All Forum Posts by: Tim L.

Just to follow-up: I spoke with the tenant and he agreed to increase the rent to $2k. 

Great responses team! I'm leaning towards just raising the rent to market rate, if he stays, fine. If he leaves, also fine. Then I can look into a HELOC in order to get some cash out to get the next deal going. I truly appreciate the help, everyone!

Thanks for the responses so far. It looks like in FL there is no limit to what you can raise the rent, but I agree that a 33% raise would be tough to swallow. However, due to the past transgressions, I don’t feel particularly bad if he were to decide to leave. I could easily get it rented for that amount. 

My tenant's lease is up at the end of April, and like many other places in the country I'm looking around at the real estate market here in south Florida and seeing everything skyrocket. I've had this tenant in place for 5 years now, and he's been pretty decent overall. He pays rent on time, and doesn't cause problems, aside from a big red flag that he's been caught subletting the property without my knowledge/approval. He currently pays $1500/mo for a 2/2.5 townhouse. Stupidly, I haven't been raising the rent on him the last few years, because I thought that it would cost me more to clean/list the property again and have a vacancy month with no income. So now I find myself way below the market rent of $2000-$2300. I aim to fix that now.

I'm debating whether to raise his rent to $2k, or just not give him the option to renew the lease so I can find a new tenant at market rent. If I let him go, I would need to swap out the washer/dryer and repaint, as well as fix any other issues that I'm not aware of. I'm confident I could get the property turned over and rented for at least $2k within the month. I would be the listing agent as well, so I could save half of the commission there.

If I decide to keep him, I'm not sure how he would take the news of having his rent raised $500 all of a sudden, but I'm sure it's going to come as quite the shock. If I had only raised it $100/year, it wouldn't be such a big change, but here we are. I could also raise it by only $200-$300, but that would be leaving money on the table, which I'm not happy with either.

I also am considering selling the property in order to 1031 exchange into another rental or two. I paid $125k for the place (owe $80k now), and these units are now selling for $300k+. With my location in the community (on the water/lake), I'm sure I could be at the top of that selling price if I did some renovations prior to listing. I would need to do all 3 bathrooms, and probably put new floors in upstairs since the laminate is older. The kitchen and downstairs floors are in good shape.

Obviously, with selling there are a lot more variables to consider. I would need to get a rehab cost, and more importantly have a plan in place for what to do with the profit so I don't have to pay taxes. Turning my 1 rental into 2 rentals would be ideal, but in this local market I don't know if I could do that.

So what do I do? I want to give my tenant as much notice as possible. It's 2 months out from the end of the lease, so ideally I want to make a decision this week to give him the heads up.

Thanks so much for your replies.

@Cameron Tope @Whitney Hutten Thanks guys. I'll swing by some local banks here in town and get a second opinion. 

I have 1 rental, purchased in 2015 for $125k that my wife and I lived in for a year while we rehabbed it. Since then we purchased another primary residence, and we've been renting the original one for $1500/mo for the last 4 years. All is fine and dandy, life is good.

The value on this property has increased to around $180k, and with an $87k mortgage I feel that it's time to refinance out to get cash to purchase another property. I could buy another identical but distressed property as this one (in the same community) for ~$150k, put ~$15k in rehab, and get it rented at $1500/mo. I talked with my mortgage broker, and he was hesitant to give me the green light due to the costs/fees associated with this plan. In his words "you want to do as few transactions with me as possible", saying that refinancing the current rental into an investment loan, probably paying points in order to get a similar interest rate (currently 4.125%), and paying closing costs only to do the same again for the new loan would be wasting too much of my equity on the deal. His advice was to just save up cash until I can purchase a new rental outright with 25% down, or do the same thing we did before and rent our our current property and buy another. His position is that getting the ideal interest rates on a primary residence is too good to pass up for another rental. We could rent out our current property and purchase another, but I'd rather not move right now just to get another rental property under our belt.

Should I get a second opinion?

Napkin math: $180k refinanced at 75% = $135k - $87k (current mortgage) = $48k cash (prior to closing costs)

So I currently have one rental property, and after accounting for all costs (PITI, HOA, vacancies, cap ex fund, etc.) I cash flow right around $300/month. Everything's fine and dandy with this deal, and I have no issues with it. It's been wonderful. However, my mom is currently renting a place a few hours away from me, and barely able to make ends meet each month (her rent is $800/month).

Doing a thought exercise this morning, I realized that if I were to sell my rental, I could net ~$70k in profit, which would be taxable as a capital gain. But if I instead (1031 exchange) purchased a small property closer to my house for $60k, put $10k into rehab, I could then rent it out to my mom for say $600-700/month. There are a couple of areas near here where these numbers could actually work, as long as I could get a good deal on the purchase price. 

At the end of the day, my mom would save $100-200/month, live closer to us, and have a place of her own where she could do whatever she wants with the yard, painting inside, etc. I would benefit in having slightly more cash flow on my one rental, and know that my mom is safe and sound in a place of her own.

Has anyone done something similar to this before? While I'm purely in the thought exercise mode right now, I'd like to delve a little deeper and explore how to structure a deal like this.

Let's get some keywords going here. 

Palm Beach, West Palm Beach, Boynton Beach, Lake Worth, Jupiter, Palm Beach Gardens, Juno Beach, Tequesta, Riviera Beach, Royal Palm Beach, Wellington, Loxahatchee

Anyone interested in an informal meet-up to discuss strategies for the north-central Palm Beach County area?

@Ben Slayen @Brian Garrett @Donavon Davies if you guys throw together a WPB meet up, let me know. I've been meaning to get to the Delray one too, but the timing has never worked out.