All Forum Posts by: Ryan Schroeder

In similar situations (breaking a lease) I always inform the tenant that they are responsible for the entire lease (in this case two months) but that if I rent it in advance of that their obligation would cease.  I would not agree in advance to limiting their liability.  After all, you are already out either way due to no fault of your own.  I would submit that you need not waiver on that point.  You will never see them again and they are breaking the contract, not you.  BTW, I am assuming this is all written down somewhere such that you could prove the agreement

If they have two long-haired dogs the filters are probably a mess and they, not you in my opinion, should be responsible for that.  Also of note that since about a year ago utility bills have risen 30% to 50% so of course their costs are higher than anticipated.  Finally, when I have tenants complain of being too hot or too cold I most often find that they are not closing their windows tightly.  If they have double hung windows and if they are not locked the top sash may have dropped in many of them and they may not have noticed.  That would make a huge difference.

We only do 12 month leases and have a 60 day notice period.  When people have asked about an early termination or shorter lease we say two things.  First, we do not allow lease terminations between October and March.  Second, they are responsible for the entire 12 month  lease, however, we will attempt to get it leased early if they wish to break the lease so long as the apartment is in leasable condition (Clean) and second that they are flexible in my requests for showings (as in I'll notify/ask but need them to say yes I can show the apartment on short notice).  BTW, we do not allow a tenant to break a lease "just because" but we will for a job transfer out of the area or purchase of a house.  If they are not comfortable with that response (my sticking with the 12 month lease) they can rent elsewhere.

Jorgen,  I did the same thing a few years ago (on the other side of the transaction).  Heidi Pliam of Resolve Counsel assisted me in setting up the loan agreement and contract for deed.  Worked out very well.  Might want to reach out to her.

We insure everything for replacement cost.  However, depending on the property our property loss deductibles are $5K, $10K or $20K upon the theory that I'm not worried about the small losses but the larger claims would hurt a ton more.  We also buy quite a bit of liability coverage and umbrella coverage.

That having been said we do always question how replacement cost is computed as underwriting is often doing that from 1,000 miles away on a data base knowing nothing about the property and they have always been willing to adjust a bit when we have felt it appropriate.  My belief is the savings in getting ACV coverage versus replacement would be in the few hundred dollars at most for a $100,000 property which is not worth the risk.

We pay close attention to the market and review market data through Zillow and Craigslist regularly, as in at least four times each year we put together spreadsheets on the competition on a square foot basis.  In situations where we believe the tenant may feel put upon by the greedy landlord we provide that data along with a letter informing tenant of need to increase rent or of upcoming rent adjustment.  We have never, in 30 years, had pushback.  My other comment is that with upcoming rent adjustments we generally provide way more notice than is required by our leases so people have an opportunity to get used to the idea and we always invite their questions or concerns with some sort of affirmative response that they understand prior to actually submitted the rental increase agreement to them.  We also time effective dates so that if they choose to move (for month to month tenants) they are doing so in warm weather given that we are in Minnesota

Brittany,

There are meet up's that show up on this website from time to time.  Might be worth attending a couple of those to make connections and learn from whatever conversations occur.  I'll admit that I've only attended one but thought it worth doing.  There are also MN folks that post on here a lot with commentary on whatever topic anyone is interested in.  Many of those people are quite knowledgeable.  You post was quite broad.  Could you narrow that a bit; might help people weigh in beyond a "teach me whatever you know" approach, perhaps.  BTW, have never gotten a real estate license and have been doing this (buying/operating) over 30 years.

My first experience is a bit different from ALL the others in this thread.  My first was a 13 unit 7 bath rooming house that was 100 years old that I bought in St. Paul MN in 1986.  I could write a book on all that I've learned from that purchase and continued ownership to this day.  In the early 90's we converted it down to 7 units.  To not stray too far from what may be helpful (as I have hundreds of life lessons from this one purchase) I'd offer the following:

1. Do the plumbing and electrical right the first time; in the early years I would just grab what was close, easy and cheap such as extending wire into a new room.  These days I gut out all the old stuff and put in 20 amp circuits and get rid of any old plumbing I can.  This avoids constantly solving leaks and drips and busted pipes and complaints of not enough power

2. Pay attention to the roof and exterior envelope of the building.  Water, squirrels, bats, and even wasps can create horrible headaches and expense.  Catch need for repair of the envelope early and get it done

3. Do not buy a property without televising the sewer to make sure there are no breaks, cracks et al.

4. Set the ground rules with your tenants early and reinforce the rules

5. Run it like a business; that includes offering value to your customer, treating them as customers, and if there are problems solve the problems ASAP

6. And in case this is not obvious, avoid buying a 100 year old rooming house with shared baths!

Brian,

When looking for investment property folks talk in terms of cost per square foot or cost per door (per door is an acronym for per rental unit).  In the markets I'm in the range per square foot to purchase is from about $135 up to about $180/square foot so a 2000 square foot duplex would range from $270,000 to $360,000.  Same goes for rental rates.  Again, using a square foot analysis our rental rent from about $1/square foot up to about $2.50/square foot/month (larger apartments tend to be on the lower side and efficiencies on the higher side per square foot).  So a 700 square foot one bedroom, depending on the market and amenities renting at about $1.40 would be $900/month.  When looking for a property you need to be aware of both what your market is getting in purchase price AND what you are able to get in rent so you need to do your research AND some math.  Same for any rehab.  You need to be aware of what it costs to "fix up" a place.  Also, whatever you think it will cost add a fairly large contingency because I promise you your initial budget will be too low as you will either forget some things or you will find surprises and likely it will be both.

Once you get comfortable that you understand the purchase and rental market and have somewhat of a handle on rehab costs and what those costs will do to your ability to increase rents from the pre-rehab numbers and what it will do to your ARV (after rehab value).

Once you have a handle on all of that go to a bank, any bank, and have a conversation to find out their lending guidelines and how they would view your prospects for meeting those guidelines.  Once you have that in hand, and maybe a level of agreement with the lender you are ready to look for property.  Anything you do without all of this would be called gambling

Nathan, I looked at a duplex we own in St. Paul to get some actual #'s that you can manipulate however you wish. These are from 2018

Rent $27,220

Vacancy $0

P Tax/assmts: $3351

Garbage: $487 (this is a 2019 # as it has doubled since 2018 due to a change in City requirements)

Insurance: $1800

Water/Sewer: $677

Gas /Electric $2800 (tenants actually pay but this is about the total annual cost for both)

We self manage and same as Bruce, we upgrade on the front end so  maintenance is low but a $200/month budget on a solid building would be a reasonable number.  On the other hand we just lined/dug a sewer at another property yesterday at a $16,000 cost so you will be wrong no matter the number.

We self manage including lawn care and snow removal so we do not have those contracted expenses