All Forum Posts by: Rich E.

Kelly- not sure I can answer that.  It depends on a lot of factors like how much suplus you have in your budget each month, the extent of the reno, age of the property, etc.

Mike-  It is a very personal number.  Some will need half of that and others will need double that amount.  A great book on this topic is "Work Less, Live More" by Robert Clyatt.

My biggest fear is rising health care cost.  If it doubles again in the next four years, that could start to crimp your budget. 

I manage 25 while working full and do about 90% of the maintenance myself.  Don't believe all that "3am busted pipe" propaganda from people who don't have properties.  It is a rare event to ever have that type of emergency.  

Kelly,

Based on what you shared, the deal sounds ok (not great) from a cash flow perspective but $152 + reno cost to hope it is worth $170k in a few years does not sound good....especially for a BRRR.
 

Personally, I would not feel comfortable going into it this tight.  You would be negative on cash flow while doing the renovation and it does not sound like you have reserve for that.  If the reno runs into problems or you have trouble getting a tenant (it can happen even in a hot market), you might be in trouble without a nice reserve.

My $.02!

Rich

Good luck. Keep us posted.  As you do more due diligence, verify the assumptions I made on vacancy, etc.  Also, the property taxes seem low to me but these vary wildly by area.

Like others, I came up with ~$500k.  This assumes a 10% cap rate which is what I shoot for in my area for B-type properties (along with a 20%+ cash-on-cash for financed properties).

Yes, without a doubt.  She held a job for 4-years while attending and graduating college and you have a good reference.  All of your due diligence shows she is a responsible person.

Chad,

I can't directly answer your question but I never use an inspector for apartment buildings.  I feel that inspectors add little value for the cost and have no liability if they miss something.  I pay the contractors/repair people I use to go thru the units with me.  They use like the break from doing hard manual labor and it gives them a little stake in the decision.  Also, they learn about the property they will be working on at some point in the future.  Things like where the shutoff valves are located, etc.  Also, as I go thru each unit, I ask the tenants a lot of questions.  Usually, they are more than happy to tell you about everything that is broke.

Hope this helps.

Typically, I stop by each unit and give them a sheet of paper with my contact information and the rent payment process.  I let them know I am in constant contact with the former owner to ensure a smooth transition (i.e. don't try to pull shenanigans about I paid him already, etc.).  I also ensure them there will be no immediate changes.

Even if I am fairly sure the rates are below market, I don't rush to raise rents on existing tenants.  I try to test my theory on rates by filling a few vacancies, as they occur, to see if I can get the rate I think and fill them quickly.  If all goes as planned, I start to increase rents.  If the rates for any long term tenants are way out of line, I may have a conversation with them to discuss how we get closer to market rates over time.  It is hard to raise a tenants rent dramatically right off the bat but let them know you will work with them to get near market in a few years.  If they move, fine, you turn the unit and get market rent right away.  If they stay, you don't have to turn the unit and save some money.

A lease runs with the property.  So, if it is current, the tenants are already under lease and you have to honor it.  If the lease is expired, then you have more options.