All Forum Posts by: John Doss

Hello BP!

I just signed the lease with a tenant today. We signed via zoom because he is out of state. Here is the back story:

I do room rentals near UNCG in Greensboro, NC. I am also living in one of the rooms at the property that I am leasing out. The wife of the tenant called me a few days ago, looking for a place for her husband to stay in Greensboro, NC. She said he's a truck driver that is constantly delivering between Greensboro, NC and Chicago, IL. And said that he needs a place to stay on the weekends maybe a few days out of the month. So I had them fill out the application via avail. Background and credit check seemed good. The only thing that was a flag was that he had an eviction judgement against him at his current residence. I asked him about it and he explained the situation and said he caught up and settled the case. He is still living at that same residence and has been there for the past 8 years.

I accepted his application last night and today we did the lease signing. He wanted the lease to start as soon as possible and last for 4 months. While we were doing the lease signing on zoom, he said a few things that seemed a little strange to me. He said he would be there in 3-4 weeks but wanted to go ahead and set up his mail to be delivered to my house. He said it would be things like bank and other bills - but I have my suspicion. Why set the lease to start tomorrow if he wont be utilizing the room for another 3-4 weeks? It seems like he just wants a place to send the mail. And he also asked several times how the mail situation works and wanted to make sure none of the other roommates will touch his mail. I told him no problem, I'll hold onto it and give it to you when you arrive.

The whole situation seems quite odd to me. Pay $605 a month for a room but only use it a few times out of the month. But at the same time, receive all your mail at the property. He has signed the lease and has initiated ACH payment for first month rent and security deposit. I have not signed the lease yet and I am wondering if I should back out now and return his money when it comes through or if I can possibly cancel it? Or if I should just continue business as normal. I saw him and his wife on zoom and they seem like normal people, but it is just a very strange situation and I don't fully understand it.

@Dave Poeppelmeier

That sounds good. The company comes into play in the case of a student who doesn’t have someone who can co-sign. But I see what you’re saying. This is all new to me so I’m trying to learn as much as possible.

It seems like a legitimate company that eliminates a lot of the hassle of requiring guarantor/co-signer and minimizes the risk for student housing. They are a nation wide company. I'm surprised there's not anything about this on BiggerPockets yet. Here is an interview with one of the company's executives. 

Interview with Leap executive

Hello BP! Currently in the process of purchasing my first house hack (a duplex) near the local university and plan to rent out by the room. I expect my main target demographic to be students/young professionals. In this situation, obviously most students wouldn't meet the income requirements to pass the screening. However, I was digging around and found this guarantor/co-signer service that a lot of the local student housing apartment complexes utilize to rent to students that would otherwise not qualify.

The company is called Leap (https://www.leapeasy.com/landl...). On their site, they assert that they will act as the applicant's co-signer/guarantor for a fee (that is paid by the applicant). Once approved, the tenant pays Leap and then Leap sends the landlord the rent check every month. They claim that if the tenant defaults on payments, they will continue to pay the rent, and will even cover a portion of the legal fees for an eviction. They also claim to provide free marketing by featuring the property on their direct-to-consumer marketing platform. 

After a quick search of the forums, I didn't really see much info on services like these. What is everyone's opinion? Too good to be true? Or is this something that could be very useful to utilize?

TLDR: The company assumes the risk of renting to tenants that would otherwise not qualify or meet basic screening standards. The expense of the service is placed on the applicant. Landlord also receives free marketing of the property on their site.

@Kristopher Kyzar

Thanks. Yea the tax is pretty high on that house, its coming in at $3856 per year.

Do you guys think its wise to not include utilities in these analyses? I know with a SFH its easy to just have your tenants pay for the utilities. But in the case where people are renting by room, how is the best way to do that? Would the landlord pay for it then divide it up by the number of rooms and bill the tenants each month?

@Tchaka Owen

I put the management fees in there with the assumption that I won’t be managing forever (after I am no longer house hacking). And house prices vary - going west they increase or are about the same, East/south they decrease. But the reason why I really like the UNCG area is because that is where all the multi-family homes are. In my city, you’ll be lucky to find a single family home for cheaper than $220,000 that can rent for more than $1600-1700 in a good area. So the rent to price ratios appear really thin across the board (less-so with the multi-family, I believe). I put the $50k rehab in there as a very rough estimate given what it needs, but it could be more or less. I plan to do a lot of the paint and cosmetic work myself which would cut down on costs.

@Sean Rooks

@Sean Rooks

That’s a good point. And currently, my living expenses are zero because I’m living with my parents (recently out of college) but I’m looking to build equity, cash flow and start investing. So I think any house hack I do would cause me to have greater expenses than I currently have. And that’s a good point about the R&M, capex, and 5% down. I will play with the numbers today and I’ll upload the results. I intentionally kept the numbers high on property #1 because it’s so old and I am assuming there are other things that will need fixing in the near future. Also, all of the appliances are extremely dated (they could almost be collectibles), so those are some other reasons for the high capex.

Something to take into account is that both of these analyses were ran after I’ve moved out of the property. So with my occupying 1 room (or unit) it would definitely be a negative cash flow situation.

I am currently comparing 2 multifamily homes to buy as a potential house hack. Both are located near UNCG (a local university) in Greensboro, NC (less than a mile away from one another) and are great for student housing/young professionals. I ran them as rentals (once I've moved out after 1 year). I would like to get some other opinions on these before I take the plunge.

Property #1

Property #2

Some things to keep in mind:

Property 1 is a SFH that is being used as a triplex. Unit A is 2 bed/2 bath with kitchen and den (rent for $1000). Unit B is 2 bed/1 bath with kitchen (rent for $700). Unit C is the basement and its 1 bed/1 bath with kitchen (rent for $600). It was built in 1925. The roof is around 20 years old, the furnace is out so the house does not have heat. The interior is very outdated and is in need of quite a bit of cosmetic work (paint, carpet, etc.). Upon looking in the crawlspace, it appears some materials were used that could have asbestos. All utilities are currently being paid by the owner and he said they are around $400 in the summer and $500 in the winter. Obviously if I were to pay utilities, there would be negative cash flow. If I buy this property, I plan to have them split or bill them the cost of utilities. It has been on the market for quite a while and has been marked down ~5k. It is currently listed at $215,000. Other renovated triplexes around the university are in the low $300,000 price range and command about the same amount in rent. The ARV would likely be in the upper $200s.

Property 2 is in a more upscale area. The surrounding houses are around half a million. It is a SFH that is being used as a duplex. It was built in 1962. It needs less major repairs than Property 1. It is in need of cosmetic work (paint, flooring, kitchen reno - approx. $15,000 - $20,000). The lower unit has 3 bed/1 bath with a kitchen and the upper unit has 3 bed/1 bath with a kitchen as well. It is currently being rented out per room for $350/each but would increase to at least $400 per room after renovations. It is currently off-market and the owner would take around $310,000 for it. According to my realtor (who is functioning as my realtor and the seller's realtor) it would easily sell for $340,000 if it goes on market (and has an ARV of ~$375,000). I have the opportunity to get in on the deal while its off-market but I want to make sure I am not buying something that will end up costing me per month. This property has a deck on the second floor and a mini-parking lot behind it which is more than enough to accommodate all 6 tenants.

For both of these properties, I did not include utilities because I plan to find a way to bill the tenants for utilities or run separate meters to each unit. I also did not include PMI which would likely be in the $200-300 range. With how the market is appreciating in this area (10-15% in the past year, and 3-5% in the past month), and given I would be performing renovations, I believe the PMI could be taken off with in the first 1-2 years. I plan to use conventional financing with somewhere between 5-20% down payment. My parents offered to partner with me to be able to qualify for the mortgage and then offered to lend me enough to do a 20% down payment to avoid the PMI, however, would it be better to maybe do 10-15% down and then use the other 5-10% for renovations? With reno + the rapid appreciation in the area, I do not think it would be hard to reach 20% equity in the house in a short amount of time.

That’s awesome! I drive past these apartments frequently. Sounds like you snagged a really great investment. Best of luck!

@Emanuel Eyssallenne @Jacob Laird

I personally haven't joined the triad REIA yet but it is on my to-do list. The value seems to pay for itself, kind of like having a BP pro membership.

I've seen a few small multifamily homes but the good deals seem to be bought up by cash buyers within hours of being posted on the MLS. At this point I am focusing my attention on finding 3-4 bed/2-3 bath single family homes and plan to rent out rooms. And houses of this type are in the 190-230k range if you're in a decent neighborhood. And these houses would only rent for $1300-1650 after turning them into a pure rental.

I have a few friends (non-investors) that have been trying to buy a house/condo in the area and have lost out to all-cash investors. From what I can tell, you need to submit an offer over market value if you want to stand a chance in the triads market. At least when it comes to shopping on the MLS. I regret not starting the search a few years ago!

Hey Emanuel,

I am new to REI and also located in Greensboro. There is a triad REIA and they have a monthly members meeting but they also have sessions every Tuesday at lunch I believe.

It’s definitely a sellers market right now. I am in the process of looking for my first investment property as a house hack and I will say it’s been pretty challenging in the current market. Lots of people are coming to the triad to invest currently.