Important Information

In Rochester, NY there are issues to be aware of that some investors and landlords might not be aware of.

Lead based paint – In any house built pre-1978 it is assumed there is lead paint present in or on the properties, walls, trim, windows, exterior, etc. The most common areas are door trim and older windows. The city of Rochester requires a passed lead wipe test to obtain a valid certificate of occupancy, Assistance programs such as DSS, and section 8 also require separate inspections as well as passed lead wipe tests. By 4/1/10, federal law requires that workers performing renovation, repair and painting be EPA certified.

DSS – QHI Inspection – Is when a tenant is receiving DSS assistance, the property will require a quality home inspection (QHI) inspection prior to a tenant moving in. The inspection is valid only up to two months for a vacant unit. The benefit is that a portion or all of the rent is paid directly from DSS each month.

Section 8 Inspection – Are HUD contracts with local housing authorities to provide section 8 voucher assistance to low income households. Inspections are performed prior to the tenant moving in and also annually. The benefit is that a portion or all of the rent is paid directly from section 8 each month.

Certificate Of Occupancy – Is required on any building that contains residential dwelling units. One and two family structures must be renewed every 6 years and multiple families and mixed use units must be renewed every 3 years. A new C of O is required whenever there’s a change of occupancy, transfer title of a 2 family if a C of O has not been issued within the prior two years. A re-occupation of a building that is vacant for over 2 months, unless a C of O was issued with-in the prior year. The inspection is visual, including the interior and exterior. Inspectors will look at items such as; paint and trim, gutters, electrical & plumbing systems, safety features, etc.

Investing choices -It’s important to have goals so you can plan accordingly.

Cash On Cash Return –cash flow divided by the amount of capital you initially invest. Usually calculated on the before tax cash flow and expressed as a percentage.

Ex. A properties annual cash flow (before tax) is $4,000. A 20% down payment equal to $10,000 to purchase the property. Your cash on cash return would be 40%.

$4,000 / $10,000 = 40%

Capitalization Rate – net operating income / value. For example a properties (NOI) is $7,000 and the market value is $40,000. Your capitalization rate would be 18%.
Capitalization rate = NOI / Value
Capitalization rate = $7,000 / $40,000
Capitalization rate = 18%

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