All Forum Posts by: Marcus Auerbach

Just look at it as a partnership. You are looking for someone on the ground who does all or most of the actual work for you. The question with a partnership is always what can you contribute that is of interest for a local guy, who knows what he's doing, has some experience and the skills and personality to make a great deal work. The obvious answer is you can become a money partner. There are plenty of guys out there who are looking for someone to fund their deals in exchnage for a cut. As long as you are a US citicen thats fairly easy, if you are not a resident it is possible as well, but takes some more legwork. Or maybe you can provide value in another way. Direct marketing can be done from any place. The other thing you can do is read and learn as much as you can. BP is the best place for that.

I am currently working on a deal where the bank requires 10%EM and suspect that they are local. Just like J Scott says REO's have become more competitive and I actually offer usually at least 5%. The majority of the banks seem to be fine with $1000 though.

Nope, and the same with wholesalers by the way. Both sound like a great concept and seem to make sense, but I have not seen a good deal yet. There might be a few great ones out there, but it is a lot harder for a beginner than they make it sound.

Have you shopped for countertops at a contractor supply house? You have to look for them as they dont advertise to the general public. I have been looking for good kitchen cabinets for a long time and tried the different lines they have at HD and M, their in stock quality is junk and the ones you have to order take often six weeks and are not necessarily a bargain. I also tried Cabinets to Go, liked the concept, but had a horrible experience with partial, delayed and then damaged delivery. I finally found a small contractor supplier that specialses in kitchens. Great quality and very competitive prices, they also have two lines that are in stock. And of course they also have countertops and have relationships with stone suppliers. I got introduced through a friend who is a builder and they set up an account for me. They dont sell to individuals, so you have to have a business. Its pretty much like the paint stores, once you are set up with an account they give you 50% off or more. Personally I don't use granit, because in my market I don't get the return. I use high quality laminates instead. I source them through my cabinet supplier and they also hooked me up with great guy who does the installation.

I think it also comes back to tenant training. What is your usual method of communication? Are you using your work email? They may not realize that this is your work email, if they have it saved in their contacts list it just shows up with your name.

My tenats are acustomed to sending me text messages. That already starts before the first showing and by the time they have moved in and all questions are answered they are very used to this way of communication.

I have the same problem as you, I have a work email, which I check all the time, but not so much on weekends and I dont want to mix issues. And I have my RE email, which frankly I dont check every day, especially when I am travelling. So text is for me the best solution, especially because its instant and also because I dont have to deal with looong emails.

Rob, I think an appraiser told me once that a finished basement ads about $18 per square foot. I guess thats a number specific to our area, but I forgot to ask him what the definition of a finished basement is. I think what I have in mind is something like the definition of a bedroom: needs a closet and a full size window. What is required in a basement so it qualifies as finished? 

The way we did it on the last project we ended up spending about $6000 for 500 sft, so about $12 per sft. That included two sides drywall, painted blockwalls, ceiling, cans, outlets, carpet and two prehung doors. Drywalling all four sides would have bumped the cost up to probably $15 or $16 giving me very little return on the investment.

On the other side I do like the fact that I have visibility and access to the block walls. Its always a little scary to inspect a potential deal and not being able to check the foundation walls. I just drafted a layout for another project and wonder if I should go drywall all the way arround or not. In this case we have one wall that has been braced 5-10 years ago. It apears to be stable and I can make a case for covering it up and for leaving it open. what do you think?

Living in Wisconsin I try to finish the basements whenever I can to provide additional living space for the our long winter season. Older houses usually come with paneling which I think is the worst solution. A complete drywall finish is the best, but also the most expensive. On the last house I tried a compromise - two sides drywall and on the other two sides we just painted the block wall which was in nice condition. Once the carpet was in it looked very nice, but the appraisal did not come in quite as good as I expected. Does anyone have experience with different solutions (paneling, drywall, block, mix,..) How does an appraiser look at them?

Dawn, if you can make it cash flow you could rent it with an option to purchase and see if you could get a little more at closing than you currently estimate. Equity seems thin for so much fix up work, but heck, you could even find a tenant buyer who would be interested in doing that himself.  Food for thought maybe..

Time for a little update. I am in the middle of the data entry phase and I am learning the software as I go. With the online help of my CPA I have started to set up a Chart of Accounts, which includes so far my properties, my bank accounts and accounts for security deposits, mortgage payments, interest payments and escrow. We have also set up customers (tenants) and vendors (lenders). We are using Classes to keep track of everything by property. I have spent some evenings catching up on data entry for this year and I can already tell this is going to make tax time a breeze this year! 

The cool thing is that by using Classes I can run reports by property and compare their performance side by side. The different accounts allow me to track expenses like mortgage interest payments and principal pay down. I did not pay much attention to principal pay down and I am pleasantly surprised how much my equity is growing every month. I have always viewed a mortgage payment strictly as an expense, because the principal pay down is a relatively small amount per property - the difference is now I can see the accumulated number from all my rentals and that is a dollar amount that definitely has my attention.

I admit this is not the most fun way to spend evenings, but I start looking at real estate a little bit different now, more from an accountants perspective and that is definitely a view worth your while.

Dan is absolutely right and that's probably the reason why Dawn saw what others couldn't - they probably just ruled out the category as a total (just like I do to be honest) because of HOA. Congratulations not only to the nice cash flow, but for also for thinking (and looking) outside the box!