All Forum Posts by: Brendan O'Brien

Hi Greg. You can and should pursue sub-metering. I wrote several BP blog posts on the subject. Puts the onus of utility costs on the tenants. Bad news is you will have to implement at time of new leases.

A tenant is moving out. She had the apartment steam cleaned and now there is a strong cat smell. She insists it is from a previous tenant and I have never noticed a cat there during her tenancy.

First question: is this plausible? Second question: short of replacing the carpets, what can I do about this cat smell?

You can technically be making money with a $100 per month negative cash flow. The thing is, part of your cash is going to a mortgage, part of each mortgage payment is principal and part is interest. The principal part is not an expense, it's a transfer from one asset account to another.

Now obviously a $100 per month negative cash flow is still bad. But let's suppose you have $6,000 increased equity (assuming stable prices) at the end of the year. Guess what - you were profitable. (And if you don't believe it now, you will when you file your taxes.)

Don't cut off his electricity. I would also recommend talking to a local RE lawyer before you begin the eviction process, if you haven't done it before. Seriously, stopping utilities is a major no-no.

No freshmen, ironclad lease, co-signers and very good background checking. I expect the college population to jump for the next few years - there's going to be buckets of government money for higher ed.

Kellen, I answered this in the other place where you posted it (new investors?) - check out my response.

Wouldn't it be the same as any other property - based on the prevailing cap rate? Also, you might have trouble beating your current rates, commercial loans are usually at higher rates than residential 4 and under.

Kellen, you have a lot of reading and learning to do! But here are five rules to get you started:

1) Buy in a growing area - even if it is not close to home.
2) Make sure you have a good cash reserve after buying the property. You need it for emergencies.
3) Look for a property you can "grow" - maybe by adding rooms or even apartments - any way to add value.
4) If you will be your own property manager, learn how to screen and manage tenants.
5) Use a qualified real estate lawyer who practices in the area where you buy.
3)

Yes, of course you must hold some cash back. How much? Well, I would keep six months rent in my pocket. That is money that can be used for major repairs or to keep paying the mortgage if you can't find a tenant.

Generally, six months rent for a property is going to be about 6% of the purchase price, say $12,000 for a $200,000 property. That is plenty to deal with almost any situation.

Regardless of what you do - you need to keep some cash back. You might buy that property and then find you need a new furnace two months later - or you have trouble finding a tenant - or...