All Forum Posts by: Aaron Smith

@Sarah Lorenz Thank you for responding. The property in is Detroit. I live in Utah, so I have no problem using an agent. 

@Phil Reames as I'm new to the REI game, I'd rather let those who know what they're doing help me, then, as I get more comfortable (and my wife trust's me more :D ) I can forgo the middle man.

@Mike Cumbie Thanks for the advice. I'm familiar with the area, having grown up/lived near Detroit until I was 18, but, a LOT has changed. And having professional advice at this stage is well worth the cost.

Hey all, 

I've identified a property I like. I'm in Utah, property is in Michigan. I have a couple of questions.

1. I'm assuming I'll have to obtain financing from a bank in Michigan? 
2. I'm still forming my team, so I don't have an attorney, yet. How do I submit an offer?
3. Do I need to have the contract exit clauses (lack of financing, due diligence, etc) in the initial offer? 

I know there's more, but this cold, coupled with a migraine is making things difficult right now. Thank you all in advance for you help!!! 

Sincerely, 

I have no nails left after thinking about writing this offer :D 

@Brett Call WELCOME!!!! 

You're on the right track by being on BP. 

Few pointers:

1. Read. Everything. 
   1. BP has GREAT forums where you can start picking up ideas. Hit up the "Education" tab and get busy! Since I decided to get into REI, I've read more now than the last three years.
2. Decide on an area and STICK TO IT. 
   1. For me, I'm getting into MFH v SFH. I like the idea of spreading the risk out, and having a greater cash flow. For others, they prefer SFH's and duplexes. Then there's trailer parks, RV parks, you name it. Just be sure to look through the options, see what appeals to you, and then hit the gas.
3. Ask questions, and then ask some more. 
   1. I'm looking at two apartment complexes in MI. One guy, he has NO records. He's and old school, shoe box record keeper. So, I reached out on the forums for advice on how to proceed. Not even a few hours later, I had a reply. We're all here to learn and help each other, so don't be afraid to ask!

Again, welcome to BP and your future! Good luck, and reach out to any of us if you need a hand!

All the best, 
Aaron

@Matthew Olszak I will! Just looked at another property that seems to have a better upside, however, only has 3 out of 15 units occupied :/ Dude had a bad management company that filled it, with less than stellar tenants so owner evicted all but 3... Better location, cheaper than "shoe box guy" BUT.... 

Decisions, decisions... 

@Matthew Olszak thanks for the reply! 

This is a 15 unit building built in 66'. For the most part, the numbers look decent.. it's the expenses, especially water/gas/trash, which concern me. I know not to place much faith in the pro-forma's, but they do give me somewhat of a start. 

It's C/C- property in a not-so-nice area of Detroit. BUT, there's no competition withing the immediate area. and rents are decent, ESPECIALLY for the area. 

Anyways, thanks a ton for the input. I'm figuring, based on the property being on the market for six months, plus the age, and uncertainty, I'm going to put an offer in on the lower end, but not laughingly low, and see how how we do. All they can do is say no!

A

@Thomas Bailey I can't speak to the financing aspects as I'm still new to this myself, plus i am concentrating on the commercial side of real estate. 

If you want to check rental rates, check Craigslist and KSL for similar properties in the area and see what they're renting for to give you a baseline. You can also use Trualia's Heat Map (Google it) to give you an idea of what the average rate is per bedroom.  

Remember, just because you CAN get more, doesn't mean you should. ESPECIALLY if you're going into the SFH arena. Unlike MFH, where your risk is spread over more units, if you lose a tenant in a duplex or single home, YOU eat that mortgage until it's filled again.

In order to know how much income a property may produce, use the BP Rental Property Calculator tool. It will give you a great place to start. If your a non-Pro member, you'll only have access to five reports. But even if you just plug one of the ones you listed above, you'll have an idea of what to look for. 

As I'm still learning, I THINK I have this right when I say, there's an inverse relationship of Cap Rate to Price (or NOI). Basically, the lower the cap rate, the higher price the property, and greater appreciation. The higher the cap rate, the higher the cash flow, but less appreciation. SLC in particular has low cap rates right now. With such low unemployment and hot RE market, the prices are high (in my mind), and rising. And with that being said, don't be afraid to look outside the state. AZ, MI, FL, TX, TN.. TON'S of places with cheaper prices and decent cap rates.

I can't stress how important it is to start consuming as much reading/podcasts/youtube vids/etc as you can, especially in whatever niche you're going to focus on. 

@Chris Seveney. I decided to up my expenses quite a bit. Just to be super conservative. And the problem is, he can't even tell the realtor what his expenses are. So I doubled everything in my estimates just to be safe :) 

Hey all, 

I've identified a property which, so far, is looking good. However, the owner uses, as the realtor put it, the old shoe box method of accounting. Which means she has no way to provide expenses on the property. 

Has anyone come across this before? How did you handle it? Any thoughts help!

Thanks,

Aaron

@Brandon Hall- By chance, and this is a LONG shot, do you know any good RE Tax Accountants in the Salt Lake area? 

And thanks for the clarifications above. I think if people look at the math above as being done on two separate forms, and THEN transferred to Sch D, it might make it easier to understand. Anyways, thanks again! 

A

Hey gang, 

Any of my SLC peeps know a GOOD RE Tax Accountant? Need to get one set up. 
Thank you all in advance! 

Aaron