All Forum Posts by: Sean McKee

@Evan O'Brien- I'll try generalize some of the steps I take, however each person will have their own unique way of operating.

I take more of a top down approach. Starting with high level factors (i.e. demographics) and the go into the granular (condition of property).

1. General Market Research of City/ Area ( i.e. demographics, population trends, Crime, vacancy, expected rents per unit type, market values/trends, etc)- To ensure you are buying in a solid market 

2. Ensure the immediate area around the property is viable (i.e. no serious crime, not in a bad location, etc. )

3. Ensure property type is appropriate for your market( ensure it's not too small, has bad layout, parking, etc.)

4. Inspect property for all necessary repairs and any potential deal breakers

5. Confirm rents, expenses, ARV of building based on inspection of building

6. Legal review (zoning, title, permits, etc)

Again this is not everything, but some general things to consider. 

The two biggest mistakes I can think of that most beginning investors make are underestimating repair costs and overpaying for a property.

To prevent underestimating repair costs, team up with a good general contractor who can give you an estimate of what it will cost.

To prevent overpaying, really make sure you understand what your ARV is and try not to pay more the 80% of the ARV minus costs.

@Nick Gee- I guess it really depends on how you are evaluating the property. If it's purely for your to live in, then I think it is reasonable to go based on your personal preferences, with the realization the costs to convert will be fairly expensive and might not actually add value to the building. 

If the end goal is an investment property, I would be much more cautious with converting, as you might not get the pay off you want. It really is going to depend on your market ,how common they are, and the condition of the existing system. Where I invest, radiators are pretty common and don't impact rents/value that much. I have a building with radiators and have no problem getting tenants. 

Radiators work quite well in my opinion and unless there's a large payoff, it is better just to leave them.

@Stephanie Young- I think you can only charge her for the two weeks it was vacant, and probably the early termination fee. But you should check local laws. Is she demanding it back in full?

Don’t worry about the ethics, you have every right to charge her reasonable fees for breaking the lease. She had every opportunity to research the area before she signed the lease.

@Kim Dillaway- I'm not sure where you are located. A lot of time son redfin, realtor, or zillow they will list the rents/lease end dates. If not then you can certainly try and engage to the broker to disclose this.

@Marcus Johnson- It sounds like you are positioned well for the increased regulations. I hope they come to their senses and follow the Oregon model, and factor in inflation to the yearly increases.

@John Warren-I've been looking at the Waukegan market for a little over a year now.  What areas do you recommend for longer term rentals?  Are the any areas you would avoid?

This is crazy. Not only is a 3% cap ridiculously low, it doesn't adjust for inflation. You can't increase rents after the tenants moves out. What if your rents are 20% below market value? I know plenty of landlords like that. There goes any incentive to improve properties beyond the absolute bare minimum. In 10 years time they will be complaining even more about housing shortages. Current landlords I hope you are close to market rents or have the time to increase rents.

@Alex Tokmazeyskiy- I'd also through Little Village out there.

@Kim Dillaway- You can certainly have your agent reach out for this kind of information. However depending on types of properties you are buying, the seller might not have all that information readily available. I purchased distressed buildings with so much deferred maintenance that I wouldn't trust any data they provide me. I'll take whatever information they provided with a grain of salt and then use my pro-forma data to make the offer price. I'll also check with the local building department for any permits issued, sometimes you need to submit a FOIA request. During the due diligence phase you can verify your original assessment.

@Allen W.- I own several C class properties. You can definitely increase rents by making the units slightly nicer. The key word is "slightly", so maybe 10% to 20% more than what would be typical for your market.  Also realize, unless the units were severely underpriced, you likely only get a 100 to 200 dollar rent increase. People in those markets typically won't pay that much more for premium finishes as they have limited budgets.

I had one unit that we just cleaned up and put new appliances in and got $200 more in rent. Most people just want clean and safe place to live.