All Forum Posts by: Brad Gibson

I have very little turnover on my units (knock on wood).  I generally have good tenants and take care of them.

I'm intrigued by a blanket loan/mortgage.  Sounds like it could be the thing to proceed with.  I'll give first crack to my local banker to see what they might be able to offer & then shop a little further.

 Thanks for the response. The idea to test out a property manager now is a really good one. 

The prior one took a solid 4 months to get a unit rented that was in great condition, super location, & slightly under-prices for the market. I do know they took a ton of applications at north of $50 per person. 

Looking to Bigger Pockets community for some ideas and advice about what comes next.

I'm finalizing my 9th investment property this month.  I started with my first investment property purchase in September of 2016.

All of my units are SFR's and have been done through conventional home mortgage loans. I have a small balance on my original home loan, so that brings me to the cap of 10 total loans allowed by Fannie/Freddie. I manage all of the properties (with the exception of one in another city) and maintain a VERY full time job as a trainer/consultant. All told, the rental properties should earn conservatively 70k net during the next 12 months.

So my question is what comes next?  How do I grow the business and scale it?

Option 1) Use cash flow to pay off smallest mortgages and then purchase the next unit using conventional mortgages through Fannie/Freddie.  The pros are that I'm very familiar with finding quality deals.  I have a local team in place for finance, repair/rehab labor, and quality systems in place to manage things.  Cons: This doesn't seem like an efficient way to scale the business and eventually, I will either have to quit my full time job or find a property manager. (I've tried two property managers, but have fired both because of poor performance...I have one for my out of town property & he is amazing)

Option 2) Use commercial bank financing through my local bank to continue making acquisitions of SFRs to grow the portfolio.  The pros for this are that it allows me to keep the current low interest mortgages and puts new cash flow into new acquisitions to grow the portfolio.  The cons are that the interest rates for these deals are significantly higher than the conventional mortgage loans (1-2 percent higher) which cuts into returns.

Option 3) Save a larger chunk of investment cash for the down payment on a multi-family (small apartment complex) property.  The pros of this is the ability to add lots of units under one roof and to scale the business.  The cons are that I have zero experience evaluating multi-family properties and determining if it is a good deal or not. This scares me considerably since it seems like a whole different world. I would also likely need to hire a property manager specifically for the complex while the talent pool in my area is VERY thin & expensive.  Quality individuals are hard to find and the wages they can command are also very pricey.  It's a part of the reason why the real estate market is so hot as well.

Option 4) I'm open to other ideas, because I legitimately am not sure which is the best way to proceed.

Thanks in advance.

I'm a fairly new real estate investor.  I've acquired 9 properties over the last 2 years and I'm looking to add number 10.  To this point, I have always used a realtor or broker to assist with the purchase of all of my units.

I got lead and then a call about a property from a lady who heard I buy houses & would like to sell.  Her asking price is a square deal and I'm ready to make an offer tomorrow, but she has no real estate experience and I have none sans-agent.

Any crash course advice for a newbie who has no fear of doing the necessary work, but I don't know what I don't know.

Here is how I think it might need to go:

1) Make a formal written offer (Find a standard real estate contract & make the offer for both parties to sign.  Be sure to include an option for inspection and an addendum for financing)

2) Notify my mortgage broker that we have a signed contract and to start his process & order an appraisal.

3) Get in touch with a title company or real estate attorney to work up the paperwork.  Ask the title company to do their standard title insurance work for both buyer and seller.

4) Do the due diligence on the property and allow the bank to do their underwriting process.

5) Schedule the closing, wire the money, and sign all of the documents to transfer ownership.

Is there anything that I'm missing or have left out?

Thanks in advance y'all.

Not uncommon for sellers in Midland to reserve their minerals. 

The last 4 deals I’ve done all had the sellers reserve the mineral rights. 

Oil companies drill wells on the outskirts of town and then go horizontal to get the oil under the neighborhoods. 

Owners of a residential lot can get a lease of a few thousand dollars & then some small royalties later. Up until a decade or so, no-one cared really about minerals since oil companies were not going to put a rig in the back yard of a home in the middle of a city. 

It matters now since they can be miles away & still get there horizontally. 

I wouldn’t fuss about the minerals or you are likely to lose the deal. Either that or raise your offfer by about 20k and include the mineral rights as a contingency for the higher offer. 

Good luck. 

Virginia Elizondo can help you on both sides (agent or property manager). 

She is unique in that she plays the long game of building a relationship & knows the needs of investors. She isn’t afraid of low offers & has a built in team that she can connect you with. 

To be transparent, I’m a customer of hers for both the acquisition and management side. But I have nothing to gain by giving the recommendation. 

Good luck. 

Just an update on this one.  We are still in the process of finalizing this deal from a financing perspective.  The hold up has been getting an appraiser to take the job.  According to mortgage guy, appraisers are reluctant to take a job and bring an appraisal back in for below the sales price.

There are no comps in the same neighborhood for a home that has a guest house & thus they are missing that as a value add for the rental income stream.

That said, it does look like that we've got someone who will take the job and are on course to close on time.  I've got a renter for the guest house lined up at $750 a month and the main house should rent for approximately $1400 at worst.

Even at a $151k sales price, we should still be plenty OK from a cash flow and a Cash on Cash return.  Hoping we get to closing.

Hi Mr. Johnson.  This complex is in Lubbock, TX.  That's about 2 hours from where I live, but I have some SFRs in Lubbock in addition to my home market.

When they said re-hab the units I pressed for some more information and it sounded like just "make-ready" for those that were being turned over.  That make ready included replacing some appliances.

These are efficiency units and I did a drive by.  They are in the rough area.

I attached the bigger pockets calculator to a post above this one with the analysis.  Let me know if I'm missing anything.

Kindly,

BG

Hey all.  Thanks so much for the great feedback.  I've asked for the last 6-12 months of the expenses/books from the seller, but I'm pretty much in the "not for me" category.  At this point, I'm doing this as an academic exercise with an eye toward learning.

I ran the bigger pockets calcurator someone mentioned and here is what the results look like.  If I missed something, would y'all let me know what was omitted.

Small Apartment Complex Analysis

 Thanks so much. Will do!!