All Forum Posts by: Alan Mackenthun

I look for 25-30%, but I manage my own properties and estimate 7 or 8 % vacancy. Generally I run a fair bit lower on the rate of vacancies with the properties I manage. I figure I can estimate more aggressively when no one has moved out for about 23 months (knock on wood). Take those out and you may be right. Just be careful about the CapEx and repairs estimates. I've mostly newer buildings and have few expenses, but I just bought a quad that has a bunch of deferred maintenance. It's only been a few months, but I'm sure I'm going to be spending 75% of my maintenance and repairs budget on that single building for the next couple years anyway.

Welcome Mike.  You've come to a great place to learn.  I'm close by just south of Prior Lake.  I also haven't ever had a plugged toilet call, but calls do come occasionally.

As you said the best learning is doing.  Find some good templates to analyze properties so you can recognize a good deal when you see it.  Flips are really a different business than buy and holds.  Flips are really more another job than an investment since so much work is required for the rehabilitations.  I've done a few, but they always remind me how much time they require (that I don't have).  If you're managing properties yourselves, then I've learned to buy them close by.  I'm going to be selling one soon because I'm tired of heading up to Maple Grove.  If you're paying someone else to manage them, then you can expand your search.  There's a wealth of info in the forums so search them with any questions and then ask away if needed.  My wife and I are also in software and invest in RE on the side.  Good luck and Happy Holidays.

Good question.  My wife and I have done a fair amount of single family investment and are determined to get into larger scale retail or multi-family investments.  We've learned the value of tenant screening, but screening commercial tenants is a whole other deal.  I expect to put professional management in place at least initially and learn from them.  It would be nice if there were more commercial resources available here on BP.

I'd definitely go with the TPO or PVC.  I would never, ever do a build up.  About 5 years ago I was president of a congregation with two churches and two grade schools.  Two of the roofs were bad and really needed to be redone.  One of the others was a newer build up, but it had been 'maintained' and patched to deal with the leaks that had sprung.  This was a huge unexpected expense for us.  We got bids and I lobbied hard for the TPO.  We did one church and one school with the TPO with tapered insulation above as you described.  5 years later we've had no issues at all with either of the new roofs and the other build up roof has been continuous problems until last summer when it was also replaced with TPO.  The white membranes are durable, but if a problem would develop, you can find the whole and patch it.  With a build up roof, you've got a bunch of gravel over layers of asphalt.  Asphalt degrades over time fairly quickly.  The gravel is supposed to protect the asphalt, but that's not always how it works and when there is a problem, you're really out of luck.  How are you going to find it with all the gravel and layers of roofing?  Additionally, the white membranes significantly cut air conditioning costs in the summer. 

If you're getting that many calls and no applications, then the price is out of line with the property condition.  With that many calls, the ad or pictures may not be the best, but they're working.  I'd have to take a long hard look at the property, comparables, and the price. 

Beyond that, if I was getting that many calls, I'd schedule open house style showings where all prospects show at the same time.  Then you can properly prepare the place so it's warm and bright and multiple people viewing the property at the same time tends to make them competitive. 

I've really found that it depends.  Financing a property with more than 5 units means you cannot use a regular conventional residential mortgage.  That means it's a commercial loan.  Banks have widely varying standards for commercial loans, but you need more skin in the game 20-30% minimum usually.  Brandon had a blog post recently that would be good to reference.  There's a lot of criteria, but they are generally more variable on a commercial property than a residential mortgage.  You will likely need to show some reserves.  The cash flow on the property must be sufficient to cover the note + some percentage above usually.  I'd recommend that you go talk to a number of banks (especially local banks for smaller properties) and see what they want in your area.

Don't pay more than you want, but I wouldn't wait.  You're not the only one with this strategy.  If you can get a place at a price that makes sense for you, I'd say go for it.  Deals can be had this time of year, but it's changes quickly come Christmas break when people have time to think about these things.

Honesty and transparency are imperative.  Straightforward, reasonable pricing is a huge part of this.  If I'm hit with extra fees or unreasonable expenses I'm going to lose trust and I'll do it myself.  We understand that everyone has to make a living, but most importantly - that includes us.  As long as you're percentage is low, then charging a payroll or other expense may be reasonable.  If you're charging 8-10% and then still adding other fees, then we've got a problem.  I also want to know how tenant maintenance (encouraging long term tenancy), apartment turnover and building maintenance is handled.  How is this managed and priced?  What is and is not included? 

1st reaction is that it's a great idea.  2nd thought is that the public schools would never be willing or able to deliver a useful education in finance.  I'd bet they'd do more harm than good.

I'm not certain what kind of calculations you're thinking of or what kind of property you're considering.  Most of these expenses can vary quite a bit by property and type of property.  A couple you're missing that will and might come into play include real estate taxes and association fees.