All Forum Posts by: Rob Newsom

Hi Neil - Good luck with finding that first deal!  Make sure you are letting people know that you are looking.  You'd be amazed at how deals bubble up in conversation after people know you like discussing real estate.

Are you looking to buy in Casper?

I have some rentals in a larger market where it is very easy to run a market analysis and determine a fair market rate.  When lease renewal comes up, I do an an analysis.  I determine what the "rent gap" is and then i tell them that it is going up by half of the amount.  I always close the gap by half.  That way, it 1.) buffers out some of the rise and fall of surges in the market, 2.) makes me seem very fair and not greedy, and 3.) there is never (*yet) an instance where I'm trying to explain to them why rent won't drop, even though the fair market shows that the rent should be lower than it is.

Yes, it does leave a little money on the table, but it still allows for constant, logical, and generous rent raises. The hard part for you, is that a small town can be hard to determine fair market, especially if your portfolio is large enough that it can swing the analysis.  Just try to avoid turning your town into "Pottersville". 

Hope that perspective helps.

Personally, I think adverse possession is very strange.  The fact that a court can take property from somebody and give it to somebody else seems unconstitutional.

That being said, it is a very interesting topic.  Planet Money podcast did a story on it a while back.  It's an interesting listen if you are trying to understand the process a little better.

https://www.npr.org/transcripts/1173682158

Update - I decided i needed to get some legit legal advice (no offense to all the opinions i got above)... I used biggerpockets member search tool to find an attorney in my area.  He has informed me that despite the tenant damaging the property and admitting to it, it is still the owners responsibility to make any repairs that can affect the health and safety of the dwelling.  And since it's summer in houston, the A/C falls into this category.

Behold, as soon as I texted my tenant that I need to schedule the repair whether she has money to pay or not, she has resurfaced and is now more than willing to meet the repair man at any time that's convenient for me.  How kind and thoughtful of her!

Awesome, thanks for all the feedback.    For now I am going to sit and wait.  We'll see if tenant pays rent for June.  In TX they have 5 days to pay, so I can't start eviction paperwork till June 6th (E-Day?).

If they pay rent i'll have to re-assess, but I'm primarily focused on making sure I'm not breaking any laws by not making the repair, regardless of who's fault the damage was.  The last thing I want to do is fumble the ball 60 days before the lease ends and then end up in a legal battle that prolongs things.  I suppose I could just fix the AC to stay "above reproach", which would cost me $1300, but at least i'd avoid any potential legal issues and/or prolonged drag-out of the relationship with tenant.

As of now, the tenant is still not answering phone calls or texts, so i don't know how i would proceed with the repair even if i wanted to.  If i didn't mention already, the property is in TX and I'm living in WY, so i can't just drive across town. 

Thanks!  Will keep updating as it develops and will post results when it's settled!

Hi there - looking for some advice here.  Here are details:

Tenant was having some issues with HVAC

I arranged my HVAC repair man to visit property, but tenant reschedules/no shows 3 times before they finally connect up with each other.

When my repair man finally can do his diagnostic, he finds that the system (which I had installed brand new about 10 years ago) had been modified.  Somebody had bypassed the motherboard and directly powered the blower.  The result:  blower motor and motherboard were fried.  The tenant proudly told the repair man about his knowledge of hvac systems, and that he had made the modifications to try and fix it, but that it seemed to make things worse.

I told tenant that they would be responsible for the repair ($1300) since they damaged the system, and the tenant agreed.  (this was on a monday)

The repair work was scheduled for Tuesday.  On tuesday, the tenant "no showed" and reschedule for Friday.  On Friday morning they "no showed" and rescheduled for friday afternoon.  Then they canceled the appointment because an emergency came up.  I now find out that the tenant has (temporarily?) moved out because it's too hot (TX summer)... and they have finally told me that they don't have the money to make the repair.

The lease expires in two months.  I'm not sure whether to expect rent on June 1st or not.  If I had to bet, I'd say there's about a 50% chance that the tenant will skip town in the middle of the night, but who knows.

My question:  Am I right to expect/require tenant to pay for the repair for damaging the system?  Am I breaking any landlord/tenant laws by not fixing the AC, and thus rendering the house uninhabitable?  Until last friday (3 days ago), i had been expecting and attempting to get the hvac fixed, but now i'm seeing it's likely going to be me paying if it does get done.

On top of that, the tenant has quit responding to email/text/phone calls.  I live out of state and cannot coordinate the repair to take place without the tenants help.  

Any thoughts?  Any recommendations on a good real estate attorney in the houston area?

Thanks,

Rob

Where exactly is the "marketplace" you mention?  I've never been able to find it... is it only available to PRO members?

I'm currently holding a W-2 job to have access to cheap, easy loans.  However, I've recently bought a property which will likely be my last acquisition for the foreseeable future (i may be lying to myself about this, of course), so the access to loans is not a huge benefit at the moment.

The job doesn't pay very well.  Only about $3k/month(net), but it is a very low stress, easy job with good bens.  My wife also works, so she has health ins. that I could get on if I quit though.  The $3k/month is a nice to have, but having to allocate 40hrs/wk takes away a lot of my time to contribute to my RE business.  So that's the crux of the matter...

If I can convince myself that I can sustainably add $3k of value every month to my RE business, then I could see myself stepping away and focusing on that full-time. 

How do you folks quantitatively assess the value that you add to your business?  I mean, my RE portfolio does pretty well on it's own (depreciation, cash flow, inflation, appreciation).

I enjoy doing most of my remodeling on my own.  I know that it's not scalable, but that's one of the areas I have trouble giving up control of my business.  Also, my current W-2 is earning an hourly rate <$30/hr which is less than the going rate for skilled labor in my town, so I feel like I'm able to add value just by doing my own remodels.

I'm very interested to hear what all of you have to say on this matter!  Looking for ways to quantify added value of your time in your businesses! Thanks!

This is a great thread. I didn't realize how easy IRR was to calculate. One thing that I will point out though, if your cash flow periods are on a monthly basis - like most of the examples above - the IRR formula will spit out a monthly IRR (this was already stated above). However, to go from a monthly IRR to an annual IRR, you do not simply multiply by 12. That will give you an IRR that is lower than actual (at least it is conservative). The actual formula for converting from a monthly rate to an annual rate is:

((mIRR+1)^(12))-1 = aIRR

and to go back the other way,

((aIRR+1)^(1/12))-1 = mIRR 

Hope that is helpful!

Awesome info, thank you both!  I'll start looking into these costs.  My gut tells me that replacing a single-door with 12 doors has to be a money maker, but I really need to start putting pencil to paper.  Have either of you (or anybody else for that matter) had any experience with seeking LIHTC, or other governmental assistance (i.e. grants) to help with building costs?

Thanks again!