All Forum Posts by: Sean Rosenbaum

I'm looking for some experienced or knowledgeable landlords / property managers to lend some insight here.  In nearly all of the lease agreements I've seen from friends, family, and other landlords, I've always seen some sort of early termination clause in a lease agreement that states something to the effect of "Must give 60 days notice and Resident will incur a fee not to exceed 2 months rent."  I've never - until today - seen a lease agreement that doesn't offer an early termination clause. "Resident shall not have the right to terminate this Lease early unless early termination is governed under local laws."

Is there any Georgia Law that would stipulate a early termination in the context of this lease?

Thanks for any responses.

I'm looking for some referrals to contractors that service the West End neighborhood of Atlanta, GA.  I'm primarily into single family residences and the scope of my rehabs are generally cosmetic with new flooring, kitchen, baths, and some floor plan reconfiguration.

Thanks for any info!

~Sean

Agreed, Trello is a good tool as well.  It's free to use and has a good interface.

I'm a Google fan, so I use Google Calendar and my Google Assistant for all of my scheduling / reminders.  It's simple to just say "Hey Google, remind me tomorrow at 8:00 AM to call xxxxxxx" or "Hey Google, create a calendar event for June 2nd to visit property xxxxxxxx".  I like Google because it's on my phone, it's on my computer, and it's already built into my routine.  (I have a nightly and a morning routine created for Google where she tells me what's upcoming for the next day.

If that's the case, then I'd say you have the majority of information you need to make a decision. With potential rental income of $2,800 that leaves you with $900 for expenses and cash flow. Double check your expenses to make sure they fall within the $900 after PITI and make your decision from there. You mentioned the plan right now is to self-manage the property. Have you thought about down the road if you no longer want to / can manage the property? Have you analyzed the deal if you needed a PM? Do the numbers still make sense? Analyzing a deal is never just a one-scenario analysis. An analysis should be done for multiple different possibilities / situations to make sure the deal is as robust as possible.

Hey @Maggie Thompson, thanks for answering those questions. In short, I agree with @Evan Polaski in the sense that I don't think this property is necessarily a golden egg. I threw some numbers in a mortgage calculator to just get a sense of how much the gross rental income potential is vs the PITI and here is what I came up with. https://www.mortgagecalculator...

I grabbed the taxes and insurance off of what I assume is the Zillow listing based on what you described. From my perspective, if you're putting down 15%, and the sale price of the property is $379k, the PITI payment would be ~$2,390 and the best case scenario for gross rental income potential is ~$2,800 from what you described. That leaves you with just over $400 for all other expenses, including any utilities, repairs / maintenance, CapEx, vacancy, rainy day fund, etc... For that price point, I don't think it's a solid property.... at $379k.

But the good news is that $379k doesn't have to be YOUR price.  Every property has a price that makes it work for you.  Maybe the seller doesn't let the property go for the number that works for you, and in that case, it just means the property is not necessarily for you at this stage in your real estate journey.  Work with the calculators (both BP's and the mortgage calc) to figure out a sales price that would work for you.  Does $350k work?  How about $325k?  Obviously the lower your number is the less likely the seller will be to meet that number, but that's why the world has negotiations.  Good luck digging into the sales price and seeing what number works for you!

Hey Maggie, so the numbers you provided can only tell part of the picture of the deal and as such anyone can only give a partial answer (without making some larger assumptions).  With the initial information you've provided here's my train of thought.

Initial Glance: 

- Does it pass the 1% Rule?  At a sales price of $349k, and gross combined rent being $2400 (possibly $2700 after rehab) I would say it does not meet the 1% rule.  But this rule's primary purpose is help weed out instantly poor deals or highlight deals that should have a further analysis done - so this property hasn't necessarily struck out yet.

- Without knowing anything about the location, I'd wonder if the $1,400 rent is at current market rent values as well (obviously if the two units are very similar, the $1,000 has got to be raised if possible).

Questions to answer to help give a better idea of the deal:

1) Once the monthly tenant is out and the rehab is done, what is the ARV of the property?

2) Do rents match current market rent rates?

3) What is the rehab cost? Sure it's minor, but money is money and needs to be accounted for.

4) Does the location of the property desirable for the caliber of tenants I am looking for? - Poor tenants / tenant selection can cause huge headaches and expenses, especially if their ability to pay rent is not solid.

5) One question I think a lot of people fail to ask themselves is "What is the opportunity cost of this?".  Meaning, if I place my money into this deal, will I be unable to pursue another deal that could potential yield a better return on investment?  In most cases, there will always be a "better deal" out there, but then the question comes down to how likely are you to find that better deal?

There's a lot more questions that you can ask/answer to help get a fuller picture but you're getting your feet wet by analyzing the deal and asking questions, so keep digging for answers and good luck!

You are correct @Summer Noyes, the 1% rule  (sometimes you'll hear it referred to as the 2% rule too) is the relationship between the monthly gross rent and the value of the property. From my experience with analyzing deals in the suburbs of Philly and Atlanta, the "sweet spot" is 1.5%.  When I start finding deals that look too good to be true (2% or 2.5%+) I start getting into issues with location where the tenant pool might not be of the caliber I'm looking for and therefore, risk goes up and possible costs due to poor tenants. 

All of this however, should be taken with a grain of salt and as you've mentioned, a proper analysis would involve itemizing all expenses and calculating / validating all the numbers of a deal.  the 1% rule is meant to be used as a "first line of defense" in quickly seeing if a deal is worth spending your time to fully analyze.

@Brenden Mitchum

I'd have to say my focus area is in LTR Buy/Hold through BRRRR in SFR or small MFR. When I analyze a potential deal though and the numbers don't really fit for LTR, I do reanalyze to see if flipping would be a good option.

Looking forward to connecting!

If you haven't already, check out show 287 at https://www.biggerpockets.com/... The episode has a ton of solid information that will hopefully be helpful to you.  Unfortunately I do not have much experience in this area.