One of my houses was damaged by a neighbors tree hitting the edge of the roof after recent hurricane high winds. My insurance will not cover it because the damage is below the deductible. I contacted the neighbor, who contacted his insurance company. Never heard back from the neighbor or his insurance company. The damage is about $950. What should I do?

Rick, I take your final statement as an earnest question, not just a "hands thrown in the air" cry of anguish.

YES, SFH's are expensive. So are multis, though. Each has their set of +'s and -'s.

I've found the key is to ensure you don't pay too much and you take reasonable steps to mitigate risk. A few things that have worked well for me:

1) 2% monthly rent to purchase price ratio or better. Example. $500 rent (no utilities includes) I won't pay more than $25,000. $1,000 rent...no more than $50,000. This ensures cash flow is sufficient to set aside for CapEx and emergencies so you aren't constantly going in the hole (i.e. your reserve funds or debt) to fix the stuff that is part of rental property ownership. Appreciation doesn't pay the bills.

2) Proper insurance deductible. You got caught here...$950 is just below the $1,000 deductible I carry on properties, so I too would be footing this bill out of pocket. Maybe you do the same. Such is life. I choose to accept the first $1000 of risk and in return my premiums are about $150 lower per year vs. a $500 deductible. If I go 3 years claim free, I have broke even on the difference ($450 saved premium just about covers the $500 risk). All claim free years afterwards are gravy on the biscuit.

Hurricanes are a special beast. I think anyone who lives within 100 miles of shore takes on a special risk that I personally am not willing to participate in. You may have greater requirements for profit and risk mitigation than I do. Does the ROI justify you continuing to own in areas susceptible to these risks?

To me that would not even be close to put in a claim.

Not worth the going on your report and how any claim can affect your rates to some degree.

On most I carry 5K deductible. Have save enough over the years that I will not mine if ever I have to pay 5K on a claim. And again I would not put in any claim unless I had to.

Rick, it's okay to vent a little. We're a sympathetic group here.

So what now? I have a few observations from your most recent post.

"When things go perfectly, then the unit flows."

This is an unrealistic expectation and must be updated to match reality or you will continue to experience frustrations.

I have heard a good "rule of thumb" is to consider 50% of the gross rent as gone for expenses. Not mortgage/debt service...expenses. Repairs, maintenance, CapEx reserves, taxes, insurance, management, miscellaneous. As a hands-on manager, you can pay the 10% typically allotted to management to yourself, but you must factor it in regardless because--as you pointed out--if you were a multi-unit investor you'd be paying a manager. You only GET that insulation when you PAY for it. Paying yourself the management fee makes it closer to apples to apples. I used to make this mistake myself and didn't pay anything for my time. It was a false sense of "saving" money...what's your time worth? What's my time worth? Factor in that expense! It feels better too, to have that money in my pocket.

I figure my expenses as follows:

Maintenance 15%

Management 10%

CapEx Reserve 5%

Taxes 5%

Insurance 5%

Vacancy 5%

Misc 5%

TOTAL 50%

Keep in mind if you have debt service, that comes out AFTER the 50% net rents. This is a basic, quick-n-dirty Net Operating Income calculation: Gross Rents - Expenses = NOI.

This is the reality of any investment: SFH or otherwise. The only different I find...really...is that you can increase the value of multi-units as you decrease expenses and/or increase income a lot easier than you can with SFH. With SFH, the neighborhood determines the value. I have SFH's with 22% CAP rates (seriously!) that no one would pay more than $30,000, but they will pay $50,000 per unit for a multi-faily with a 12% CAP.

Most folks don't even figure CAP rates for SFHs, but I do. It's the only way to get a realistic apples to apples comparison.

Regarding tenants trashing units. That happens, but it happens less to me now since I began the in-home inspection screening process. I can see how they live. If they are slobs and have 10 cats...I'll see (and SMELL) that the minute they open the door. This is now a requirement to rent from me. No inspection = no approval. One trashed unit can eat a year's profit easily. I'll risk a longer vacancy vs. take a bad tenant.

The deductible you chose saved you a lot of bucks in payments to the insurance company over the years. So it's six of one and half a dozen of the other in this case. I hope you saved more than you have to spend now.

Rick, understood. Some areas have higher expenses. I know property taxes are killer in some states that don't have income tax, for example. Labor is higher on the coasts than here. Percentages are just guidelines and have to be adjusted to fit your market.

At the end of the day, though, ROI is king. I think you have some decisions to make about reducing expenses, increasing income, and if still in the red, possibly selling and finding an area where you can make a return that lowers your aggravation factor.

Some great income boosters that cost you nothing to implement:

1) Pay day rent plan (50% of monthly rate 26 bi-weekly payments per year = 8.3% increase).

2) Pet fees and rent increases.

Some income booster that cost a little:

1) Place extra storage on site and rent that out separately from the house. For a $1,000 shed, you can get around $50-$75/month here. Quick payback!

2) A "Worry Free" moving-in package. You negotiate discounts for cable, internet, trash service...bundle them, and pay the service provider and charge the tenants an increased rent of base cost + 20%-30% markup. Setting up services is a major hassle for some tenants, and they'll pay you to do it for them. If you have enough units, you may be able to get services for lower cost than the tenant could get by themselves, making it a 100% WIN-WIN!

Rick of TX, It may be time to re-evaluate your management company???

Are they doing an excellent job of tenant selection? Take a look at your units and consider the tenants they placed in the units. Are the tenants paying and are they keeping the units in good shape. Do you have a high rate of turn over with management company?

Have you done a walk thru with the management company of each of your units? Are they nickel and dimming you on repairs? It sounds like you need to re-evaluate the management choice you made on the units.

IF the history of your SFH unit has been in the negative then maybe its the wrong SFH and you may need to pull it from the management company either chose another management company or prepare the property to unload it. Cutting your losses and find another property that has a better return for you. OR manage the units yourself for awhile, this may not be possible with your schedule and work factors but it will give you a better handle on expenses..

Sid of MO made the comment about the tenant selection? Do you let the management company select the tenant and place the tenant and all you do is get the net rent every month. I think you mentioned you are passive as the owner. Again I am wondering if your selection of management company is the problem. Check your local Landlord Association get references for a new management company. How easy or hard is it to break the contract with your management company? Tenant Selection is extremely important, tenants app, app fee, showing the unit, criminal checks, tenants living conditions of present rental before your unit, call previous landlords. Once you get the tenant then do a monthly inspection of the unit.

I understand hands off to a degree but in the end its your investment and you are either making money or not making it on the units. When you are not making it then you have to take money from your own pocket then that can get old. You can not predict a storm and damages by mother nature.

Rick, single families have their benefits, but take much longer to recover than multi units

NE, that is what I am seeing too. Assuming my SF tenant renews the annual lease, I can go a couple of years sometimes with little repairs. I put a massive amount of $$ up front when I purchase the house, or do a rehab before occupancy. Those houses can make money, but they have a long payback. When I have turnover costs & repairs, it can wipe out a whole year's worth of cashflow. Just not right. I'm a landlord to make money, not see it float away into other pockets.

On the other hand, I am a partner in three multifamily properties. I don't want to be a lead investor... I don't want another job. Those MF's pay consistently every quarter. When one is sold or refinanced, I make money that I move into another MF deal. Thinking seriously about selling my five SF's and going all MF. I am close to retirement, and dealing with these SF's makes me nervous. I need consistent retirement monthly income.

Rick of TX, In your area maybe multis make more money and they make a better investment. If that's your plan to sell the 5 SFH then consider having a home inspector check out the units and now you have a list of repairs that you may have to make. ALSO you should do an inspection of your own to make certain the tenants are keeping the place in excellent shape and the unit don't have an odor. If you can smell it you can't sell it. Good example are dog or cat odors. You may have to evict a tenant because they can cause you to take less for the unit due to below average upkeep of the unit.

Another post talks about flipping and how important it is to know the problems and address them before you place the house on the market. Brad made an excellent point get the home inspected to know the repair problems and address them before placing on the market. More importantly have a certified real estate appraiser give you a written appraisal now you know what you can get for the house. You are not going to be blind sided with an offer from a buyer and the mortgage appraiser will not blindside you as well.

I know its hard to accept the fact that you may have to evict a tenant or two however they may cause you to lose more money on the SFH that you want to sell and move on to multi's.

A coat of fresh paint that is the trend color makes a world of difference. Take your digital camera with you to each of your SFH and take a video of the exterior and each of the interior rooms. Tell your tenants you are doing the video for insurance purposes at this point. Once you complete each house look at the video of each unit from a buyers view point. What needs cleaned: sidewalks, exterior walls, drive ways? What paint is peeling or looks tired give it a fresh coat of paint. How do the interior rooms look on a video. Any rooms needing painted, vanities need updated or just a coat of paint on the vanities and kitchen cabinets. Does flooring show wear it may be time to replace it with a vinyl click floor or hardwood. Vanity and Kitchen counter tops are they marked and worn does the unit price say laminate or granite??? Go to a few open houses in your area and check out the SFH on the market.

Yes you may be frustrated but take a deep breath and do your homework before selling the SFH making certain you will get the most money for them in your market. Do one unit at a time place them on the market once you have prepared them to be marketed for sale.

Best of Success with the SFH and your multi's!!!!

>Another post talks about flipping and how important it is to know the problems and address them before you place the house on the market. Brad made an excellent point get the home inspected to know the repair problems and address them before placing on the market. More importantly have a certified real estate appraiser give you a written appraisal now you know what you can get for the house. You are not going to be blind sided with an offer from a buyer and the mortgage appraiser will not blindside you as well.<

I am very hands on so my costs are lower. Not just the 10% to the PM but all the other costs as well. For the tree I would be out with a chainsaw in hand (if not too big) I doubt my costs would be $950. This is a second job. If you are completely hands off then I can see why you are not making it on SFH. Did you get bids on the tree or just pay what the PM told you it cost? Did you get 3 bids? (I have hurricanes too so I know that is impracticable after a storm but...) How much control do you have over your costs.

Unless you win the lottery, making money usually takes work or risk. You risk the amount you invest, or you work on the unit for a return. Paying someone to do all that takes it out of your pocket. That is why most of us do a lot of work ourselves. Decide the risks we want to take with tenants and fixing.

Insurance falls into that risk category too. Not carrying it, you risk having to pay for everything yourself. High deductibles saves you in premiums. But you must plan for those possibilities. Spreading that risk is also good, but realize, when the SFH costs you, your multi is covering it.

I run my own properties, and do not pay anyone else to do so. The neighbor cleaned up the fallen tree, but the roof damage needs to be repaired by a roofing company. I don't "mom & pop" my properties. I've used a number of roofers over the years, and had mixed results. Found one that I stick with. I use a local realtor to list the properties for rent. He takes the apps, collects the app fee, and turns them in to me for background checks and approval. This has worked well. I don't want to deal with screening tenants or meeting them at the property. Had had tenants in the past because I used a prop mgmt company and another realtor to do the work. Found they did not do a good job.

Hi Jeffrey,