All Forum Posts by: Alan Grobmeier

@Alonzo Ramirez.  IF the property was in a good school district, I'd probably be interested in it if it was in my area (using your numbers).  I know some have said this isn't a good deal, but it REALLY depends on your real estate goals.  An 'all-in' at 50k with a 5-6k positive cashflow per year is still over 10% cash on cash return.  I don't know where you can get a 10% return that doesn't have way more risk.  You just need to mitigate your risks as much as possible.

My .02

@Alonzo Ramirez. I picked my 'strategy' because I don't know what the future holds AND the fact that you can keep tenants LONGER in a SFR vs an apartment complex. Apt complexes are transient in nature.

A former partner and I owned a 4 plex.  WAY too much hassle for me.  I am not their 'daddy'.  For me it was way too time intensive.  Especially when you look at the overall profit.  My former partner now has 32 'doors', but he doesn't do anything but real estate.  He is a former Navy SeaBee and does most of his own repairs.  It works for him.  We have 2 opposite business models and they both work.  ;-) 

@Alonzo Ramirez, I managed up to 9 properties while holding down an engineering career that required me to travel around the country (and sometimes around the world) with more frequency than I desired.  You CAN do it.  You need to put systems in place where you have minimal interaction with tenants.  For example, I used home warranties as my first line of 'defense' against maintenance issues.  Although about $45 a month, that is much less expensive than a property manager @ 10% plus 'issue' costs.  I use ACH to get my rent and have only had ONE late in over 9 years.

Today I am 'semi-retired' and still don't have much to do with my properties.  It takes me longer to get my paperwork together for my CPA than it does for me to manage my places.  

My $.02:

1) $700 is low on the PITI part. Im thinking closer to $800. Taxes in TX are 3%, which is around $300 a month. Not sure what type of 'smoking finance' deal you are getting, but 5% amortized interest would be $430 for the PI part.

2)  "Turnkey" does not usually mean:  Need new roof.  A roof, depending on the size of the house, can cost 10k+.  Do you have any quotes on the roof by someone that does roofs?

3)  Have YOU done your own due diligence to determine what rents are in the area?  NEVER rely on a property manager for what you THINK it might rent for.  Although it MAY rent for $1300 a month, it MAY also stay on the market awhile until that person comes by.  A more realistic number could be $1100 (or even less) if you don't want to turn the property every year.  I usually take the 'low' end of Zillow as I can find good tenants FAST that way.  Then I 'boil' them like lobsters over time.  ;-)  My average stay is 4 years.  :-)  Turnover is a HUGE cost, especially if you have a property manager in the middle.  :-(

4)  If it needs a new coat of paint in the living room, it probably needs a new coat of paint EVERYWHERE.  Budget $1000 for interior paint.  ;-)

5)  How old is the house?  If it is over 20-30 years, your maintenance budget needs to be ready for all kinds of possibilities.  

6)  Property managers will USUALLY take your first months rent PLUS 10% of all rents received to place a new tenant.  That will seriously cut into your 'profit'.

If it was me, I'd get a roof estimate and then renegotiate the price.  IF all the other numbers you state are true, I'd move forward.

Alan

Here is my own fwiw:  I have listened to a bunch of Mike's podcasts.  Since they seemed reasonable, I thought I'd give his company a call with regards to coaching.  I was told, basically, $1000, without too much 'meat' of they would provide.  I told them I was not interested.

That was about 2-3 weeks ago.  Now they call me literally every other day to sign me up.  I don't answer the phone and let it go to voicemail, which is easy for me to do.  I don't do business in the 661 area code.  ;-) They appear to be unable to take the hint, so I have now resorted to blocking their number.  Hopefully that will work.   Lol

AG

@Francesco Barbati

What I did was get with an 'investor friendly' realtor (rare breed, btw) that would send me NOTHING but owner carry listings.  Believe it or not, there is a lot more than you think.  The problem, like I previously mentioned, is terms.  Usually they want a high interest, over-priced and/or out of the property in a short (3 years or less) time period.

What I have done, in my negotiations, is let the seller dictate price.  I dictate terms.  If they try to dictate both, I walk away.  I need to 'win' as well.  ;-)

Most of the listings I see are of little interest.  They are 'war zone' properties, need tons of work, and are over-priced.  It is kind of like the lease-option money, less than 1/3 actually exercise the option.  

Since I don't work that way, most of the seller carry that I see are targeted towards owner/occupants.  

But, with that being said, they CAN be found.  In my case, I COULD lower my standards or just wait until I see something that meets my criteria.

I've chosen to just wait.

Hard money does not usually pencil out well for a rental property.  Interest rates are high.  Repayment time is usually 1 year or less.  If you have a deal that does work with hard money interest rates, you may want to look at JVing with someone to get a loan.  Part of something is better than 100 percent of nothing.  ;-)

I use Chase quikpay.  Cost:  free!  My favorite price.  :-)

@Ben E.

I ALWAYS ask for everything on the inspection report to be fixed, but thats me.  The roof is a huge issue.  Depending on the size, that can set you back 10,000.  Expect the seller to walk OR try to negotiate the roof cost.  The 'good' thing is that the seller will have to disclose the condition of the roof to any future buyer, which gives you some leverage.  :-)

@Eddie T.

7 of the 8 are in my 'backyard', in the Phoenix area.  The other one is in San Diego, which I have not even visited personally in 5 years.  I generally don't visit them unless there is a problem that NEEDS my attention OR I need to turn the property (which is rare).

Jay was 'lumping' all of us 'engineers' in one group, which is what I was jumping on. Not all of us are about ROI. Some of us do have long term thinking. ;-)

I created an EXTREMELY specific business model and repeated it.  My places ALL have shutters on the windows and 100% tile floors, 3/2 and one story.  It took awhile to get them the way I wanted.  And it cost me some money.  But I can rent my places in a weekend to a high quality tenant that wants to be there for a LONG time.  My schools are good, 8-10, which is another attractor.  I don't gouge on rents, but I do go for market.