All Forum Posts by: Paul Hormann

Great points, @Jeff Bridges thanks!  So my only remaining question is can one tenant legally terminate a lease for all the other tenants on the lease, or must they all give consent?  My lease says they're jointly and severally liable for rent payment, but doesn't specify about notice to terminate.

I have a rental with a couple on a month-to-month lease.  The couple broke up and the woman moved out and now she wants to terminate the lease, but the guy wants to stay. Can one tenant terminate the lease for both tenants?  And would I have to return the security deposit and get a new one from the remaining tenant?  The tenant who wants to remain may not qualify on his own...

Thanks @Michael Currie @Account Closed, good advice.  I'll just stick to the lease terms, and if they both agree to remove Jane from the lease, Joe will have to qualify on his own and provide a new security deposit beforehand.  Otherwise, she stays on so there are more people financially liable.

One of my rental apartments is leased to "Jane" and "Joe" who are dating.  Joe has 2 kids that live with them.  This month I didn't receive their rent by the due date and started getting calls from both Jane and Joe explaining how the other one was crazy.  Jane moved her things out and Joe says he's waiting to pay me once he gets her part of the rent.  This part I believe I'm handling well, as I told them that they are both on the lease and both responsible for the entire rent or an eviction will take place.  Here's the part I'm struggling with: Joe wants to change the locks so Jane can't get in anymore.  They both say she's moved out, but is still on the lease so is entitled to access to the apartment, regardless if she's paying any portion of the rent or not.  Thoughts?

Also, I stupidly allowed language in the lease that said that Jane paid the security deposit alone.

I opened up a separate savings account for each of my tenants.  They have their own account number to deposit into so I know who paid what, then I can just go on my phone and transfer everything into my operating account.  I also provide deposit only ATM cards so they have no excuses for late payments.

Hi @Jacob Plocinski IRR is the big one that most investors will use. It differs from cash on cash return by looking at your total return over time, not just what you can expect in one year (yes, it's a bit confusing because IRR does provide an annual return number). I like to think of it like this: CoC return is like having a salary. IRR is like having a salary and contributing to a savings account. After say 5 years, the overall amount of money you made in each scenario will be different, because IRR takes into account all the ways you made money.

I like to use IRR to see what kind of upside I can look forward to over time. If I'm looking at a stagnant market and a short hold period, my IRR may not be much higher than my CoC, or possibly even lower if values rise slower than inflation. But, if I'm considering an emerging market and can project that values/rents will likely go up quite a bit, my IRR can become much higher than my initial CoC.

If your plan is to buy and hold basically forever, you can still benefit from doing an IRR calculation to see how the deal stacks up. I would project your hold period out over 10 years and see what your overall return would be if you were to sell it then. Compare that to other deals in other areas and you can get some valuable info. Hope this helps!

@Nick Patterson @Brock Y. I'm looking west of Chicago, IL, but this could apply to any non-hot market. 

I have the opportunity to buy a large portfolio of off-market 4 plexes in a far chicago suburb in an A class neighborhood. Buildings are <10 years old and, with conservative numbers, would provide a 9-9.5% cap rate. I'm interested in syndicating this deal, which could give investors 12-14% CoC returns and myself much higher with an equity bump, but there's really no value add opportunity and the market is stagnant. I have a property manager I trust. What are your thoughts on this? Is this something investors would be interested in? I don't have it under contract yet, so can't provide more details, but I'm interested in thoughts on the strategy. Thanks!

@David Cole Have you run the numbers if you used leverage?  See what the returns look like if you buy 4 condos with 25% down each.  Try some different scenarios such as 30, 20, and 15 year loans, but the rates are so low right now that it's easy to make much higher returns using loans than with cash if the cap rate is high enough.  Of course, this also depends on how close to retirement you are...

@Andrew Bjorklund Make sure you get an assignment of lease form signed at closing, so in case things go bad you can prove in court that you have the authority to evict them under their current lease.