All Forum Posts by: Steve S.

To me you're leaving a lot of numbers out of the equation which would paint a clearer picture, but I'm a simpleton.

For option 2. You're stating that you're putting 130K down on the property, rent would be 1200/mo your cash flow is 250/mo so that would suggest to me that you're still carrying a mortgage with payments around $800 a month. So ball park figure is that you purchased a 260K home and you put 50% down. (This is an important assumption as it deals with how much of the payment would be going towards principle versus interest for long term growth)

If my assumption is correct for the numbers on option 2, I guess it depends on what you want to do or how hard you want to work.

The great thing about option one is that basically after you "BRRR" you gain your initial equity back when you refinance so you can go out and get another deal and do the same thing over. If you did this over and over again you could easily have a portfolio worth an excess of a million dollars in a very short period of time.

Your second option is a "low workload" option. You buy you rent and you reap the rewards. With $250/mo cash flow per month that equates to 3K a year and around 2% return on your money. Here you're hoping for appreciation and the fact that you've put such a large down payment on the property the majority of the rent is actually going towards the principal versus interest.

IMO there's pros and cons to both strategies... one is very effective if you wish to build wealth and a passive income, the other is a good strategy to have if you already HAVE wealth and want to supplement it with a passive income.

What is your market you're trying to sell this home to?

Is it more of a single or dual income no kids type home. Is this a place that's far away from any schools or playgrounds? Is this house closer to many sources of employment?

I see NOT having a tub in a house as a great deterrent to those that may have or want to have kids or pets.

I do  not know what the housing market is like in your area, but you eliminate potential buyers without a tub in the house even if there is the potential to install one in the basement/lower level.

You will get your money back if you add the tub, but more than that you will get more interest in the home and potential for those bidding up/against each other. Without a tub you limit the buyers.

What I'm not understanding from your post however is the dimensions of your bathroom. You say that you have a 7'8" x 7'8" space to work with. That's plenty of room for a tub/toilet combo on one side and vanity/sink/mirror on the other.

If the house has been gutted, you are not under the constraints of where the door, plumbing or electrical has to go. You've got a nice blank pallet to work with to create a masterpiece! While in my opinion 7'8" squared is HUGE check out some small bathrooms on IKEA or European  schematics. You'll see some great ideas to make use of every square inch of a small space.

I wouldn't want anyone else to try and find my next tenant except me... who knows if their standards are similar to mine.

This is your business YOU do the work! You find your next tenant.

I would tell them though they are responsible for rent UNTIL you find another tenant or their lease is up, which ever comes first.

If you wanted to buy one house could you tell the bank you're not going to pay for the one you're currently living in anymore b/c you're looking at buying a new house?

Sometimes people will have to carry two mortgages for awhile, or pay rent at one place even though they're not living there any more. In the conditions of the sale of the house THEY could've put that they were not going to take possession until their lease was up. THEY chose their possession date, you shouldn't be out of pocket for that!

Tell them they're responsible for the rent until you find a new tenant. Tell them you want written permission to show the house or unit to prospective tenants with 24 hrs notice.

These are items that SHOULD already be in your lease agreement.

Now the tenants have an incentive for you to show the unit to tenants that YOU have vetted. Plus if there's any damage to the unit when you're showing the unit, you can tell the current tenants what needs to be addressed prior to moving out, as well as if they fix it sooner there's a better chance of getting a tenant in sooner.

They are now motivated to have the unit in pristine condition, you get yourself a new tenant, everyone wins!

Is there a written contract?

What does it say in your written contract about late payments?

You can't make this stuff up as you go along. If you're going into a meeting with this individual you best be prepared! Would you go to court without all your documentation and expect to win a settlement?

If you have a contract in place I would take the "meeting time" you have to go over said contract with your tenant. (He/she is NOT your room mate even though you share a space YOU are the landlord!)

Without a doubt your tenant has been taking advantage of you. The fact they will go out and get gifts, pay for their phone, computer, internet, car payments and NOT rent shows you their priorities.

If you continue to have issues at some point you may see yourself in court. So I would recommend the following:

1) Get some sort of contract (lease agreement) put it in writing and have your tenant sign the document. The contract should include ALL items you would normally find in a tenant/lease agreement.

2) Establish a method of payment that will be consistent and on time. Some people like setting up something with their bank where they can automatically transfer funds to your account. Others like writing post dated cheques. What ever method you come up with, just make sure it's NEVER an issue for you to receive payments on rent. 

I have house hacked and let me tell you nothing is more uncomfortable than sharing the same living quarters with someone who is past due on their rent and seeing them day to day. It's absolutely awkward!

Contracts will in the end settle any/all disputes, learn from this and start treating your business like the proper business it is supposed to be.

Please forgive me if I have my facts messed up.

1) You believe this property will rent for around $900-950

2) If you purchase this property you believe it will cost you around $700 in mortgage fees.

3) there's 10% vacancy rate in this area.

I would run from this deal! There's only $200 difference between your mortgage and the rent, and you still will have to pay for insurance, land taxes and wear and tear on the property between tenants.

You won't make ANY money! This won't be a positive cash flow it's a negative cash flow.  And what if the property doesn't rent for 3-6  months? Will you be breaking a sweat paying off that mortgage without a tenant? Or will you settle for a tenant that you may not typically want. (This is the start to every bad tenant eviction story BTW!!)

From the sounds of it you're trying to justify this decision by saying the property will appreciate over time. I live just a little north of you across the border and I would say our housing markets are relatively the same. Sure the markets won't "slump" but they don't surge either. Think of property appreciation as the cherry on top. The "long term holiday bonus" you get for the years you put in managing the property or finding and working such a good deal.

Even with 3-4% appreciation you will be putting money into this property hand and foot I assure you, and at the end of 5 years you will realize that the total net gain, you probably will be far better off putting the money you did have into either (a) a better deal or (b) some sort of ETF that averages between 6&7% a year.

This first place you make your money in real estate is on the BUY! The numbers have to be right. Now if I told you, that you could buy this property for 80K it would be a no brainer for you and you'd pick up this property in a heartbeat b/c you KNOW you could make money right off the hop.

Seems like in this deal you're trying to "justify" poor cashflow by "utilizing" appreciate values. That's very VERY VERY VERY bad business practices. You can only count on the money that's in your hand, not on what MIGHT happen in a 5-10 year window.

Run don't walk from this deal... go home and start crunching the numbers to figure out how after ALL expenses and you should always include cap ex! (even if the house is brand new!!!) that you can generate positive cash flow.

hint: I look for a cash flow between $150 and $300 as acceptable, with an ROI of around 11%. All "appreciation" is just a bonus and should NEVER be considered as a reason to invest into a deal.

Through correspondence, he has been telling me that his wife is going through chemotherapy, and that the notice to vacate / eviction notice, and emails have had an emotional toll, and that he will file a lawsuit against me for emotional damage, etc.

You know what would reduce the emotional toll?? PAYING THE RENT!

There is absolutely no good time to evict a tenant! When have you ever heard from a tenant, 'ohh you're serving me a notice to vacate... ohh for sure that's awesome this is a good time for me.. I'm just going to get my stuff and leave"

The only issue I have is that you have waited this long. First time the cheque bounced I would be serving them a notice.

Life circumstances are not going well for tenants but does that mean that it should affect your pocket book. You have done the right thing at this point, cut it loose and move on. 

bifold doors are generally cheap. You could paint them to spruce them up. When they're in a tight hallway I personally find them just annoying. I typically just remove them, add a bit more lighting to the "closet washer/dryer area" (usually what's in those kinda closets) and bob's your uncle.

#1 the job of the home inspector is to work FOR the buyer or home owner who hires them. 

Did you hire an inspector when you purchased this property? If so I would be upset you weren't aware of these issues before hand and have a valid argument. If not... I don't really think you have a leg to stand on here.

An inspector's job is to look over the entire home and make note of things that may be a hazard, structurally unsound or become an issue.

Asbestos? Mold? ... these are things that should NOT be taken lightly!

EVERY time I purchase a house it's contingent on passing a home inspection to MY approval. Meaning if there's something in the home inspection I don't like I can always back out of the deal!

The inspector did their job and acted in the best interests of those hiring them. The buyers made a decision accordingly.

A home inspection cost between 200 and 500 minimum... you just had two at the cost of the buyers. Look at the positive you now are aware of some issues that need your attention.

Houses have problems. It's nothing personal. If  you feel they're serious enough give them your attention. If you do not then don't. 

I personally would NEVER be able to sell a house knowing it has asbestos or mold. Regardless of where it's located.

Get it re-mediated and you get the paperwork that you have had it done... 

It sucks I know you probably just want to get this deal done and move on. I would recommend that you add some really good people to your team. From the sounds of it, you need a good home inspector yourself, furthermore it sounds like you need a good realtor. If this is going to be your business treat it as such and screen your "personel" carefully so they're working FOR you. 

Wishing you more prosperity than headaches... 

Kitchens and Bathrooms are where you always add the most value to your property. If you were trying to get a lot of tenants want your unit, that's the first place I would look for improvements. 

But you will honestly have to do a needs assessment on your property. Go room to room. How many bedrooms are there? How many bathrooms.

I would rather have a 3 br than a 2 BR... so if possible that's one place I look to take some space and turn it into another BR. If there's only one bathroom in the house I also look at adding another as well. It just adds value.

The absolute number one reason why permits are in existence is ensure that the work is being done to correct building codes. And if you have the opportunity to make improvements and update a buiding to current building codes you do so.

It is ALWAYS better to get a permit! You can even do some work on your own and pull your own permits. Talk with your local inspectors to get a better idea.

It's also in your best interests to have permits. You show your newly renovated suite to someone, and in the portfolio you show the documents with the permits you have had approved, a prospective tenant will feel better knowing the work was done correctly and to code, and that you're not trying to get things done cheap or cut corners which may risk their health or safety.

Yes it may be a bit more time consuming to pull permits. But if you're organized and ahead of the game you can usually get it all done without having any major issues or hold ups in your project.