All Forum Posts by: Rick Santos

Hello,

Looking for some help from other Connecticut landlords on lease agreements and tips. I am in the midst of rehabbing my first investment property in New Britain, CT and am targeting to have it ready for rent/occupancy on 4/1. Does anyone have any standard lease agreements to share? Any insight on things to outline in the lease to protect myself, & things to go over once tenant is selected?

I feel I have a good understanding on tenant screening, here is what I plan on using as criteria:

3 x Rent Monthly Income

No felonies

No evictions

Credit Report

Prior Landlords Information

$Application Fee

1st Months Rent - 1 Month Security

Area is class C, plan to list 2BR units for $800 per month to gauge interest and go from there. Want to avoid as many mistakes as possible as far as the leases go, although I'm sure i will make them! Thanks for your insight!

Rick

Insurance debates are always great, up there with politics and religion for subjects to talk about. Bottom line, you leverage on a premium, like paying 100k for a house that is worth 85k from day one, just so you can borrow against it. Part of the difference goes to the insurance company and part of it goes to the agent selling the policy. The trade off is you do not have to qualify for a policy loan aka "financing" with income/credit etc like you do for means of financing like you do from traditional banks & lenders. May work for some, but for the vast majority of people probably does not make sense. 

May fit well for investors with lots of cash that want to leverage, that happen to have shortcomings with qualifying for loans or some type of permanent insurance need. Usually people with lots of cash will not have trouble qualifying for financing, but i'm sure that there are some people out there that fit the profile.

@Thomas Rutkowski

@Thomas Rutkowski, i am interested in learning more about this policy, is there any information you can send me about the product you are referring to? I'm not ruling it out, just want to understand the details/fees. My email is listed in my profile. 

The asset you borrow against is the cash value which is discounted 85% (to avoid MEC) from the beginning? The asset in this case that produces the return to offset the policy loan (5%) is the 'policy dividend'. Are the 7% rates guaranteed by the insurer at some minimal level, or is it just a dividend based on performance of the mutual insurance co? Are there any surrender fee's in case someone would want surrender the policy?

It seems like a variation of an asset based loan wrapped into an insurance policy. Kind of like, I buy a house for 50k , can cash out refinance for 75-80%, pay 4% or whatever rates are at that point (can be deductible), but rent out the house and make more than 4% on the 40k and take the 40k to invest in something else with higher returns such as tax liens like you suggested? Would this be a fair comparison? (If we leave out the insurance component)

Welcome @Aaron Hawthorne, good to have you on board! 

Congrats on the first property @Matthew Tally! I would definitely factor in the other expenses. Not sure what rental demand is like in your area and the quality of tenant, but those are important factors in estimating your expenses. I would use these figures as a starting point and make adjustments based on your area:

vacancy - 5%-10%

General Maintenance - 5%

Cap Ex - 5%? How old is the roof, major system:, hvac, electrical, hot water heaters?Windows updated? I try to address all of this into the figures before buying so no big surprises come along. If major expenses are on the horizon, you want to allocate more. 

Lawn / Snow / Trash? : 

Standard Rules of Thumb: 2% rule - you are at 1.15% (not bad or good, depends on other expenses) , 50% rule take 1150 - Principal Interest Payment only, to estimate whats left over 

Assuming you will be managing yourself once you move out. If we take 15% of rent (2300) for above items = 345. Net CF = $247/month

You will be all in 18k , cash on cash return = 2964 / 18000 = 16% , 6 years to recoup investment. Plus you will be building equity, getting tax benefits, and hopefully some appreciation. 

I would say they are acceptable #'s, but can be better or worse depending on the area the property is in and other factors not mentioned above. Hopefully this helps, and congratulations!

Hello @Daniel Pabon, best thing to do is to make a few phone calls to banks in your area. Most of the time you can get some info off the bank website for business/commerical lending. It may be a general # but you will find someone that will point you in right direction and give you some general criteria. In my area they will cash out refi 70-80% LTV.

Not a big fan of using Life Insurance as a vehicle for investing. Everything sounds good on the surface, but always look at the fees associated with the product. Life insurance is life insurance, agents get paid a good amount of money to write policies, insurance companies are a for profit business, be mindful of the hidden fees. 

Thanks @Jonathan Makovsky, more rent is always better!

@Brian Larson this is great how you laid everything out with an actionable plan. Look forward to your updates!

Thanks everyone should be interesting and a learning experience. Let's see how close the rehab numbers end up being. @Luis Melendez it is on Woodland St.