All Forum Posts by: Roger Vi

@Robert Klisak Thanks for clarifying. The $200 to get your tenant to move out makes a lot more sense now. Forgot about 90 days and how significantly under priced it was.

However, I would have to disagree with your suggestion of buying a property BEFORE calculating repair costs on current property. Sure it will help you expand faster, but this is only ideal if OP has unlimited cash. If cash is limited, purchasing another property could prevent her from paying for needed maintenance costs in the short term. I would much rather have 1 strong property that is caught up on maintenance than 2 weak properties that I have to keep worrying.

Two different strategies and I have seen them both work. I have family members and have spoke with other investors that delay maintenance costs as much as possible. These are the same investors that never raise rents and never have move outs. Tenants pay their mortgage and at the end of the day, investors reach their goal and their retirements are funded through real estate. I just personally prefer to keep up with maintenance and always be one of the better properties on the block. More work but more profit, worth it IMO.

This is what is great about BP, different investors with different strategies and we can all come together to share ideas. Thanks again for clarifying and I hope we've improved the quality of this post for future readers.

Hi @Mary Wilson! Thanks for the FL info, here is my input on Everett and Sno/King County in general...

Prices have gone up significantly last few years and we are back to all-time highs in many areas. Add that to the fact that this isn't historically a cash-flow friendly area and it makes the deals even harder to find!

If you are planning to self-manage your rentals, do most repairs, and hold long term (15+ years), I would say shop around and take advantage of these low rates before they are gone! I consider anywhere in Snohomish/King County along the I-5 corridor to be prime for appreciation and long term growth. The combination of good jobs in a diversity of industries, favorable climate, and liberal policies have been attracting people from all over and there is no sign of this trend stopping. Our local geography also plays a part, the mountains and water limit the build-able land and prevent urban sprawl. They say we are the next San Francisco and I believe it! 

Cash flow is calculated based on the assumption that you pay a normal rate for licensed contractors/repairs. If you self-manage and do repairs on your own, you are saving money but trading your time to do it (paying yourself normal rate to do repairs). Since we cannot accurately predict appreciation and this area does not see much cash flow, you are essentially betting your time on appreciation. 

If you buy in this area, it is a pure appreciation play for the most part. You could venture 30+ minutes off I-5 to find better cash-flow markets. You could even go to Eastern WA to find better rent/price ratios. However, if you are not self-managing and will need to build a team, I would argue that the process and difficulty is not any different in state or out of state. 

You already have experience with the FL rental. That is about as far as you can get from here in the US. I would open up my search to the entire US. Not saying the this area isn't a good place to invest. I just wouldn't assume it is your best choice just because you live here.

Hope this helps!

One more thing @Account Closed Just want to hear more about your advice. You would suggest the OP buy their next property before calculating how much repairs will cost and how much money they have? Then you would raise rents to pay for these repairs? And you would pay the section 8 renters to clean up on their way out?

I am not trying to be mean, just want to make sure you didn't mistype a word or if I am missing the big picture. I am just seeing this as irresponsible advice but would love to hear more as I am not the smartest guy and would love to learn a new trick or two if you have one. Please elaborate...

@Account Closed

I was in a similar situation regarding low rents + deferred maintenance a year ago. I think if you break it down into all possible scenarios, there is a clear best choice

YOU MUST RAISE THE RENT ASAP! You did not buy this to lose money. One thing you will do for sure is raise the rent. Since they aren't your ideal tenants anyway, raise rents as fast as legally allowed until you reach market rate or at least a rate you are happy with.

Deferred maintenance is there regardless. You can change tenants 100 times and raise rents 200 times but none of that will ever take care of the deferred maintenance. Make a list of work that needs to be done and identify the urgency of each. Immediately fix the safety hazards and the ones that will cost you more in damages if you let them go (ex: leak in the roof).

What is left on the list will be the ones that can wait and won't cause any significant immediate damage. My biggest expense that fell in this category was new windows. The current windows worked, but they were 25 years old, not energy efficient, and unlikely to attract high-quality tenants at market rent. With these repairs, I concluded it was better to wait for a move-out. Most of them only seemed to make sense to attract a better tenant. Fixing these with you not-so-perfect current tenant is counter-productive; especially if they end up breaking or damaging something.

So now you have your list of repairs and rents rising on the tenants you despise. Now its about patience and knowing you are in a win-win situation. If tenants stay, you get more rent and you can delay some of those maintenance issues further and free up your cash/credit. If they leave, that is your chance to complete those repairs, potentially raise rents even higher, and be more selective with your next tenants.

Here's something to think about regarding your next property. I am not sure what your financial situation is, but I would make sure that purchasing another property is the best personal/financial decision before proceeding. It seems you are fairly new to land lording. It might be a good idea to let this first experience sink in before you expand your rental portfolio. You will learn a lot of things about your property in the next 1-3 years that will help you make a much better choice on your next investment. Another thing to keep in mind is that you want to have enough reserves to handle any unexpected situations that may come up. This is especially true if the deferred maintenance is already building up on your first purchase. If it costs 20-60k, I would do some calculations and see if doing those immediately will get you a better return on your money than purchasing another home will. I recently put about 20K in a rental and am collecting at least 10K more per year that I could not have gotten without these repairs. Best part is I charged most of this on a 0% intro credit card, basically a "RAISE YOUR RENT FOR FREE" card.

Last thing I will say is to learn to accept your tenants for who they are. If everyone was as hard-working and ambitious as yourself, this real estate game would never be possible. America truly is great. Each lazy pot head collecting government rent vouchers is one less competitor and one more customer.

Hope this helps and good luck with your real estate ventures!

Jason Reynolds these are all excellent questions to ask a CPA familiar with your state laws. They will answer these for free if you call or email. Regarding the capital gains tax, I believe the rule is something like "if you live in it 3 out of the last 5 years, you are exempt from capital gains tax." Again, check with CPA as each scenario could be different. If you are looking to pull equity out, you will have a lot easier time doing it on the home you occupy. You can get a HELOC set up on a primary but i have never gotten anyone to establish one on my rentals. You can cash out refinance both, but your rate will be lower and your loan amount higher if you do it on your primary. I have shopped for HELOC and refinances for rentals and the home I occupy in recent months. For best answers, contact one of the many lenders on BP! Hope this helps!

I live in a 3 bedroom house around 1200 sqft and don't feel crowded at all. I even use one entire bedroom as storage and still have room to spare.

Most rentals in my market are between 800-1000 sqft for 2 bedroom homes/apartments.

You should have no complaints about space with 1200 sqft, especially if most homes are 900 in the neighborhood anyway. A family of 5 might think its small, but most families in these homes should be 1-2 adults and 0-2 children. Just make sure the design is right and the bedroom sizes are at least standard size. High ceilings are also a big plus.

IMO, if money is not an issue then size really isn't an issue either. Just build it bigger or in the upper range of the other home sizes in the neighborhood. Then spend money on amenities and make your block of houses the best block of houses in your area. 

Solar, jetted tubs, nice landscaping, outdoor space, efficient heating/cooling, smart technology, high end stainless appliances, etc... This will help you sell more than an extra 100 sqft.

@Ana P.

Welcome to the site! Always great to see more locals come on the board!

I would probably have to agree with your realtors and advise against owning rentals in the city of Seattle. Not only because of the laws, but because its SEATTLE! 20th most populated US city, home of Starbucks, Amazon, Mircrosoft... Basically it is on everybody's radar and people make it a priority to make sure everything sells for FULL PRICE or higher.

There are a lot of foreigners and out-of-towners coming in Seattle and buying/investing. Their goals and priorities are probably much different from yours. It may make sense for them to overpay. Based on your situation and goals, I would say you have much better options.

One advantage you have is that you are local and can travel outside Seattle and see the areas unknown to outsiders. I've heard good things about cities south of Seattle all the way to Tacoma. Or you can join me up here in Snohomish County / Everett! Seattle's craziness has an effect on all surrounding cities, but as you get further away the numbers will start to get better.

Since your goal is to live in a unit and commute to your Bellevue job, I wouldn't take the numbers you see on BP too seriously. Most investors here are cash flow people looking for 1%/2%/50% rules. You have a great idea to buy a multi and rent out the other units to help pay your mortgage. It will save you money compared to renting, but in this area it may never reach the criteria for an acceptable BP investment.

I would be more concerned with whether you can handle the task of being a landlord. You will also have the extra challenge of sharing walls with your tenants if you occupy a multi. In general, are you a people person? Are you patient? Are you good at setting rules/expectations and sticking with them? Your success in rental properties will depend on how well you manage your tenants or the person managing your tenants. If you want to learn how to be a landlord, occupying a multi is a great way to get started. If you prefer to hire out management, I might start looking at out of state rentals where you can afford this. Your 10% down in Seattle could be 25% down on 2-4 out of state homes. 

Hope this helps. Please feel free to get in touch with me if you want to chat more about our local market and Snohomish County specifically. Good luck on your journey!

@Mary Wilson Welcome to BP! I'm a local Everett guy looking to expand just like you.

Funny thing is I am actually looking into other parts of the county to invest and Jacksonville, FL is on the top of my list. Can I ask, where is your FL rental located? I would love to get some insight on your experience managing from Everett.

@Kirill Chervets Very impressive to hear what you've built in such a short time. I'm living here in Everett and am in a similar situation, I'm somewhat backwards from you though. I rent out a 4 unit and live in my SF. Purchased in 2013 and 2014, just shortly after you.

I'm in no rush to sell anything that cash flows well. I have thought about it quite often lately however. I usually conclude that I would like to keep some sort of RE investment in Snohomish County. Seattle is building like crazy and the population growth numbers look great all over SnoCo. Everett, as well as many other cities around here, are building to accommodate this growth and if everything goes as planned, appreciation should stay steady for the next few years.

I want to sell my SF for something that cash flows better. I've been looking around the country for cash flow cities and am pretty sure I will be exchanging this for a SF or MF that is more focused on cash flow. 

With that said, I think buying/holding anything in SnoCo is a pure appreciation play at this point. While I wouldn't rush to sell anything that cash flows, I would calculate the estimated cash available after sale and start thinking about other options. We have experienced excellent returns last few years but it would be irresponsible to expect this to continue. 

You do not have the problem I have with occupying a home that eats cash every month. I would just start looking around to see whats out there since you are wondering anyway. 

Feel free to message me to chat more about this subject. I am looking to cash out of our area and move my investments to a more cash flow friendly market. Would love to get your input and hear what ideas you come up with with your local properties.

@Roy Mitle
I never rent to friends, so take my advice with the assumption that I would treat every tenant the same regardless of our personal relationship.

I always find out market price and set goals to meet that price as soon as reasonably possible. It becomes simple math when you look at how many dollars you collect in 12 months at the current rent and at the market rent. Raise the rent so that you collect the same amount whether you keep them or they move out and you have to deal with the 2-4 weeks of vacancy + rehab. That way you win either way. If they move out, here is your chance to update your units (if necessary) and raise rents. If they do not, you raise rents a little and still collect the same amount in the next 12 months.

This is all assuming the market is hot, your units don't need major rehab, and it will be easy to find tenants as mentioned in the above reply. If this is not the case, I would need to know more details about the extent of your problems before advising.

Hope this helps.

@Roy Mitle