Hey friends. So as everyone knows not everything is rosy in real estate investments (the majority…). I raise…
Hey friends. So as everyone knows not everything is rosy in real estate investments (the majority…). I raise a "blackening" issue that should always be taken into account and that is vacancy. We bought a property from which all the numbers work and suddenly the property stands empty / or a tenant like a clock that went out, etc. and find ourselves for a while without a rent.
Here's my dilemma: So pictured is an amazing property I recently purchased. I will expand later that it will be my turn for the weekly corner about my entire process in real estate in the US as mentioned for the next time...
As for the property and the dilemma of all the numbers by the book, we will buy at a good price below the market, its yield is good and according to the plan.
Mama until I bought the house, we renovated what was needed, we arrived in November and the cold winter was around the corner and this is the deadliest time of the year.
Suddenly it is not all pink and we believe that the pink will return of course that everything will be leased but now we have to deal with the crisis.
Some property data Purchase price 210 Market value 235 A, the most sought-after neighborhood in the area of affiliation to reputable schools and a variety of Amanties (another term for interpretation - attractions and services in the area)
Rent according to all CMA reports no less than $1795.
The property has been on the market for over a month and there are no applicants. Lowers the price by $50 and still nothing. The management company is now offering 1700 if I'm desperate to find a tenant ($100 less than the original plan).
So the dilemma is to lower to 1700 and offer a contract for 15-18 h so that in renewal I will be after the winter and I can raise the price back to the market price or wait a little longer to find a tenant at the market price who will ensure the property is rented at the right price. Alternatively find a tenant in 1700 or more just for a year and then next year comes back for goodness sake…
I tend to lower the price and find a tenant for a year plus a few months let's say 15 or 18 so that the renewal will be after the winter.
Conclusions that are important to remember - Americans are a different culture, it's not like us Israelis that when we see an apartment worth renting in a neighborhood that we want to live in, we will also look at apartments for 200-500 NIS above the budget and yet we will be interested and bargain. The average American for $25 will either leave home or not be interested in the property at all. This is something that is important to emphasize in renewing the contract next year as well. In the US, for the most part, in a good market, the rental prices are updated upwards and every year there will be an increase in the price of NIS that the tenant is required to pay. There is no such thing as an option in Israel.
Whenever a tenant leaves I first find out if it's a price issue and then I am flexible. For example, I had a case where a tenant of several years wanted to leave because of the market price that went up and I became flexible and maintained and on the other hand in another property the market price went up and the tenant did not renew. I inquired with this price it turned out that the tenant was leaving for a real reason that he had purchased a property for himself. So another tip to give that a contract has expired and there is a good tenant try to do everything to preserve it even at a price of less than a quarter of what the market offers.
Link to the original post in the United States Real Estate Forum on Facebook - Works on a desktop computer (To view the post must be members approved for the forum):
http://bit.ly/2NfoUdi
The original responses to the post can be read at the bottom of the current post page on the site or in the link to a post on Facebook and of course you are invited to join the discussion
Agree with everything you've written above except the problematic 4 clause.
If
You make a two-year contract without an option to leave with 60 days' notice and in general, but you are flexible if he decides to leave before that, it is actually a unilateral option that you gave to the tenant and what about reciprocity?
What will happen if you want to sell and sell before the end of the period and the tenant will refuse to vacate in favor of the buyer that the right to eviction is only his?
Where is the house if you can ask?
Thanks .. Great post
Two things 🙂
1. Well done about buying the property
2. In my opinion, a mistake for "beginners" (I don't know if you are a beginner or not, but it's for everyone). Why buy a property for $210000 for a rent of $1800??? And say it is worth $235000 (your market value - means you have about $6000 capital gain on the property) why are you doing this…… (really I would love to know). This is a yield of 6%!!!! (very low in my opinion). I know a number of people who do this and today they come to me to get them out of such investments (mostly because of tenants who don't pay - yes yes it happens even in the best neighborhoods!!!)
And now that I've got the steam out that's what you have to do. Download to $ 1700 or less to rent the property (and hope the renters will pay). Also rent at $ 1650 to get the property off the market.
Sorry if I'm a little "upset" but that's my opinion
Omri Ben Ya Just what I came to say. It is better to lower price and put in hires as soon as possible. Quality hires, of course
A blank month costs you more than $ 1700.
Take down even $ 100 and lose "only" 1200 (over a year).
Sometimes it pays more to lower the price and rent the property faster than to insist on a high price and miss a month.
Hi Daniel. Thanks for the great post that definitely talks about a problem that bothers us all - a dead time when the property stands empty. I can tell how I try to deal with the issue:
1.First the contracts I make are two years. I allow a long contract without a price increase after a year so that the tenants promise themselves a lower price if they sign for two years.
2. I price the contract about 10 percent below the market price, as the cost of the management company, and manage the property directly with the tenant - this of course depends on the nature of the property and the quality of the area - in the area and conference you describe it seems possible to me, but here of course there is the dilemma of whether you prefer to be More passive but pay a premium for it or be more active and handle the problems yourself. From my experience, the quality of the management companies in the US is such that in most cases I take care of the problems myself to find the best contractor prices and therefore I do not have a significant contribution in using management companies in properties located in level A areas
3. The contract states that if the tenant does not pay, I enter a management company
4. No exit from the contract - I do not give an option for 60 days notice in advance. For the benefit of the tenant price is charged for two years. Of course I am flexible about this if necessary but in the contract itself there is no possibility.
What gives you the contract above is finding a renter more likely that you are priced less than the market price, but you do not have a direct impact on the cash flow because you are not using a management company.
But of course it is only suitable for high-level properties with very high quality rents.
You can advertise the property in a real estate agency that already has a pool of tenants pending - most management companies do not have such a pool because it is not their main business but worth checking out.
I would not enter into a contract with the rental company that requires you to work only with them and I would actively use the various mediums to find a renter myself.
Hope I helped!