All Forum Posts by: Rich Cavanagh

@Jeffrey Holst

Looks like the comparison between value and rent isn't as strong as I thought.

I found an older thread that referenced this site... https://www.deptofnumbers.com/rent/

My area shows really no correlation between the 2 from 2006 and 2012. No consistency.

So the big question is... what is the big driver behind rent fluctuations? It can't be as simple as a steady incline with inflation, can it?

Unemployment maybe?

I'm a pretty conservative long term buy and hold rental investor focused on cash flow. My thought process thus far has been to buy safe and smart so a good looking property I buy now isn't easily put into the red once the market turns and rent drops.

For example, I aim for $150+ cash flow / month (SF currently). I generally use zillow to see the 10+ year rent historical so I can have a reference for the worst case scenario. With one property it's a range from $650 (in 2013) to ~$900 (current). That can mean either great CF or leave me in a place where I'm scrambling to offload a property at the bottom of a buyers market.

I just wanted to pick the brains of the more seasoned veterans who have been through multiple ups and downs in the market over the years.

1. Do your reference this older data when doing your homework?

2. How much value you do you place in old rent historical given that there is obviously inflation etc.

Of course none of us has a crystal ball and rent can always come crashing back down with the change of tides... but I figured i'd start up a discussion.

I'm a pretty conservative long term buy and hold rental investor focused on cash flow. My thought process thus far has been to buy safe and smart so a good looking property I buy now isn't easily put into the red once the market turns and rent drops.

For example, I aim for $150+ cash flow / month (SF currently). I generally use zillow to see the 10+ year rent historical so I can have a reference for the worst case scenario. With one property it's a range from $650 (in 2013) to ~$900 (current). That can mean either great CF or leave me in a place where I'm scrambling to offload a property at the bottom of a buyers market.

I just wanted to pick the brains of the more seasoned veterans who have been through multiple ups and downs in the market over the years. 

1. Do your reference this older data when doing your homework?

2. How much value you do you place in old rent historical given that there is obviously inflation etc.

Of course none of us has a crystal ball and rent can always come crashing back down with the change of tides... but I figured i'd start up a discussion.

This! ^

Make sure you take the time and break down every detail. The responsibilities of each individual as well as how you will handle multiple unforeseen bumps in the road. What happens if you need more cash for closing? If you need more cash for rehab? who is responsible?

This is where a lot of people go wrong with partnerships. Some people are skiddish about putting these scenarios on the table for discussion and getting them in writing but its not out of mistrust....or shouldn't be if you are seriously considering them as a partner. The reason for a detailed plan / breakdown of responsibility is to clearly and swiftly set a standard for the course of the partnership and then squash any potential breakdown later on down the road in case either partner forgets what was agreed to.

Personally, I like a percentage based split. 60/40 for example. They may be more comfortable with that as well. Rehab numbers can be off. Especially when you are new. Percentage based splits make it feel like you are more in the game together in case the numbers are off...for better or worse. At least IMO. 

@James Roberts, Sounds like your first target is house hacking with a duplex. All of the above users have given you a ton of great advice. 

Only thing I would add is a bit of bigger picture advice. Regardless of your first step, start watching BP podcasts! I can't stress that enough. You can even cherry pick the ones that catch your eye in regards to your investing style. IE, single fam / multi fam.

Read the books the guests mention as well. 

@Drew Denham, I had to deal with this first the first time on an empty house. The tenants left a rottweiler in the house and moved. The fleas were treated 3 times by 2 different companies who said it was the worst flea infestation they had ever seen.

I decided to head over to http://www.domyownpestcontrol.com/ and handle the problem myself. much cheaper than a professional and same selection of chemicals.

Few things I learned after successfully treating them myself.

Adult fleas are only only about 5-10% of the total population. The rest are larva, eggs, juveniles.

Sprays can kill adults and larva but not the eggs or while they are in the cocoons they use to transition from larvae to adult. They are pretty much nuke proof. 

Find a nice spray for the adults that is safe and will continue killing them for months (a real one off of that site...not out of a big box store) then get a good insect growth regulator (IGR) like precor. That will keep the adults from developing and reproducing ...slowly killing them off. 

Side note: If the house is vacant you will have to go over and vacuum to suck up eggs / fleas and keep them active. If the fleas do not sense the heat or movement of a meal...they will go dormant (or the young ones will just stay in their cocoons) and can do so for close to a year i'm told. 

I had to go vacuum those carpets every other day for a few weeks to get them all. 

I picked up a painters suit at lowes for cheap .... one that has the booties sewn on. I literally had 10-15 fleas jumping at each of my feet. They cant climb the suit very well. This kept me from bringing them home. 

Since it is not vacant it will be MUCH easier. Just spray for the adults and spray an IGR to keep them from breeding and you should be good but no way to kill them all with a bomb or single session. You can get both of those sprays for ~60-80. Keep that site handy too. Have used them a ton of times and really saves some cash.

@Jerry Dengmanivanh, makes some great points. Lots of variables here.

It depends on how conservative you want to be.

Me, personally, I'd take the monthly cash flow and security of the MF. I'm in a similar spot. Day job is a grind but I probably won't quit mine until I can match my paycheck with investment income. That MF passive income will help you save up more capital as well. 

Then again... My strategy is strictly buy and hold focused on rentals so take it for what its worth. 

@Lamar Thomas I mean it kinda depends on your pricing strategy i'd say. I tend to price a bit towards the higher end of potential rent range in general and often pet owners seem to have a hard time finding pet friendly rentals.

Not against anyone who chooses to charge extra rent per month at all. As long as you do your research on the tenant, meet the animal, and feel good about the situation, I find that tenants are quite agreeable with the pet deposit and it keeps them from potentially resenting you for a double hit.

Just be fair. I also don't open my rentals to pets unless I've had the chance to completely tile it.

Second the $250 non-refundable pet deposit per animal. Damages should be taken from the Security deposit.

I'll second @Account Closed on the spending limit. The ones I have dealt with have generally set it at ~200-250 default.

It's nice to do when testing the waters with a new PM. Once you find one you can trust you can surely relax a bit as them having to get your approval for a small fix can hinder them. Regardless of the spending limit I set I want notification on every issue.

Just a few extra things that are big for me...

 l like to know how many properties they manage as a company, how many managers they have, and how many properties each manages. I have had issues with overworked PM's and have paid the price.

Also, read over their lease very carefully. I had a PM who tried to push out leases that didn't have ANY verbiage on smoking not being allowed. Their reply when I called them out? "We have business for XX years....we hardly ever have tenants that smoke and most respect the property enough to go outside."

Huge red flag... if they are too lazy to put in a small clause like that in a lease then they are not nearly enough concerned with protecting your investment.

Last but not least.... off the top of my head. I like to know that they are comfortable using MY contractors for work if I request it.