All Forum Posts by: Scott Swanson

Mark,

There are no limitations on rent increases in Indiana. The only stipulation is that you must give a minimum of 30 days notice. As Sheldon stated, I would suggest you give them more than a 30 day notice. A 70% increase is massive for a renter to absorb. I think if you explain to the tenant, why you're increasing the rent so much, they'll understand. But to increase with just a notice, can be detrimental to both parties. Most likely, they know they're paying a low price. So explaining to them why their rent is going up, is just good business. Sheldon also mentioned maybe doing some upgrades. This makes a tenant feel like they're "getting" something for the increase. If they're paying on time, keeping the place clean and are overall good tenants, try to work with them as much as you can. A "good" tenant can be worth their weight in gold! 

Hi Darshan and welcome to BP! You said you were interested in rentals and tax sales. I would recommend that you put tax sales on the back burner, until you have more experience. There's a lot involved and tax sales can be a headache as well. Yes, you can make money purchasing them, but they take time and in my opinion, aren't for the new person. 

NW Indiana offers lower taxes than Illinois and also lower home prices. The rents are only slightly lower, so that results in some great cash flow. The area has been growing quickly and the outlook is excellent. There's quite a bit of migration from Illinois to Indiana, because of taxes and a lower cost of living. However, the Chicago area still has some good deals when you can find them! The market is very tight all over the country and prices are way up.

What is your price range for single family homes? That will dictate where you'll be able to buy. There are some small pockets in Illinois, where you can get in for as little as $75k, with rents between $1000 and $1350. Taxes are reasonable and values are going up. These are NOT bad neighborhoods either, but the competition is fierce. Indiana can offer duplexes for as little as $120k, it just depends upon where you buy. I never recommend you buy in areas below a C. But that's just my opinion. Taxes are much lower in Indiana than Illinois and taxes can make or break a deal. I hope this helps. 

Chinazom,

What makes you think you have to "change" the numbers?

As far as what the units are renting for, I would ask the seller for his records. He should be able to provide you with those. 

Samuel, I'm a little confused. You said you want to purchase a rental or a flip and are ready to move. FYI....you don't have to move to the market that you want to do business in. Does it help actually living in the area? Of course it does. But you can still invest in other markets if you put together a "quality" team of people in the area you want to invest. Boots on the ground would include a realtor experienced in working with investors, a solid contractor and a solid experienced wholesaler, to find you properties. A realtor can help find you properties for less cost than a wholesaler but until they know you're serious and you buy from them, you might have issues with them not focusing on your needs and goals. They're here to make money and that's the bottom line! There are "clubs" as I call them, called REIA's. They're groups of people who usually get together once a month and discuss real estate and investing. These groups can be a valuable tool for you to learn the business and are typically a great place to meet investors, wholesalers, realtors and others in the business. You can learn from the experienced, network with them and get many of your questions answered as well. Talking to people with first hand experience is the way to go. Just Google Reia's and you can most likely find one in the area you're focusing on.

We have investors from all over the country that purchase rentals and flips, so your location isn't critical. However, I highly recommend that if you use this strategy, you form a rock solid team or you can run into some major issues. I hope this helps. Best of luck. 

Stephen,

The following scenario is based on the numbers you provided. I added up your expenses and they come out to approximately $233k per year. The rents come out to only $224k. I also added a 10% management fee of $1872 a month or $22,470 a year, to get your total expenses. If your management fee is 8% or 10%, it won't "tilt" the numbers much at all. So based on the numbers you provided, this isn't even close to a being a deal. Your cash on cash return comes out to almost a negative 1%. I also didn't add any costs for upgrading the building or costs associated with rehabbing any of the units. Does this make sense to you?

Frank,

Call the Crowell Agency in Merrillville. I'm fairly certain they do commercial and they're a broker, so they can help you find the best fit and price. Best of luck. 

Stephen,

How much are your monthly payments going to be?

One thing to keep in mind about College towns and renting. Typically, the students leave once school is over. So you might be getting high rents, but you're risking getting no rent when school is out. 

Mallikarjun,

You didn't mention if you're new to investing or experienced. If you're new, I would highly recommend you stay away from a 10 unit building to start out with. Start with maybe and sfr or possibly a 3 or 4 plex. Get your feet wet. Learn the in's and out's of being a landlord. Get some experience first. Allan C's post is very valid. Maybe ask yourself, exactly what is most important to you? Is it monthly return? Is it appreciation? What is your end goal with buying a multi unit? Do you have cash reserves, in case something major happens? Do you have a solid property manager? Do you have a solid crew to rehab the units? Do you have boots on the ground that you can count on? These are all things you need to seriously consider, before investing. 

Upper income areas in or near Chicago, will most likely bring an overall lower monthly rate of return, but the appreciation is most likely there. Middle income areas "typical" rates of return will be a little better and appreciation can be the same or only slightly less. Each area is different. So you need to figure out exactly what you want out of your investment. Northwest Indiana offers some very good deals, compared to Illinois. Taxes are much lower, home prices are less and the potential for solid appreciation is definitely there. There is a migration out of Illinois, into Indiana, because of skyrocketing taxes. So be sure to check property taxes, when considering a purchase. High taxes can kill cashflow, therefore rendering a deal no deal at all!

Remember too, that the more units a building has, the more the rehab will cost. People have a tendency not to take those costs into account. Then there's typically expenses like lawn maintenance, snowplowing, common area electric costs, the water bill and garbage pick up. I hope this helps. 

Rey,

I have a calculator that you're welcome to use if you'd like, to calculate your return. You plug in the numbers and it calculates your return, percentage wise and also dollar wise. For your costs, you need to make sure you have down the following monthly or yearly costs: 1. Property management fee, insurance, taxes, loan payment, vacancy, any utilities you might have to pay and maintenance. If you included all of these and your return is 9%, including the mortgage payment, I think you're doing just fine. Mortgage payments' really "drag" down your return, but 9% is very acceptable. Best of luck.