All Forum Posts by: Allen Hayes

@Thomas S. Careful with that one.  In some jurisdictions in the US they consider a post dated check an open contract and won't allow eviction proceedings to start until all the checks have been submitted and bounced. 

I use a combination of methods. Drop box for checks/money orders at the big apartments, mail checks to an office mailbox at the big apartments for the other locations. I do this so I'm not running to as many places to check for mail checks.

If a tenant is hell bent on cash I give them a deposit only ATM card and tell them to find a PNC ATM that accepts cash deposits and do it yourself.  Last thing I want is some moron to hear a story from a friend of a tenant and think I've got $11K sitting on the counter at home on the first of the month. Some griped at first but they all understand not wanting to get robbed and they have a receipt from my banks ATM saying when it happened so there can't be any confusion about the when or how much was deposited.

If you're going DIY, go to the local home store like Lowe's or Home Depot, look at the kitchen, bathroom and carpet you like. 

The only time I care about sqft personally is when it's flooring or paint.  A bathroom remodel is driven by new tub/toilet/vanity, flooring is actually not a big driver.  Kitchens are appliances, cabinets and counters, flooring is only a big worry if it's a big room or you're doing a unique upgrade. Drywall is $10/sheet, the cost is in hanging it.  Paint is likewise reasonable at $30ish/gallon but the cost is in spreading it. 

With more experience you'll get better at your estimates. 

@Marquell Jones,  I generally agree with the BP community above but what's the financing situation like?  Are you doing a big down payment or anything like that?  Paying for all the repairs yourself?  I've had a seller stuck on price before but was willing to do a type of seller financing that was basically 2% better than commercial lenders would do, a nominal down payment instead of 20% and a balloon term of 12 years instead of the normal 5 years.  Look at all the other items that go into the process and see if the seller can compromise on any of those before you completely give up.

@Ward Roberts, Seems like there are a lot of commuters but couldn't really say how many vs local workers.  SM and those areas are too rich for my blood, they consume a load of capital to acquire and take a while to really start paying off.  Wow, 2 bed 1 bath is 200K in SM?  That's crazy. I could point you to a couple of places in Oldham that are bigger, would cost a quarter of that and would kick off a 3-400/mo cash.  Are the renters in SM really that much better to justify the extra cost? 

@Kiersten Vance, I like that you were able to get them like that.  I've been thinking of what it would take to build units here and I think that if I do build it'll be in 4 plexes like that just to make selling them off easier to regular people instead of deep pocketed investors.  I agree about the scale thing, my 4 plex is just about as much work as the 20 plex as far as landscaping goes.  The 20 plex is just more work keeping track of rents and fixing 5 times as many issues.

@Ann Bellamy, I've never understood the X 20 vs X 4 mistakes thing.  I'm only upgrading units when the tenant moves out so if I don't like how one unit looks afterward I just do the next one different.  I do expect to spend more time doing turns at the 20 plex just because there's 5 times as many people living there but if I were doing what @John Henry is talking about with regards to a maintenance company it wouldn't be a big deal, more turn on more units that make more money sorta thing.

Having said that, I do spend a lot more time at the 20plex because of issues from deferred maintenance that I'm still resolving.  I have to say that the 20plex seems to be the biggest pain in regards to collecting rents.  Keeping track of who's paid, who's late, who have I spoken to is the biggest time suck of this thing so far.  It won't be as bad in the future after I've retrained the tenants but the prior owner would let them get months behind and forgive late fees constantly.  I'm the new bad sheriff in town who puts late notices on doors the very next morning and demands my late fees. 

Honestly though, if you're in VC and can get into some early rounds of funding on some decent projects you'll make a whole lot more money than buying 4 plexs ever will.

For me it's 1) free cash flow, 2) capital requirements, 3) other relevant ratios. 

Real estate investing is basically buying your next job, so make sure the job is worth it income wise. Free cash flow also has most of your assumptions baked in, stuff like mortgage, interest, taxes, maintenance, vacancies etc.  I consider expected improvements as a discounted bonus because I can't count on cashing checks for rent increases I haven't passed yet.

If the free cash flow looks good I'll worry about capital requirements, basically is the deal too big for me to handle. Being short cash and credit when an AC goes out is a giant problem that forces you to make very bad decisions (hard money lender? pay day lender? let the tenant sweat?)

If the deal isn't going to swamp my cash and credit lines and will earn me enough every month to make it worth doing the job, I'll worry about other relevant ratios. Looking at the other ratios will also tell me what other investors are willing to pay. On my 20 unit deal I knew investors were way lower due to CAP rate, so I went in at full price but with an MLO that got her a steady cash flow, no tax penalties for sale, and she got me much better financing than I could ever have come up with anywhere else. Everyone was happy in the end.

Hi @John Henry, @Jeremy Hunter is very right about the distance thing.  What is your goal with the rentals? What do you expect the margin to look like on the 4 plex vs the larger one?  A 4 plex is pretty low intensity, I have one that I barely go to once a month aside from doing turns.  I have a 20plex that I go to nearly every other day just to find out what else is broken.  You could probably manage your own 4 plex (and hire out the mowing service) and have it fairly easy to upkeep remotely since contractors are just a phone call away.  A bigger unit like a 10-16 would be better cash flow and appreciate more but due to your distance you'll probably need the management service which is going to be expensive. 

If your goal is max cash and to become a full time real estate investor, the 10-16 units would be the way to go since once you get enough units under your belt you can fire the management company and go full time on them. 

just for reference on the laundry room, my 20 plex has a laundry room, I remodeled it and brought it up to 4 pairs of machines and I still dont make much money. I plan to move the laundry next year and turn that space into part of an apartment to get more rent income. Laundry room is really just an amenity to make up for no washer dryer hookups in units here.

Keep in mind you'll be getting higher utilities, less rent and buying four sets of machines that on the very low end run 2k per set and now I check it about every other day just to make sure its working. A rented apartment is way less work and more income.

Hey Ward, good luck in Louisville.  When looking I personally like the east end and Oldham county.  Very high demand for rentals in those areas.  If you can't find anything reasonable in Jefferson Co. Look out to Oldham, drive isn't much longer and the rents don't drop much but the prices seem to be much better. 

 @Jeremy Bates good luck! I don't know the sources well for Houston but I can say for my own purposes I check Zillow, realtor.com, craigslist and a couple of others regularly.  Sometimes there will be a difference in data load times between them so it helps to get a few days head start on others who just look at the other source. 

What kind of rentals do you want? You said buy and hold home but that's a super vague term.  Getting regular financing for up to a 4plex means you have options galore.  If you're looking just at single family homes, figure out your market there too.  A 3bed/1 bath 1K sqft house will be in a very different rental market than a 3bed/1.5 bath 2sqft house.  What condition does the property need to be in for you?  When you talk to the different realtors mention that you're still open and ask what they think about your options and which way they would go and why.  Just listening to their reasoning will be a great educational experience. 

When you talk to realtors, be upfront that you're a newb and make sure they're ok with it.  Because you don't have experience yet prescreening properties, you're going to be requesting a lot of information on houses that you'll eventually learn to completely ignore because they don't fit with your goals.  Early on I probably sent 30% of my finds to my realtor, visited 15-20% and made stupid offers on a few. My last 2 closings were probably more 5% to the realtor for info, visited just the ones I liked and made offers on them same day.  We joked the other day that even though the last two were super easy for her, she still hasn't made back her gas money from the first one!