All Forum Posts by: Rob Gribben

2 of my properties that I have a 4 year history on, have been about $1,550 annually (for maintenance and "improvements").  Improvements would be costs to keep up with other properties in the area (for example, I installed granite kitchen counters after tenants of 4 years moved out).  The $1,550 does not include vacancy loss, and doesn't include my time to manage (I don't pay PM costs).  

Lots of reasons:

1) They don't appreciate as well as A and B class

2) The tenants in C and D properties have less stable incomes, and generally don't take good care of the properties.  You also are potentially dealing with tenants who have criminal past, or associate with those who have criminal records.

It's all about risk.  Higher risk = the potential for higher profits, but also equals the potential for serious headaches and loss of revenue.

I generally stick to class B, decent cash flow, relatively good appreciation, and decent working class tenants usually.  

@Dan D., think about it like this.  In an area that commands $1,800/month, your going to have to spend more to keep the property competitive with others in the area, at least potentially.  You may have higher end appliances, more particular tenants, etc...  All of those factors drive expenses higher.  

@Jamie McKenna, if you give me your email address I can send the spreadsheet. It's based on Net Present Value (NPV), so basically I account for all of the estimated expenses (mortgage, taxes, insruance, maintenance, etc....) and the estimated rent, and then calculate the NPV and the ROI after 10 years. It's an excellent way to compare properties.

I use a spreadsheet that calculates ROI over a 10-year period. I plan to hold for at least 10 years, so I try to project the ROI after 10 years, and then sell in year 11. I try to be as conservative as possible, and therefore use $1,500/year to account for maintenance and improvements (again, to maintain the property in a condition that allows me to compete against other properties and get market rate rental rates). That's based on my experience over the last 4 years with 2 of my properties. The other property I own doesn't have a 4 year history yet, so I don't use it as a basis yet. Over a 10 year period, most properties are going to have updates like roof replace, HVAC replace, kitchen/bath upgrades, etc.....

Buying in 1996 in the Canton area in Baltimore City for $63k.  I put about $30k into the house to renovate, and did a lot of the work myself (with the help of my father, who owns 6 rentals himself).  The Canton area has exploded in the last 15 years, so rentals are in huge demand with the young/professional crowd wanting to live downtown after college.  When I moved to the burbs in 2003, I kept the city house.  It's now paid off, and rents for $1,500/month.  I purchased a short sale property and a foreclosure in the last 4 years, so now have 2 in the city and 1 in the county.  One of the best things about real estate investing (to me) is you can feel a sense of financial independence, not being totally dependent on that corporate job.  

@Ned Carey, repairs and improvements only.  By improvements I mean keeping the house competitive in the market.  

One property was "improved" last year with new counters, basement carpet, and hardwood floor refinish after tenants of 4 years let.  The other I purchased as a foreclosure.  I'm not counting the repairs made prior to renting (those I consider expenses to make rental ready).  However, on the foreclosure I have had to replace the roof after 2 years and the AC after 3.  I think those types of expenses are to be expected with foreclosures especially.  

So, in my spreadsheet calculator the default "annual" maintenance/repair cost I enter as $1,500 per year.

I own 3 rental houses in Baltimore, one on the county side, and two in the city.  All are in nice areas, rents range from $1,100 - $1,500.  My "annual cost", which includes maintaining and keeping the property up to a standard that allows the house to show well in relation to other houses in the area.   I calc'd the expenses (based on two of the houses over a 4 year period), and it came out to $1,550/year.  Based on my experience, you'll have years when your costs may be $200, and the next year $2,000, it's by no means a steady cost from year to year.

Anyone doing business with Growth Equity Group (self directed IRAs).  I am considering pulling some 401K money out of my account and investing with GEG.  I am really not all the bullish on stocks, see a big correction when QE ends, so looking for alternatives to stocks and annuities, and this sounds like a great alternative, though I have not done much research into GEG, so wondering if others have any experience or opinions.  

I don't see a mass exodus from the suburbs, there will always be a demand I think, just a matter of how far out are people willing to go vs. 5-10 years ago.  Most people now recognize the drag on quality of life when you have an hour commute to work.  I definitely see a trend with millennials wanting to live in or near the city, and wanting to be able to use public transportation.  Some will stay in the city as they age and have kids, but I still suspect most will move to the suburbs once they have kids.  I have 3 properties in Baltimore City, and all are rented by young professionals.