All Forum Posts by: Marcus Auerbach

I have not, so I can't tell you one way or another. On their website they advertise homes that cost $200 ish a month and are rented out for $1200. What do they say? If it sounds too good to be true,...

I second REIS.

@Jared Baker You are on the right track and you are feeling your way around. What you are fining is that you can't live in a nice house in a nice area and live 100% rent free. You can probably save 70% of your rent. I think I have bought almost a dozend house hacks with clients in the last year and none of them were 100% rent free. Even the ones in cheaper neighborhoods won't cut it, because as your acquisition cost is going down so is your rent. You can't take 50% of the income potential off an investment and still expect it to throw off cash. That would be too sweet. Especially if you buy it with an FHA loan, so essentially you have a third party buy it for you.

Hartford is relativley cheap compared to Madison, but a lot more expensive than Milwaukee propper. The housing stock in the Milwaukee suburbs like Menomonee Falls is mostly single family homes, once in a blue moon you will see a two family come on the market, sometimes thats an old farm house.

What you are missing is the bigger picture. There are actually two phases in a house hack. Phase one you live there and safe up down payment for your next. In phase two (after min of 12 mo) you buy a second duplex and move, so now you have one that will cash flow and one that you live in. Overall you should be in the gree at that point. You can repeat that as often as you want, lenders typically require you to live in a property with ownber occupied financing (low down) for at least one year.

A quality property will be better for you in the long run. Many of the cost to expense ratios are more favorable compared to a chaper property. Think of rental income vs. cost of a roof, cost of water heaters etc. Also your debt pay down is much more significant with a 300k property.

Like I said you are on the right track; you have just discovered that there is no free lunch in real estate either; but it's still an increadible vehicle to change the trajectory of your life! Hope this helps!

@Adam Stroik RUBS is not a commonly used system in Wisconsin. You see once in a while a duplex that the water bill is being split, but that's more an informal arranagement than a billing system. Electrical has to be submetered in Wisconsin.

I don't think it's unethical to charge for coin laundry, you are charging for providing the machines, having the serviced and fielding maintenance calls when needed. Water is a rather small component.

However, let me expand this a bit: in my opinion it's not worth your time and energy to optimize small multi family's on NOI, because the value is typically not calculated on a cap rate. Your single largest expense is tenant turn over, so that's where I would focus on. Further, while positive cash flow is mandatory, it does not create any significant amount of wealth in a reasonable time. Hint: how long does it take to generate a million on cash flow? You dont have that much time. Dept pay down and appreciation (even very modest like 2%) is what's creating wealth.

@Kelly G. I dont see a problem with that; it's a common sense approach. Water bill's usualy dont fluctuate that much unless you have a pool or something thats seasonal. People are very stable with how much laundry they do, how often they shower etc.

You have a similar situation when selling a property with property taxes. Typically they get prorated on the basis of last year's taxe bill (because this years is not available yet). The previous owner pays the new owner at closing the prorated amount and then the new owner pays the bill in full.

The other approach is that you make the tenants get and pay for the final bill and privide you with proof of payment when they move out. Otherwise withhold a prorated amount. Depending on their personality they may just let you withhold it and save themselves the hassle, so you are back to above.

Agree with Mike Lauer, $400 after PITI at time of aquisition is a good number for a SFR in good condition and a quality school district in the Milwaukee area. That would be based on 25-25% equity.

Cash flows tends to creep up year over year if done correctly. The biggest threat to cash flow growth is deferred maintenance. You can push it out so many years, but eventually it will happen. This is particulary dangerous for those who invest in cheap houses.

Cash flow has to always be viewed in context. If your repairs, expenses and future capex are high, you need more cash flow to make it a good deal. If you buy new construction in a growing market you may be perfectly happy with a $50. Especially on a 30 year fixed rate note, as rents tend to go up as the years pass, while the mortage payment will remain flat.

Filppers and turnkey rehabbers always face the same dilema: how much money to spend on things nobody can see and nobody is willing to pay for. Most rehabbers have the best intentions and want to provide a great product. Anything that is inside a wall and not visible, like dryrotten framing, poor or no insulation, old water and sewer pipes etc are costly repairs which are not visible after the job is complete and difficult to evaluate even for a home inspector. The appraisal will not be any different, nor will the sales price.

In my opinion the best turn key provider is a homeowner, who has renovated a home for themselves and has been watching the contractors to make sure things have been done right. A home that has been renovated for profit will often not be up to the same standard. As a flipper you learn that very quickly, when you do things right and you get beat up by buyers on price squeezing your margin to zero or into the red.

Turnkey is certainly more than a rehab, but a PM will easily cover the rest. Buyers beware, do you homework and make sure you are buying a good product.

@Anthony Rullo I would say the short answer to your questions is: no, it's probably not a good deal and second, there is not way to tell if you assumptions on expenses are right without knowing the property. There is no generally good % number for repairs and capex, it depends on the property and it's condition. You basically have to build those numbers based on a repair and capex budget for the next 3, 5, 10 years and then break that down to a monthly %. To illustarte: a new property or a completley remodelled house will take much less in both categories than a property that has not seen a contractor in 30 years. It takes a bit of experience to ballpark both numbers correctly. You should not buy anything that does not cash flow well AND has a positive outlook on value development. You need cashflow like the air to breath, but cash flow does not creat wealth. It takes 166 years to make a million on $500 in cash flow. Mortage pay down and appreciation will get you there many times faster. I have leads on two off market duplex portfolios, but they are both larger investments. Otherwise there are plenty of SF and single duplexes in good areas. Feel free to contact me if you want to know more about Milwaukee. 

@LEONID ORLOV you dont need an attorney. The city assessor is happy to look at evidence (sale and comps) and based on if you have a case or not adjust your assesment. Against popular believe you wont have to fight them, if they are objectivley off. PM me the address, I'll tell you if you have a case.

@Dan D. great goal; makes for a good "why"! The difference between the people that I see who succeed and fail or give up is that some have a passion for money and others have a passion for real estate. Find a good agent in your area, how is also an investor and will mentor you. Learn as much as you can, but don't delay your first purchase. If you dont have any money to invest, then thats where you begin. House hacking will get you in the game and free up some monthly cash. Make it a goal to buy one property a year. Focus on cash flow and on quality, don't buy junk, just because it's cheap. Find a side hussle, start a business you can run while you have a job. Whatever you do don't quit your job. Most people who achieve this goal will still work a regular job, because they realize that sitting at home while everyone else is at work is not that much fun. Your attitude towards the job will change once you know you don't have to work, you work, because you want to.