All Forum Posts by: Sarah Ottesen

@Kyle Jenkins you should definitely consider consulting with an accountant, a lawyer and an insurance agent. my lawyer suggested that I just get really good insurance and wait until I get a handful of properties before starting an LLC. What he meant by "really good insurance" is an umbrella policy. this policy add additional liability insurance to all of your policies. you will want an umbrella policy to be a bit more than your assets. This will cover your properties if you were to become liable for something. An example, you have properties worth $500,000. your auto insurance covers up to $300,000 if you were to cause an accident. The $300,000 would not cover your entire assets, therefore, if sued, a lawyer could see that you have the $300,000, but you also have a $500,000 house and will try to go for the property as well. If you had an umbrella policy that was at least $200,000, it should protect your $500,000 property (300,000+200,000). Again, talk to an insurance agent, they can explain better!

Hello @Brian H.  I agree, this is very exciting!  Congrats on your potential purchase.

We have a four-plex with some Section 8 tenants.  Like you said, the good is the guaranteed rent.  The bad, sometimes the quality of the tenant is not great.  Given that the ones you are inheriting have been their for a couple of years is encouraging.  Another positive thing about purchasing a rental that has Section 8 tenants currently in it is that the property is meeting the "stringent requirements", therefore, it should be a good property without too many surprises!  Our property manager has been handling the inspections with Section 8, so I do not know the details of exactly what they are looking for, but so far it has not been difficult to pass.  Again, I think this is because we also inherited Section 8 tenants and therefore, the property was already ready!

Regarding utilities, I don't like the idea of paying for the utilities either!  Just brainstorming, but one idea is to have the tenant pay for the utilities and if you are in a cold snap you do an inspection of the property.

Good luck!

Hi @John Acklen!  Are you hoping to purchase a multi-family in the Midwest or in California?  If it is for cash flow purposes, I would vote the Midwest!  What part of the Midwest?  We are currently near Los Angeles and are also moving back to the Midwest; to Iowa.

If you get a multi-family unit over 4 units it would be considered commercial.  In this case you may not need to prove income because they might only look at what the income from the property will be.  However, you may need to have a down payment of 25%.

@Jason Peterson I use Pregler Properties for my management.  Mark Pregler is actually out of Waterloo, but grew up in Dubuque and I have been very satisfied with his knowledge on tenant and landlord laws.  We had to have an eviction right after we purchased the property and he did everything.  There was no headache for me.  But, as Jared mentioned, I didn't learn anything either! :) 

You can look him up online, his number is listed there.  

He does charge 10% rent, half month's rent to fill and 10% on all services, such as, a plumber needs to come out, the plumber charges pregler properties $50, Pregler Properties is going to charge you $55.  I don't mind the mark up.  He is also willing to let you go out and fix up the property and then, of course, there would not be a mark-up.

Hi @Jason Peterson,

Regarding  the $299,900 house on Alta Vista, don't give up on it yet.  See if it may be possible to get the heat and water separated so that you can have those utilities go to the tenants.  Being able to do this will just reduce your risk. 

Also, the owners could come down in price. They bought it in 2010 for $252,000. Even with an offer price at $260,000, 25% down, you could make 10% on your ROI given the possible monthly expenses. I also should have mentioned, I was using a 4.5% interest rate.

On the $199,000 properties, the numbers do not work for me, either.  If you could get rid of the utilities, that would be significantly less risk.  With 20% down, I see a negative cash flow or just about even. Part of the reason is because of the way I figure cap ex and maintenance.  It doesn't stay at a percentage.  I take into consideration the number of units and square footage as they explained in a blog post Bigger Pockets published (https://www.biggerpockets.com/renewsblog/2015/03/03/why-you-cant-make-money-on-30000-houses/).  I made some assumptions here, so you may want to run your own analysis for Cap Ex and Maintenance & Repair.  For the $199,000 property the cap ex and Maintenance & Repairs came out to be about 15% of the monthly rent, or $412.00.

Hi Jason,

This is exciting!  

First, just as an FYI, if you plan to manage the Dubuque property yourself, if you haven't already done so, you will need to take a class, called "Successful Rental Property Management.  Even if you were not planning to manage it yourself, I would recommend the class.  They give some great information!  The next class is on March 15th.  

The bank will most likely consider this a commercial property because it has more than 4 units.  Therefore, your down payment may be higher, 25% possibly.

To analyze the deal, consider using the Bigger Pockets calculator. When I did a quick analysis I found that with the 299,900 purchase price at 25% down, 10% vacancy consideration, 12% Property Management Fee, 12% for cap ex and maintenance and the $6700 for utilities, the return on your investment (25% down) would be 6%. I am not sure what your goals are, I like to hold off for over 10% on ROI. However, once you get this paid off, it still would provide some good cash flow!

Regarding the utilities, how are they split up?  Does the owner pay for all of them? Or does the tenant pay for some.  $6700 a year seems low for six units if the owner is covering all utilities.  This would be  a big concern for me.  I would like to see the tenant pay for their electricity, heat and water/garbage.

Have you attended any of the meet-ups Dan Kelly hosts for the Dubuque area?  If not, consider joining a meeting!  They usually meet monthly and can offer some great insights.

Hey, hey @Erin Rose!  I was just listening to the BP Podcast #229 and @Mindy Jensen mentioned the files that have been uploaded to BP!  You will find a lot of templates there that can get you started.  www.biggerpockets.com/files

@Mashy Green, I am not sure if there is an authentic way you can know.  However, you can also take a look to see how long their leases have been in place.  More than likely they will not renew a lease if the tenant is paying.  

You will need to ask for the "rent roll" from the owner.  My property manager suggests to ask for two years worth.  The owner may not want to give you this unless you make an offer, but you can put this in with the contingencies.

Hello @Aric Wilkerson!

My goal is for cash flow. So I probably wouldn't pick the turn key house hack. There are a lot of assumptions I made with expenses/cap ex, but I couldn't get a positive cashflow if you were actually to totally rent both sides out.  

With the dirt cheap duplex renovation, I could see it working a bit better, that is, if the total rental is $1100/month ($550 * 2 units).  Again, I made quite a few assumptions, but even looking at the 1% or 2% rule.  It falls right in between there -  $85,000*1.3%=$1100.

If I were totally honest, I would probably pass on both...but I am picturing them in my market.  I am hoping for a >10% on my cash invested.

I wish you luck!