All Forum Posts by: Ronald Bowser

Hello everyone, I remember going to this property when it was Available back in October of last year.  I still have the email highlighting the water damage and shoddy work/deferred maintenance.  I do not disagree with the OP and comments regarding the unethical approach taken by a number of investors.  Unfortunately, it is all too common in our area and no doubt nationwide.  I only need one guess who @Jordan Sachs is referencing.  This particular property is/was not theirs.  Allentown/Lehigh Valley is an old area, most buildings are over 100 years old and were larger properties that have been converted to multis over the years.  Properly maintaining the property is key to protect your investment of course and it is not uncommon for listing pictures to not capture "issues".

My only comment is that this isn't the worst strategy in my opinion.  I typically work with B&H investors and if you are able to purchase a property, force value with increased rents because the last landlord didn't bother to keep up with market rate (or properly maintain), it can be a great strategy.  A number of investors I work with followed that strategy over the last year and factored in the turnover expenses in anticipation of increasing the rents to market rate.  

Placing tenants that can't afford the unit is a terrible strategy any way you slice it, you are setting yourself up for vacancy and hassles with evictions, turnover, re-renting, etc. and as OP implied, not putting the tenant in a good position either. Properly vetting them and verifying employment and income and all the other factors is vital, but if the rent is inline with market rate I would consider it a good strategy actually.  

With the above said, I absolutely agree that we should be bringing value to the communities we live and invest.

Hi @David L Miller, congrats on the investment, there is some good advice above regarding the lawn, AC unit, and attic space (leave it as storage if it isn't eligible as a legal bedroom).  

I would get the oil tank filled on a routine basis and then bill that back to the tenants.  If they let the tank run dry, it can cause significant damage to the heating system because the dried up oil gunks everything up for lack of a better description.  Fogel's Oil Service is in our area and can put the property on a routine fill schedule, that way the system doesn't run dry and there is incremental billing every quarter instead of one large hit over the winter months, so easier for tenants to budget accordingly.

Also, I'd recommend keeping the Water/Sewer in your name and then billing the tenant back.  Those are lien-able utilities, so if the tenant isn't paying, the water authority can place a lien on the property or at a minimum have you stuck with a large bill to avoid it.  When you receive the quarterly bill, forward a copy along to the tenant.

Storage shed I wouldn't bill separately, but build a bit into the rent for it.... too many separate expenses may overwhelm tenants, but for a SFH heating and Water/Sewer expenses are expected in our area... good luck!

I recommend LVT as well.  Paint or carpet will work, but inevitably will need to be addressed a short time down the road.  The cost per square footage is higher than carpet, but will last significantly longer.  As @Scott M. mentioned, paint will always be a problem.  It comes with higher upfront costs, but is much more durable and good for rentals... also looks great in my opinion.

Thanks for sharing @JD Martin, this is my local market and I happened to see it this morning and was sending the link to a couple buyers I have been working with.  It is definitely a challenging time for buyers, investors and owner-occupants, but pretty cool to see BP and the Lehigh Valley mentioned in the WSJ!

This is awesome!

HI Gary, I definitely agree with you that the area is booming and do not see any signs things will slow down, so I agree with your logic.  If the property cashflows after all expenses and is in good condition that it won't require major Cap Ex in the near future, it could be a good buy.  Investors have different metrics they use, maybe a certain amount of cashflow, cash on cash return, or a specific Cap Rate they target, so it all depends on what your goals are for investing.  

The spreadsheet I use factors in 10% for PM, and 5% each for vacancy and maintenance, so slightly lower than the numbers you use.  Items like Cap Ex or the need to clear a CO at purchase, we factor in directly to the offer price and what we think is fair deal.  It is a competitive market in our area with low inventory, so that of course is pushing up the price points and thus lowering the returns we would have been targeting a year ago.

I hope the above is helpful, but please feel free to message me or reply here if I can try and help with anything else.

Good luck with your investing and Happy New Year!

Congratulations @Nicole (Dunlap) Pendergrass!  I didn't even realize you were partnering with @Christian Beyer on this deal... great choice and great guy.  It is awesome to see your hard work paid off and I am happy to see you're working with @Jennifer D. and our team.  It was cool to see pics of our office here on BP and I am definitely digging the socks!  Congratulations again and I am sure you'll keep that momentum moving into the new year!

@Gregory H. is correct.  Definitely keep the water/sewer in your name and bill back the tenants accordingly.  I know you are in a different and difficult situation right now with everything, but with this tenant and going forward, it is best to bill back water/sewer.  Those utilities are lien-able and if the bills are going to the tenants, you may be unaware of missed payments that will eventually be your responsibility anyway... or even worse.

Regarding electric, gas, and any other utilities, we have the service scheduled to terminate on the day after they move in and ensure they are properly notified of who to contact and to call ahead to get it in their name.  The service will work for that first day, but if they do not transfer as expected they understand it is their responsibility soon enough.

Sorry to hear about your rough start @Charles Giovanniello.  There is always a stabilization period when you take over a building, the owner is selling it for a reason after all and sounds like you had some tough luck on top of it.  I couldn't agree more with the previous comments regarding a new PM.  Those timeframes are way too far out, repairs and vacancy.  That vacancy revenue alone would more than cover the management costs.  Feel free to send me a message and I would be happy to plan for a time to talk.  Not knowing your annual expenses and just looking at high-level numbers it looks like you have a good investment on your hands, you just need some proper management in place.  I definitely wouldn't rush to sell, it is a long term game as @Corby Goade said.  You just need to get the property stabilized and performing as expected.

Congratulations @Daniel A richiez!  Those numbers are phenomenal for a purchase price and a great area.  We manage a number of properties on W Walnut, some just down the block, and it is a great section of Allentown.  Good luck with everything, please don't hesitate to message me if there is anything I may be able to help with, and congrats again!