new 4-plex

[JessHunt]

Whew! It`s taken a long time, but I`ve finally purchased a 4-plex, in Innisfail, AB.

I plan to manage this property myself and learn the ins and outs and how to handle new situations. My first is that 2 of the tenants do not use cheques; they pay with cash. Unfortunately they live and work in Innisfail and want to deposit their cash, but none of the banks I bank with have a branch there. How do you get around this if meeting on a specific date each month might be problematic?

Also, 2 of the tenants have asked to do the lawn and snow maintenance. I`ve seen on other posts that this is considered to be a viable situation, but how would you screen them to ensure that they would do a good job, and how would you determine a fair rate of compensation?

Thanks, Jess

 

[MonteDobson]

QUOTE (JessHunt @ Sep 9 2010, 09:37 PM) I plan to manage this property myself and learn the ins and outs and how to handle new situations. My first is that 2 of the tenants do not use cheques; they pay with cash. Unfortunately they live and work in Innisfail and want to deposit their cash, but none of the banks I bank with have a branch there. How do you get around this if meeting on a specific date each month might be problematic?
Congrats on the purchase!

Why not open an account at one the the local banks...problem solved. Or look into direct debit from the tenants accounts with ATB or other banks??

PS. Did you get a good deal??

 

[JessHunt]

QUOTE (MonteDobson @ Sep 9 2010, 07:41 PM) Congrats on the purchase! Thank you!

Why not open an account at one the the local banks...problem solved. Or look into direct debit from the tenants accounts with ATB or other banks?? That may be the best solution. I considered it, but since the mortgage and other payments will be coming out of my bank I was trying to not spread myself too thin, or get in a new bank`s bad books by withdrawing these amounts as soon as they`re deposited. I suppose there`s not a better way though. The tenants are new Canadians and seem a bit spooked by the banking system and the change of management. Might take some time to build trust.

PS. Did you get a good deal?? A bit under appraised value, and at a price that appears as if it will cash flow in Innisfail, which is about 15 minutes from Red Deer and close enough for me to manage. Possibly not great, but undoubtedly a good fit for the get rich slowly concept. Thanks for your help on the banking question.

 

[housingrental]

Do not hire your tenants to do work on the properties
If you have more questions please see above line

 

[ChrisDavies]

FYI, the law says the method of payment must be agreeable to both parties, and cash doesn`t sound agreeable to you. You can refuse it and require a cheque or money order. They can get money orders at Safeway for a couple bucks.

At Davies Management we stopped taking cash because it was unsafe for our caretakers to be storing or transporting what was often tens of thousands of dollars. People ***** a little, but it`s much better in the long run, and you avoid counterfit bills (your problem once you accept them).

 

[MonteDobson]

QUOTE (JessHunt @ Sep 9 2010, 09:37 PM) Whew! It`s taken a long time, but I`ve finally purchased a 4-plex, in Innisfail, AB.
Hi Jess,

Quick question regarding financing your 4-plex. We are looking at a bank of 3x4-plexes in a row. Did it fall under the residential or commercial sandbox? Did you put 20% down? What was your purchase price and approx gross rents?

Thanks,

 

[rharrap]

QUOTE (MonteDobson @ Sep 10 2010, 12:53 PM) Hi Jess,

Quick question regarding financing your 4-plex. We are looking at a bank of 3x4-plexes in a row. Did it fall under the residential or commercial sandbox? Did you put 20% down? What was your purchase price and approx gross rents?

Thanks,

Hi Monte,

If each 4 plex has a seperate title, it could easily be done residentially, likely with 20% down.

 

[JessHunt]

QUOTE (ChrisDavies @ Sep 10 2010, 09:00 AM) FYI, the law says the method of payment must be agreeable to both parties, and cash doesn`t sound agreeable to you. You can refuse it and require a cheque or money order. They can get money orders at Safeway for a couple bucks. Very interesting! I was not aware of that law, and it will indeed influence the method we use. I will suggest that method, and also offer to accompany them to the bank to set up their own chequing account, as they do seem intimidated by the banking system. Or would that not be advisable?

At Davies Management we stopped taking cash because it was unsafe for our caretakers to be storing or transporting what was often tens of thousands of dollars. People ***** a little, but it`s much better in the long run, and you avoid counterfit bills (your problem once you accept them). Another interesting law, and one to take quite seriously. Cash is so much more difficult to trace the paper trail, which is another matter I`ve been questioning.

Thanks for your help!

Jess

 

[JessHunt]

QUOTE (MonteDobson @ Sep 10 2010, 11:53 AM) Hi Jess,

Quick question regarding financing your 4-plex. We are looking at a bank of 3x4-plexes in a row. Did it fall under the residential or commercial sandbox? That sounds lucrative. I was told that 6 units would be commercial, so this was residential. Did you put 20% down? Yes What was your purchase price and approx gross rents? 36000/395 000 - 9% on the first filter. What are your purchase prices and gross rents? Where are your 4-plexes?

Thanks,

 

[MonteDobson]

QUOTE (rharrap @ Sep 10 2010, 02:01 PM) Hi Monte,

If each 4 plex has a seperate title, it could easily be done residentially, likely with 20% down.
Thanks Rebecca,

My concern is that we`ve got 8 mortgages already, so may "hit the wall" at some point in the residential sandbox. And commercial lending relies more on the cashflow of the building rather than the credit of the borrower.

 

[rharrap]

QUOTE (MonteDobson @ Sep 10 2010, 02:10 PM) Thanks Rebecca,

My concern is that we`ve got 8 mortgages already, so may "hit the wall" at some point in the residential sandbox. And commercial lending relies more on the cashflow of the building rather than the credit of the borrower.


Hi Monte - that may be case but I wouldn`t know until i see the application and run the numbers.

Whats nice in this situation is that you would have the option - if it doesn`t work residentially, you can always look at it commerically instead (the commerical lenders wouldn`t be too concerned that its seperate titles). Wheras, if it were not seperate titles, you wouldn`t even have the option to look at it residentially. Drop me an email, i`d be happy to run your numbers and let you know your options in terms of rates/prodcuts.

Thanks

 

[RCrein]

QUOTE (JessHunt @ Sep 9 2010, 11:37 PM) Whew! It`s taken a long time, but I`ve finally purchased a 4-plex, in Innisfail, AB.

I plan to manage this property myself and learn the ins and outs and how to handle new situations. My first is that 2 of the tenants do not use cheques; they pay with cash.

Also, 2 of the tenants have asked to do the lawn and snow maintenance.

Thanks, Jess

First, congrats!

Second, It is possible that your tenants aversion to anything but cash payments has more to do with underclared income than distrust of the banking system.

Also, I agree with Housingrental that hiring tenants to do maintenance can be problematic. It sounds nice to have people right on the property who should care how well things get looked after but you may find that you have to manage them much more than a service company. You can fire a lawn service but its hard to fire a tenant; especially without damaging the relationship. Once you have the discounted rent documented in a lease, you are limiting your reported income which discounts your valuation. If you include documenting the compensation in lease you have an employee which has its own complications (CRA has special rules for onsite supers, check their website). If you really have tenants that need to work for you to afford their rent, how good are they as tenants?

I get the sense that you might benefit from treading cautiously here. It would not be hard to create some significant management headaches for yourself with your tenants. Best of luck as you go forward with your property. There are lots of people here to help you.

 

[invst4profit]

Jess, congratulations. You have obviously take a big step but you obviously are aware there are many challenges ahead. Now that you are a new landlord you will be determining how you will be operating your business not your tenants.
With any new endeavor it is important that you start off in the right direction. Correcting mistakes is far more difficult than doing things right in the first place and learning from others mistakes is the easiest.

At this point in time you have the opportunity to train your tenants to fit your business plan. Train your tenants to make your life the easiest. If you want to be paid by check say so. If you are not comfortable doing it now you will find out very soon you will be having to make far more difficult and emotionally demanding decisions down the road. This business demands that we be in control otherwise the inmates quickly take over the asylum (so to speak).
Put the effort in now to have them do things the way you chose to run your business regardless of how it was done in the past and your life will be easier in the long term. Now is the very best time to determine your future path in what can be a very emotionally difficult and demanding business.

You are operating a business and you make the decisions not the tenants.

Keep in mind in this business "no good deed goes unpunished" is all too often a cruel reality.

 

[JessHunt]

QUOTE (RCrein @ Sep 10 2010, 05:15 PM) First, congrats! Thanks!

Second, It is possible that your tenants aversion to anything but cash payments has more to do with underclared income than distrust of the banking system.

Also, I agree with Housingrental that hiring tenants to do maintenance can be problematic. It sounds nice to have people right on the property who should care how well things get looked after but you may find that you have to manage them much more than a service company. You can fire a lawn service but its hard to fire a tenant; especially without damaging the relationship. An excellent point I hadn`t thought of. Once you have the discounted rent documented in a lease, you are limiting your reported income which discounts your valuation. If you include documenting the compensation in lease you have an employee which has its own complications (CRA has special rules for onsite supers, check their website). If you really have tenants that need to work for you to afford their rent, how good are they as tenants?

I get the sense that you might benefit from treading cautiously here. It would not be hard to create some significant management headaches for yourself with your tenants. You`ve raised a lot of good points that I will definitely take to heart. Best of luck as you go forward with your property. There are lots of people here to help you. That is what makes this venture possible. Thanks for your input and encouragement. I would never have considered this venture without REIN and REIN members

 

[JessHunt]

QUOTE (invst4profit @ Sep 11 2010, 05:10 AM) Jess, congratulations. You have obviously take a big step but you obviously are aware there are many challenges ahead. Now that you are a new landlord you will be determining how you will be operating your business not your tenants.
With any new endeavor it is important that you start off in the right direction. Correcting mistakes is far more difficult than doing things right in the first place and learning from others mistakes is the easiest. Absolutely! myreinspace is an awesome school!

At this point in time you have the opportunity to train your tenants to fit your business plan. Train your tenants to make your life the easiest. If you want to be paid by check say so. If you are not comfortable doing it now you will find out very soon you will be having to make far more difficult and emotionally demanding decisions down the road. This business demands that we be in control otherwise the inmates quickly take over the asylum (so to speak). Oddly enough I hadn`t thought of it in just those words.
Put the effort in now to have them do things the way you chose to run your business regardless of how it was done in the past and your life will be easier in the long term. Now is the very best time to determine your future path in what can be a very emotionally difficult and demanding business.

You are operating a business and you make the decisions not the tenants. And here I thought I was getting out of teaching high school! Drat! Back to the classroom. You are absolutely right, thanks for the reminder.

Keep in mind in this business "no good deed goes unpunished" is all too often a cruel reality. Until this post I hadn`t realized how similar this was to teaching. What an accurate saying! All too true.