One of the best things about Ken’s Inner Circle is being able to ask Ken your questions about real estate. Ken answers these questions every Monday during his YouTube live. Moving forward, we’ll also include Ken’s responses here. Do you have a question for Ken? If so, you can ask here.
Do you think that rents will fall once rents drop (assuming that happens)? – Millie
Ken’s response:
No, I do not. We have a big shortage of housing right now, close to 5 million housing units short, so while home prices may dip in some markets, the shortage of available housing is not going to be resolved overnight. That means that even with lower home prices, the demand for housing will still remain high, which will keep asking rents at the same rate.
I have a vacant two-bedroom apartment. Should I buy a new refrigerator before I start showing it? The existing one is fine, but it’s outdated. I’ve found one I could buy for $800, but I’m hesitant to spend that if I don’t need to. What are your thoughts? – Nick
Ken’s response:
In some markets, tenants supply the refrigerator. This is a longshot, but if they’re moving from a house, they may already have one. You could specify in the lease and in your move-in paperwork that the tenant has to supply the refrigerator. The other option, if the existing refrigerator is detracting from the value of your rental, is to go ahead and replace it. I would advise you to look for a used one though because $800 sounds a bit steep. You could look on Craigslist, OfferUp, Facebook Marketplace, or Nextdoor to see if anyone is selling theirs. Danille and I just furnished an Airbnb and found a stainless steel refrigerator for $400. Remember, this isn’t your home, it’s a rental property. As long as the used model is clean and in good working condition, your tenants will be happy.
Hi Ken, I own a rental property and need to take over management responsibilities from the bad management company we hired. We’ve gone through landlording 101, but we’re looking for guidance on what to look out for during this process. – Chris
Ken’s response:
The first thing you should do is get your bank accounts set up right away and tie up any loose ends with your accounting. Then you want to double check all of the leases to make sure they’re current for all of your tenants. Double check that the management company’s rent roll is correct. Do a forensic accounting of your property to make sure that there aren’t going to be any legacy issues from their mismanagement. Make sure that you have access to any security deposits that your tenants have put down. The good news is that in many markets property management companies have to be licensed, so you’ll have some recourse if they were doing anything in breach of their licensing requirements.
I am considering converting my current primary residence (single family home) into a rental property but am conflicted about which of the following is more valuable from your perspective. Through recent appreciation, I’ve built up about $200K in equity to net in a sale. As a rental, it would only cashflow about $400 a month. Should I rent it out with that cash flow and keep saving for the next investment, or would it be better to take my $200K and invest into higher dollar yielding asset when the opportunity presents itself? I can’t do a cash out refi because I have such a low rate currently it would stop cash flowing. This is my first rental, so I’m trying to determine which option would give me the most powerful launch. Thanks for your help and insight! – Jay
Ken: Just keep cashflowing that baby. Rents are going to go up over time, so that cashflow could be $500 in a year and $600 in two years. Also, your equity will have grown because of inflation.
