All Forum Posts by: Ryan Logue

My wife and I are curious how much umbrella insurance we should be carrying in the below scenario. We are relatively new to the real estate investing business, have two properties, both sole-proprietor owned (no LLC) with maximal insurance. One of those properties is a rental for 5 college students a block from a college campus. We would be considered high income earners on each of our W2 incomes, we have less than $1,000,000 in assets, and have a goal of accumulating much more rapidly.

Is it advised to carry more umbrella insurance in the above scenario assuming we both plan to keep our W2 jobs and thus protect against future garnishing of wages in the unfortunate event of a suit costing more than our net worth? 

Can someone recommend a contractor in the Indy area that does siding, windows, etc at a reasonable price. I have a 1500 sq ft 3/2 ranch and for a basic exterior remodel, the best quote I am getting is like $22,000. I figured you savvy REI's would have a few handy sources!

Excellent rental on a private college campus within a large city. Rent is $3000/mo for a 5 BR house (comp rents away from campus are $1500/mo).  This is the type of house where 5 unrelated college students rent the property together. The yearly group of students that historically rent this house are from an excellent, academically minded, "calm" fraternity. I'd love to keep the good will with this revolving group as they pass down the house to future generations. I am fearful of other frats / sports teams etc that are flat out animals (we've all seen the movie). 

Due to Covid, current lease dates were signed a bit off-cycle compared to what is common for this campus. Here is our scenario... The current lease with five student tenants ends 05/15/2021. Three of these tenants will be returning to start on the 06/01/21 to 05/31/22 lease between five tenants (ie 3 carryover, 2 new). The three tenants that are on both leases have asked to store their property in the rental during the non-leased time from 05/16 to 05/31, as they plan to return home for a brief post-semester break.

At minimum, I will addend either the current least out to 05/31/21 OR addend the upcoming lease to start early on 05/16/21, it would just depend on which group (current v future) will sign the addendum. All will be required renter insurance, carry the utilities. 

Would you charge extra for this scenario?  Full pro-rated rent? Nominal storage fee?  I'd love to keep the good will with this group. 

Half month rent is $1500.  Storage facilities 10x10 charge $40 + renting a truck to move $30 + time/labor to move items.  I get it -- I'm the landlord, I'm the boss, don't let tenants push you around, ya ya. 

What would you charge?

 

Hi there, Indy native and real estate investor. Could you please pass his info to me? My handyman left state recently.

Best, 

Ryan

Thank you for the reply.

On the flip side, with interest rates so low, does this also mean there is a risk for the value to decrease a bit if rates rise significantly. For example, if this $500k purchase price goes down to $475 market value with increased interest rates, then the cap rate increases and the investment was a poor choice. 

I'm just trying to see if my rationale is correct here, as I usually stick to SFH / duplex and use CoCROI as my metric.

When considering buying a 10-unit apartment complex, is it better to buy below the average cap rate for the market, or above the cap rate for the given market?

For example, there is a property I am looking at as follows:

Hardly ever any vacancy, strong rental history (confirmed), rent roll confirmed (possible ability to raise some rents), expenses confirmed, no major CapEx / repairs needed soon.

NOI: $50k

Cost: $500k

Cap rate 10%

Local average is 7% cap rate for B- / C+ apartment complex. 

What I don't understand is this --> this property will cash flow well, seems to be a great investment, yet is considered a "risky" investment compared to the market Cap rate average given that it is 10% versus 7%. I can even likely increase the NOI which will increase the Cap rate more. Yet people are telling me this too high of a cap rate and I should be hesitant. I don't understand it, can someone help...

Are pre-closing on a great property that is in a college area of a bigger city, rents for $3000/mo and after all expenses are accounted for will net around $1200/mo cash flow. 

The question is, how to set this up prior to closing and whether we should get a CPA. Here is the situation:

1) First lease for $3000 is July 2021 to July 2022

2) For now, my wife's mother needs a place to live (we pay her bills anyways), so we'd pay the mortgage, taxes, etc to put her up in this house until we can find her a permanent house not in a college area. She will take on a roommate for $550/mo and has already arranged this. It's probably too late to find a renter for a 5 BR college property this late into the summer, thus this strategy. 

3) We are buying the property in my wife's name, no co-sign. I am a physician and want to leave myself off the deal. 

4) Eventual plan is to have my wife open an LLC in 2021 with her as sole proprietor and move the property into the LLC.

The question is, will we be able to expense closing costs 1/27.5 per year doing it this way, or once it goes from wife to LLC, do we lose that? Also any other ideas on tax issues we may be faced with knowing 2020 there will be very little revenue 2021 6 months of revenue, and 2022 a full year of revenue. Obviously, any major but non important improvements shall wait untill 2022 for deductions.

Any general tax advice, or should we meet with a CPA prior to closing 7/30?

We are ready to make an offer on a beautiful college town rental that has been recently rehabbed, is now turn-key ready, and all the numbers really check out for this to cash flow well. 

There is one major dilemma: 

The house is 1927 built originally a 2BR / 1 BA with unfinished basement. 

House was sold in late 2018 to investors who extensively rehabbed it. There are now an additional 3 BR / 1 BA in an completely finished basement. All construction was done with permits, and all new bedrooms are up to code according to size/placement/etc of egress windows, doors, closets etc. 

My realtor says it is legal to advertise this place as a 5BR / 2BA on MLS and around campus, legal to have people sleeping in these bedrooms given that they're up to code. However he tells me that since these 3 new BR are below grade, for appraisal and tax assessment purposes this parcel will only be a 2BR / 2BA. The most recent tax assessment is based on the pre-renovation 2BR / 1 BA and original square footage.

My questions are as follow:

1) Is this assessment correct?

2) Is there extra liability having 5 students living in a house with 5BR up to code but the parcel only says 2BR?

3) Is there potential for insurance claim deniability in the future if this is insured as a 2BR and there are 5BR being used?

4) In subsequent tax assessments, I suspect square footage to go up given that the basement is finished, but will the assessor now include these 5 BR into the tax calculation?