All Forum Posts by: Adam Giles

Jump on in Matt, the water is warm.

If I can offer any advice while you start off, it is to take the time to build your "team". When I read this or heard this early on it sounded like your typical teamwork mumbo jumbo, but I have found that it is unimaginably true. I spent months speaking to local loan officers about how deals would be structured if I went with them. I saw some themes, and some differences . I also spoke with local Real Estate Agents/Brokers who knew the area. Before I knew it, I had a team and didn't even realize I had done it. I was just looking for information. I closed on our best deal to date a little less than a year ago and it was brought to me off market by one of my agents, and one of my loan officers was able to get me 75% LTV on appraisal instead of the normal "lower of appraisal of purchase price". This resulted in us being able to purchase a half million dollar multi family complex for about $3500 down. I owe this deal to my team, without question.

Tell them what your plans are. How you are going to do it. Get them invested it what you are doing and build those relationships. 

Good luck on your journey, and you made a great first step. BP is the right place to be.

I agree with @Alex Bekeza. Higher vacancy rates and riskier tenants would be my primary concern.  That is not a knock on anyone either. It is just a simple fact that low income tenants will have more variance in their lives. I have considered venturing into this space a couple of times when deals have presented themselves. Ultimately I have decided that the deals I had presented to me were not profitable enough for me to deal with the additional headaches I expected. If I do go down this road, I will look for higher cash flow per door than I achieve on my other units, and I will definitely bump up my occupancy budget. 

I also could not agree more about the "heart" comments being made in this thread as well. Creating affordable housing options for good people is our mission. If we do our jobs right as landlords and investors, we should be improving lives and communities, not living up to the old stereotype. 

I agree with the partner philosophy. I began on my own and was only able to purchase about 1 unit per year. The first year I took on a partner in a 50/50 share distribution, we purchased 10 units. Just make sure you find a partner that has skills you do not, and make sure roles are clear up front to avoid disputes. My partner loves to get his hands dirty. I don't mind that either but prefer spending my time in QuickBooks given the choice. Silent partners work great too ;-)

Congratulations on getting that first deal done. Judging only by your payment it appears you either got a phenomenal rate or put bit more down than the typical 75% LTV. That is great because it keeps that payment low so you can cash flow, however I highly recommend including those occupancy and repair numbers in your cash flow estimates. I like my units to flow at least $150 per month after PITI, a 10% repair budget, and 10% occupancy budget. This way a busted furnace or open month between leases won't destroy your profits. Plugging your numbers into the sheet I use to evaluate properties, I would be "losing" about $65 per month. Now I obviously don't know Jack about your deal, and I also have local MILL rates built into my formulas that appear a little higher than yours, so I do not mean imply at all that you shouldn't have made the deal. I just offer the advice of making sure you include ALL numbers when determining how a property will cash flow. I have learned the hard way that nothing will kill profits faster than unexpected repairs or vacancy. I had to replace a furnace or AC in 2 of my first 3 units even after inspection estimated they had 10-15+ years of life remaining. Also, you may not have had vacancy up front, but when your current tenants leave your cash flow may stop and you may have holding costs. Especially if you decide to flip it.

Out of curiosity not knowing if it was the rate or DP that resulted in your payment.....what is your expected CoCROI?  

I not sure which is more silly, what your tenant is trying to pull, or the fact that the thought popped into my head that I should consider some sort of "spirit" clause in my lease.

For what its worth, I agree with some of the previous posters that it is generally not a great idea to force an unhappy tenant to stay in your unit. It causes all kinds of issues. i have had a lot of success working with tenants in this situation. I explain to them that I will "enforce" the lease meaning that they will be responsible for the monthly rent until a new tenant is found. I have honestly never needed to enforce more than a single month. If it did consistently take long periods of time to fill, I would consider a rent adjustment, improvements to the unit, or selling the unit as a poor performer. Over all, my tenants in this situation have reacted fairly well  to finding out they will not be held responsible for the entire remainder of the lease. That would honestly not hold up in court in Nebraska regardless. I treat their deposit normally once the new renter is found, returning the entire amount minus repairs.

I would say your estimates are a little low as well. We are in SE Nebraska (Neb City/Syracuse). We have a mix of single family and multi family. All of our units are 2/1 and we average around $625/unit. We do price our units a little below market as we strongly believe we see returns in occupancy rate. We have been over 97% for 5 years. We only purchase units that will average net at least $150 per month. This is after piti, any utilities, and repair budget. We do not have too much trouble finding units to purchase that meet this criteria. Sometimes it means making offers on units at the price we know will make this formula work, even if they are below asking. Which they frequently are. You'd be surprised how often they are accepted. We routinely purchase homes in the 40-50k range that need minimal repairs. That allows us to stay right in the 15-20% CoC ROI range.

I understand, and agree with, the premise of what you are saying, but the broker license honestly overlaps only slightly with what property managers do on a day to day basis. I think the majority of property managers would be fine with a license requirement if it did not include studying and paying for a majority of knowledge that does not apply to what they do.  Also, I do not 100% agree that personal property managers only answer to themselves should they do something stupid. Personal property managers can still treat tenants unethically. They hold funds that belong to tenants. They are still responsible for understanding and following fair housing laws etc. When the day comes that I look for a manager for my portfolio, I would much rather have a personal property manager with years of experience in my area, than a broker who deals mostly with real estate sales. Unfortunately my state doesn't give me that option.

I manage my own units and am also studying for my broker license for this very reason. Although the license may prove useful, I can say with certainty that the strong majority of what I am studying has no applicable value to property management. If the purpose is to ensure those in the business of PM are consistently qualified, there should be a separate and distinct PM license.  

@Rachel Bier Wonderful place. We enjoyed it very much.

@Rachel Bier Are you on the patio at Auberge du Soleil in your avatar by chance? My wife and I ate there on our last trip out and it looks like you are the same table we had.