, but if it doesn't, there wont be a better time to fail than now. You will grow stronger and better out of it. 

I think it is lack of responsibility from the tenant. A failed message is an undelivered message and it is as good as it was never sent. Absolutely the tenant should have attempted again. ruined carpets would have been noticed at some point from the tenant and they should have tried to call. 

Also, to avoid this in the future, your contact should be updated to say Landlord should be informed via PHONE CALL (not through text messages) of any issues. 

I would not feel so bad that you are loosing this tenant then as you are probably better off with him leaving. 

@Gui Touma, seems like your relationship with the tenant is more broken than the window itself. At this point, you don't have many options. You let him go, you fix the window, you replace the tenant with someone else. Last but not least, learn from your mistakes. I'd hate to say it but it sounds like you neglected this for a while, hence found yourself in this situation. The question is, would this tenant have gone had you fixed the issue timely?

@Mack Bailey, most of the obvious has been said above, so I wont repeat. 

I am assuming that because you are looking to rent into a "College town" your primary target will be students. If that is the case, I would be advising against living under one roof with your tenants. Most students need/want the independence and don't feel the same about caring for the home as you would, you will grow frustrated with the lack of responsibility and carelessness. Also, look into your local laws and regulations as each town has different requirements as far as the number of tenants, students, non-related people living in a SFH...etc. To add to @Joe Scaparra's math above, your insurance for student housing will be closer to $125/month instead of $75, if you get a carrier to provide the insurance for you. 

Also, the 5% vacancy and 5% maintenance can also be more than that. Especially if a boiler breaks, roof leaks...etc 

Look at your cash flow and see if this makes sense for you. 

@Oneil Guntner, 4% matching on your 401k is a significant return with very low risk to you (other than knowing your vesting timeline as each company has different vesting methods). So you are pretty much getting $0.67 for every dollar that you are contributing on your 401k. There is no real estate investment that will give you that return, no doubt about it, not without a whole lot of risk exposure anyways.

As far as taking a loan against your 401k, as mentioned, the longest time would be 5 years to pay it back. This is also dependent on whether you foresee yourself in your company for 5 years or longer. If you end up leaving, I think you have to pay all the loan back within a few months. So if you decide to take a loan against your 401k, make sure it is not substantial to the point where you cannot paid it back if you were to lose your job. Also it is not technically penalty free as you have to pay interest on the loan, even though the interest is to yourself in the form of 401k investment. You can argue that the money is on your 401k, but you cannot touch it without a penalty until being vested, hence limiting your cash flow today. 

Having been in your situation, I always capitalized on 401k first (especially since mine was 4%, dollar to dollar match), and then tried to figure out ways on how to aggressively save for investment opportunities, without touching 401k account.