All Forum Posts by: Todd Moriarty

Hi All,

My tenant has been in my rental for 5 years now. He has been paying the rent and keeping it clean. After the one year lease expired 4 years ago, he asked to do a month-to-month lease which I agreed to and it's been that way ever since. I kept the rent the same, initially, because I liked him. My question is, should I have charged more for a MML (month-to-month lease) or refused his request for a MML and done a yearly lease? I have heard recently that most landlords charge more for a MML. I'm in the Detroit metro area in SE Michigan.

Thanks.

Thank you Nick!

Great info indeed, thank you. I'm sure I'll have some more questions regarding your answer and will probably call upon you to clarify, but first of all:.......coincidently, I read Steve Berges' book back in '07 and it was helpful and I considered it my "bible" for years. One of his examples, the Flint apartment, happens to be here in Michigan. And for years, he actually lived here (he may still). However, I thought his approach to valuation was too simple and not realistic.....in the real world...but a good start. His chapter on valuation, which was the most important to me stressed his "key ratios every investor should know" such as cap rate and gross rent multiplier. There was too much emphasis on simple ratios and almost nothing on local "comps" sales, comparing price per square feet, price per unit. My uncle is a very successful real estate investor who has bought many apartment buildings over the years (my parents met at one of his buildings) and he laughed at me when I told him I was valuating half a million dollar buildings by using these simple equations. He told me to forget GRM and do it by $/sq.ft. But I wasn't sure if you valuate income producing buildings that way. I used to work as a real estate agent and appraised houses that way. So I wasn't sure. And I haven't found that many good books on the subject. I've walked away from some good deals on apartment buildings back during the housing crisis because I didn't feel comfortable making a "real world" intelligent offer. I mean c'mon, I'm gonna make an offer using cap rate based on roughly half of the gross income and asking an appraiser what the cap rate is in an area? Is it really that simple? I spent more time analyzing numbers and comps when working as a real estate agent on basic single family houses.

One of the best things in Berges' book was his "Value Play" software for property analysis. I just recently transferred his model to a spreadsheet to do all the calculations for me. Powerful stuff. I'll ignore cap rate and GRM and focus, as you stressed in your answer above, on cash on cash return, ROI and $/sq. ft.

I'm also surprised at how many veteran real estate agents don't know jack about the subject. My uncle is a very good source of knowledge but he's a very cold arrogant dude. I'd rather chew and swallow broken glass than talk to him.

Thanks again for your reply. Are there any other good books on this subject that you can recommend? Or online resources? Or other smart guys on this website?

Thanks,

Todd

Thank you sir! Hope I can hang out with you professionals and learn a few things along the way.

I bought a commercial building in '04 from a friend in a very upscale town in Michigan called Birmingham and sold it a year later at a nice profit :) When I rented out my first house five years ago I was scared but it has been an enjoyable experience and profitable over the years.

Hi,

I'm a new real estate investor looking for info and advice on valuating apartment buildings. What's the best approach? Analyzing cap rate? Gross rent multiplier? Price per unit? Price per square foot?....is one better than another? I've read different opinions on this and see huge swings in price and can't find anything definitive. Then I can't find decent comps. What's the best place for comps? I have many questions....lots of gray areas. Lots of interest in this field but many unanswered questions.