All Forum Posts by: Seth Kitchka

Jon W. Thanks, my wife ended up calling the attorney to make sure we don't screw up. He said pay the water from the rent received, deliver a notice to pay or quit. We'll see what happens.

Hi all,

So we have a tenant that hasn't been paying the water bill. They're a few months behind and we said something to them last month and gave them a notice stating per the lease you're responsible and please pay... something like that. Once again it's not paid. In our county, and I think in all of Michigan, unpaid water bills go against the property so we were advised to keep the water in our name. That way we receive the bills and can look to see if they're paying, and when they're not... Like this tenant.

So my question is where do we go from here? Pay the bill ourselves? Can we deduct from the money they're paying for rent, then deliver a late rent notice because it's not paid in full? If so, can we charge a fee because we have to now take care of something they're responsible for? Or evict?

Oh and they haven't been the greatest tenants to begin with. We are not renewing the lease with then when it's up in a few months.

Thanks!

@Pingal Sapkotahello from Muskegon

I shouldn't try to post and do math on my phone at the same time... The NOI after the "refresh" would be $18,952

@Joshua D. Thanks, we'll see what happens. 
We have a great lender that I think will make it smooth if we decide to do it.

Joshua Daniels not one individual house has the equity to cover the down payment on the duplexes. I haven't really thought of selling, we want to continue to hold. Yeah I'm out of town and haven't even seen the buildings in person yet, so going over the numbers is about all I can do now to see if it even makes sense.

William Pesce thanks for your input. Yeah I caught the COC return after the fact. I don't want to bet on appreciation, but I do think there is more rent get. I know I wasn't figuring it in the numbers, but I think I need to for it to make sense to pursue. I think right now the rents are just below market, and I think with a little refreshing it can bring $650/unit. So figuring the "refresh": Figuring $2,500 refresh for each unit. NOI = $10,672 CAP = 11.8 COC return = 23.6% $10,672 / $45,200 Refresh cash flow = $1,770

Correction to the Cash on Cash return: 16.6% = $5,872 / $35,200

Hey all,

I would really appreciate some advice on this, both on the refinancing of my SFRs and on a two duplex deal. I'm considering refinancing four of our SFRs to pull some cash for a down-payment on two duplexes. The duplexes are both two stories and on the same lot. All four units are occupied and rented for $550. I think they are under market rent and can bring $600-$650, but I'm not factoring that in to my calculations. That extra rent will be a bonus. Thanks for any advice.

1. First the refi...

Four single-family rentals we have built equity in by repairs. FYI values are $30-60k. Rents are average to low. We plan to increase rents total by $100/mo.

Current cash flow ~ $1,195/mo

Refi cash flow ~$880/mo

Refi will pull ~$55,000

2. Now the deal...

Financing:

Potential purchase $80,000 per Duplex
$16,000 down (20%)
$64,000 @ 5% = $345/mo
double this since there are two Duplexes
$690/mo debt service for both Duplexes

Income:

$26,400/yr
Each unit is rented for $550/mo

Expenses:

Taxes ~$4,000, 
Insurance ~ $1,600
Lawn care/snow removal ~ $2,400
Maint. reserves ~ $2,400
Factoring a 7% vacancy (7% is conservative for the area)

NOI ~ $14,152

Cash Flow: $5,872
$14,152 - $8,280 (debt service) = $5,872

ROI: 18%

Cap Rate: 8.8%

COC: 40%
$14,152 / $35,200 (downpayment + closing cost) = 40%

3. Cash Flow...

We factor in $100/mo per building for reserves when doing cash flow.

Current cash flow ~ $1,195/mo
Refi cash flow ~$880/mo
Refi plus the duplexes ~ $1,370/mo

All right, tear it apart!

@Pancham G. Thanks, I heard something similar from another investor I work with. I'm going to talk to my lender and attorney about this. I'm a strong believer of the K.I.S.S. acronym, so I don't want to over complicate it

@Adrian Smude

That diagram is what my CPA recommended me as well, however, we are not doing it yet because our SFHs are in our names because of the mortgage. We don't plan on putting the properties in an LLC's name until they're paid off... or when our plan changes like it will. When we get a 5+ unit it will be in a LLC's name under our "main" LLC/S-Corp (we'll talk to our CPA again when we get closer). I was over complicating it when we started too and came to the conclusion a good insurance policy is the first step to CYA.