All Forum Posts by: Andrew Johnson

Adam H. I like commerical multifamily so I get a value increase through raising rent (over time) and I don’t need the dirt to increase in value. That said, I don’t invest in San Diego (where I live) so I like that “forced appreciation” aspect. But it comes with a commerical mortgage which doesn’t make me super happy so there’s a trade-off. And that’s the key: there’s usually a trade-off when looking at real estate! My “right answer” won’t be yours because my trade-off comforts won’t be yours. 🤷🏻‍♂️

Jennifer Matsumoto My two cents from owning apartments near a college (not in Orange County): 1.) If you going to heavily rehab, make it nice. So nice that tenants are worried about breaking things. Keep it nice. Nice enough to charge more so that “I want more beer money” student doesn’t move in. My turnover costs on my “nicer” units is less than my “pretty good” units. 2.) Tile, wood-look waterproof vinyl planks, stain concrete, etc. will be your best friends. Carpet...is...well...carpet. 3.) Don’t let students hang signs on the exterior, from a balcony, etc. Sure fire way to be a party-ish house. Might sounds small and petty advice but...well...

Liz Cole You have to make assumptions when responding. It’s just as easy to condescendingly respond to a response 🤣 And, no, not all subs are unreliable. But some are and those 6-hour car drives to check-in will get really old really quick. Or you have to pay someone local to check-in. Or you have to pay a GC to manage the process. So you’re back to risk-adjusting the deal given you’re 3 hours away. Any deal (out of state where I buy) that I’ve penciled out has costs associated with plane tickets, food, car rental, hotel stays, etc. If I’m dealing with a contractor — even referred — for the first time then I’m checking in on my deal. The net result is that I (as someone that’s a 5 hour plane ride from where I buy) have disproportionately higher costs that someone doing the deal locally. There’s nothing condescending about that, it’s just a plain ol’ fact. And I’ll 100% certain that my apartment stabilization costs are higher (and I love my PM) because I’m not investing where I live. I’m not being condescending to myself in that regard, I’m accepting reality 🤷🏻‍♂️

Gregory Hatcher For whatever it’s worth you will run straight into issues with quality, available time, etc. Will I happily look at some high-level numbers on BP and give my two cents? Sure. Am I going to spend my free weekend time working through a pro-forma with you? Eh, probably not. That said, if you need a coach/mentor then I can tell you this: YOU DON’T WANT ME. I have 36 units, that’s great, I have a system that works for me, etc. But if you want a real coach/mentor you want the investor who has 300 units (owned, not an investor in a syndication). If you want to chat for an hour about timber values, stumpage values, etc. I’ll chat with you for $50, I know a little, I’ve look at some small deals, etc. But I can tell you that if it were *my* money I’d pay Jay Hinrichs $500/hour and feel LUCKY if he took my money. 🤷🏻‍♂️ But I also see some awesome free advice on BP and some awesomely scary advice. Taking the wrong free advice will cost you more than the expensive “right” advice. Now how do you find out if Tom at the REIA has advice worth $20K? That’s the trick...

Bryan Tasumi No. I’ve seen more than my share of great “cash-flow per door” deals that need a new roof, have issues with flooring that isn’t quite level, etc. All things that don’t show up in any listing photos 🙃 Getting $200/door instead of $100/door doesn’t matter if I’m dropping $50K on a new roof for my $200/door apartment building. That cash-flow? Poof! Gone! See ya in maybe 5-10 years!

Victoria S. So here’s your challenge: My vacancy where I invest won’t be the same as where you invest. I use 8% for modeling and it’s a little lower (hovers between 4%-5%) but I don’t know Overland Park nor do I know where you want to invest. As for maintenance, I’ll just say 5%-10%. Again, I get my numbers from T12s and the risk adjust them up. I also look at the age of the property, how durable the finished are, etc. If your unit is all carpet and my bottom floor is stained concrete...well...our costs will be different. It’s a small difference but then start looking at brick vs. siding and 100 other small variables. So the net result is that we can all give you what metrics we use but they could be off a huge amount. And don’t get me started on utilities if they are owner-paid... 🤣

Liz Cole You’re getting quality advice on this thread. I’ll just add this to the equation: You won’t find/get/add “rock stars” to your team when you’re hours away, a first timer, etc. That’s not to say “don’t do it” but rather you need to risk adjust accordingly. It sounds like a negative sentiment but I’ve yet to find a recommended contractor where I buy that isn’t booked up for 9 months. So that means (if I’m rehabbing or flipping) that I a.) take a chance on a non-referral or b.) wait 9 months to start whatever endeavor I’m undertaking. In either on of those scenarios there’s a cost. Either time or risk so (for me) the opportunity has to be incrementally better to offset that risk.

John LaVecchia You getting great advice so far and the cost structures are completely different. Would you care about running the A/C 24/7 if you didn’t pay the electric bill? But the biggest issue is management expense. If you end up not loving to manage your “normal” rental you can peel off 10% of gross rents and you’re set. With a vacation rental you’re likely looking at 25% as the sweet-spot. It’s a huge difference. Now it’s all well-and-good that people want to self-manage, there are tools to help, etc. but you’re “buying yourself a part-time job” to some degree or another. And if you want to “fire yourself” and hire a PM you might go upside down when it comes to cash-flow...

Jordan Santiago So I visit my out-of-state properties twice a year. Two plane tickets, 2 hotel stays, 2 car rentals, blah, blah, blah. That doesn’t sound like a huge expense and it’s not...unless...you do it because you own one SFR cash-flowing $100/month. Poof! Goodbye profit! Now I have 36 units so it doesn’t matter but it’s brutal to start. And, though it hasn’t happened to me yet, you risk the properties “slipping” in terms of upkeep. I can’t just drive 20 minutes to my apartments and just stare at them to see how they’re doing as an “audit”. I have to depend on my PM. She doesn’t a great job but if she ever didn’t it would probably take me months to see it materially impact the financials 🤷🏻‍♂️

Maria Luna It (mostly) boils down to how you arrived at $50K. Whenever I’ve looked at deals I have oddly specific numbers where the deal “makes sense”. The max (just making things up) might be $53K for me so I’d offer $50K to have a little wiggle room. But if you’re just wingin’ a $50K offer out there based on: purchase price = needs work + hope You’re going to have a hard time working with realtors. If you say: “I’m starting at $50K because the max I can do the deal at is $53K” and that’s derived from a pro-forma it might be another story. It doesn’t mean you’ll get the deal, have a happy realtor, etc. but at least you’ll know if your logic makes sense to them. 🤷🏻‍♂️