Swap Vacation For Multifamily Investment
Greetings from a newbie to this great site.
I am planning on doing a 1031 exchange of a vacation rental property for a multifamily rental property. I am looking at a 4-5 unit multifamily property in a large elegant victorian rowhouse in a great urban neighborhood. I am planning on eventually ( 5 years) selling my personal residence and moving into one of the units.
I am trying to look at this as more of a business investment - than an emotional one - very hard for me.
The 4 units currently earn $45K/year and are in good shape. With a little more updating/restoration they would be really great. The tenants pay the utilities and the taxes are fairly reasonable. My husband & I plan on managing the property ourselves.
We have other means of income - and are looking at this building as a long term investment - that augments our other incomes - but does not make us crazy.
The vacation home operates at a huge loss - and the multifamily will have a Cap rate of approx. 8.0.
We are new to the "landlord" world and want to educate ourselves.
I welcome any advise - opinions.
Thank you all in advance.
Landlording on Autopilot by Mike Butler. $20 at the bookstore and he covers a lot of ground. He has some good ideas and points out a lot of fine points a newcomer might not consider.
Good Luck!
This is a huge generalization, but my experience with illegals is that
(1) they will call you for nothing. which is good to reduce nuisance compaints, but they also will not call when the air conditioner is leaking water onto your hard wood floor
(2) they pay their rent in cash and on time
(3) they move in several people who are not on the lease, which is really hard on the unit and property. and parking becomes a real problem.
(4) when moving from apartments to single family homes, they are caught off guard in the change in the power and water bills and end up moving out quickly (this is not a problem for you as you have an apartment)
guess the real problem is the tendancy to move people into the unit, which is almost impossible to control. the upside is that the rent is usually paid on time.
your property manager wants to run a credit report which needs a SSN. in Florida he can still run an eviction report with a valid DOB. I would require a valid state issued ID. otherwise you have no idea who is this person and it is impossible to run any kind of checks. i would rent to them if they had good rental history from a verifiable landlord (apartment complexes are the best) and it was a small family (versus four single guys) that might be less likely to move in more people.
When I have trouble renting a unit, I usually have a "move in special" where the security deposit is 1/2 the normal amount. It always works. People love a bargain. And if they leave the unit in good condition it cost you nothing. And even if they trash the unit, you only lost 1/2 the security deposit which hopefully you made back by renting the unit in less time.
You could also qualify the "move in special" for qualified candidates. Meaning that if someone had questionable credit, rental history, etc, you could tell them they did not qualify for the move in special and that they would have to pay a full or double security deposit.
Lowering the out of pocket move in costs usually fills our nervous vacancies. 1/2 deposit / no deposit/ free month. You should upgrade your screening diligence for any reduced or no deposit candidates.
No personal experience with this, but in our research in the Dallas TX market (not quite Austin but close), we were told that properties with large Latino profiles, that it is vital to your success to have a Latino run management company. Its not just the language barrier but also cultural. At least you should have a Latino representative as the primary contact to those tenants. Otherwise the cultural differences can cause barriers and trust issues, which seems like you may be having with residents afraid of the application.
Never drop your screening standards though, you still want to attract those hard-working long term renters that respect you and your property. Remember it costs more to rehab a trashed unit than to hold a vacancy
Just my 2 cents, best of luck
This is why I have no desire to invest outside of my own area.
I just found this for CA people.
http://www.presstelegram.com/news/ci_7154024
New State law prohibiting immigration status checks.
and the gov signed the bill making it law, that
landlords can not ask about immigration status.
This is a good thing it will take the pressure off
landlords and tenants.
Folks,
What is the difference between an A property and a C property? I have an experience or 2 with illegals but before I show my ignorance and discuss any quality of life issues let me get some answers first.