All Forum Posts by: Account Closed

@Jennifer Fernéz

Landlording is not a get-rich-quick scheme. Its very slow and steady. Depending on your market, property values and rental levels, you may only cash flow $50 a month, or $100 a month, or $150 a month... or $1000 a month. I don't know your market. You need to do the math and decide if its worth it for you.

You'll see a lot on the forums about the 1% rule. I won't get into whether or not this is a "rule" or whether it is a good measure of your success as a landlord. But to use a simple example, if you purchase a property for $100,000 and you rent it out for $1,000 a month, you meet the 1% "rule". Then comes the 50% rules which says that typically (it holds true across most markets) that half of that will be expenses (maintenance, property management, vacancies, taxes, capital expenditure, etc). So then your income in this hypothetical example is $500. Then you still need to pay your mortgage. The money left over is your cash flow.

This is an over-simplification, but find some properties on the MLS, go look at some houses that you would consider to be a "good deal" and then ... do the math (there's a great spreadsheet in the "analyze" tab above), put in real numbers (or as close to real as you can get) and then figure out if its worth it for you. Figure out if landlording fits into your short, medium and long term financial goals.

For me, I'm not depending on the income from my 2 rental units. I leave them be and have my property management company take care of them. Over time, the properties will appreciate in value and I can figure out if I want the continued income from that or if I want to sell. But, as a buy and hold investor, I have a long term horizon.

@Oscka Flocka

You're in the right place! Your question is quite broad so it will be hard to respond. But if you look around on the forums and search for threads on landlording, you'll find a lot. Set up alerts for yourself using the word "landlord" and you'll get alerts everytime that word is used in a post. Look at the "Learn" tab above and you'll also find resources on how to analyse rental properties and various forms and documents that will be useful to you.

Further, listen to the podcasts that deal with rentals and landlording. There is a wealth of information.

Congratulations!

What is the reason for changing it back to a three bedroom? I'm guessing because it gets you higher rent?

@Will Bert

Its so nice of you to be helping them out like this. The best advice I can give on any investment is the sleep test - will it keep him awake at night? Something that may not stress you out at all may make someone else break out in a sweat.

I live in the US and my property is in another country. Having a property management company you can trust is important. As extra insurance, I would also ensure that maybe a friend or a family member in Vienna can keep an eye for you. If my property management company needs to do any repairs, then I'll have my mother get me at least a second quote to make sure their price is reasonable and I'll also have her stop by to ensure the work is being done properly.

I did once have a property management company but I had no one nearby the property that I knew. There was a list of things that needed to be prepared and they sent me a quotation for the work. I gave them the go ahead to do the work and they deducted the amount from my next rent check. In the end, when I sold that property 2 years later, the prospective buyer asked me to repair a bunch of things before she would purchase the property. Can you believe, everything on her list was something I had paid the property management company to do. Just saying, put a support structure in place so that this does not happen to you.

By the way, I'm hoping to move to Vienna in June for a new job. Glad to hear there are property investors there as well.

If the income source is illegal, the applicant is not likely to have verifiable income (W2) or tax forms or a great credit score. And then there's the background check you're likely to do for criminial and rental background. So you'd probably screen them out of your tenant pool anyway.

I think the restriction is more about wanting to specify income source because you think that a person with a particular profession would not be a suitable tenant. So I heard someone complain that their tenant (a hairdresser) was seeing her clients in the rental unit and that there had been multiple complaints about drains blocked with hair. You can't say that you won't rent to a hairdresser but you can put stuff in the lease agreement that you don't want the person practicing their profession from the home. I recall another person on BP who got an applicant that said they loved the apartment because it was the perfect size for her to use for the daycare business she was planning to start. That you don't have to accept.

Hey @Roc Pilon

Congratulations! Very impressive that you made that happen.

My first focus would be on moving into your new home and getting your first tenant in place and paying (you didn't say in your post if you took on an existing tenant or if the unit is vacant). Maybe you need to get the house spruced up. It wouldn't hurt to learn some skills in fixing things, painting, simple repairs - even if you plan to outsource these functions as you grow, you'll be a better negotiator with your contractor or property manager if you know how much stuff costs and how much work is involved in different tasks.

The first year will pass quickly enough. I would invest any spare cash (savings from your job, or cash flow from the upstairs unit) into a reserve fund for any major repairs that may come up down the road and then, secondly, to start accumulating cash for a second property.

You're young so you have time to learn all the lessons that you will learn from doing the above. The last thing any of us would want is for you to over-extend yourself too quickly.

Again - Congratulations on your purchase and wishing you all the best.

Wendy

Have you spoken to your bank about being able to roll the repairs into your financing? Will this be something they consider if you're only potentially putting 10% down? Also, bear in mind, they may have different standards than you. For example, they may require that the work is done by licensed contractors. And also as I've said before, they may not be willing to finance a place that has code violations (e.g. is an illegal 3-unit). All of this depends on what they say.

For me, your first step will be to learn how to run the numbers yourself. You've been on biggerpockets now for 2 years so you should know where to find the different resources you'll need. Even with all the templates and helpful spreadsheets you'll find on the site, none of them is going to give you a definitive answer. You need to get professional contractors in there (at least 3) to give you a realistic idea of how much renovations will cost. I'm sure it will make a difference to you whether the repairs will cost you a few thousand or a hundred thousand dollars. Make sure you go into this with your eyes wide open. Its very easy to underestimate how much these things will cost. One key cost you miss from your list above is "vacancy". What if a tenant moves out and trashed the place and you need a few months to fix the unit up before you can re-rent it. You need to have money in the bank for those months.

Second step is to find out for certain if the property is a legal 3-unit or not. Code violations can take a lot of money to fix. Sure, if you can get your bank to give you financing anyway (assuming a miracle that it doesn't come up in the appraisal or the inspection), maybe you'll get away with it for a few years but eventually they'll catch up to you. That being said, if you find out for sure that the place is not legal, this is a great negotiating tool to get the owner to come down in price.

If everything goes well, maybe you'll scrape through but if it goes really badly, and you lose the house and have to declare bankruptcy, remember you'll still have to repay your parents. Make sure your conscience is clear if you're going to take a loan from your parents - is this their retirement money? If you lose their money, will they still be OK? I think you need to have more of your own "skin in the game".

What kind of money do you have lying around? Let's assume you can get it for $500,000. Do you have money for a downpayment and for closing costs? Have you spoken to your bank about a mortgage. And do you also have money for all those repairs that you mention?

Also, check with someone who knows, but if its currently not a legal 3 bedroom, will your bank be willing to finance it without it being made legal or converted back to a 2 bedroom?

It sounds to me like you're just going to keep running it the way you've always run it. If you are really intending to become a landlord and be professional about it, open up the good old Excel and run the numbers until your eyes burn. And do some research.

@Joe Cummings

Its amazing the stuff people don't notice. Keep us posted on how this turns out.