All Forum Posts by: Benjamin Magnie

As an agent, some of my buyers are fine to see the leases and current rent rolls, and other buyers request tenant estoppels for every building I help them buy. 

Before I was an agent, and we were building our own portfolio, we just operated off of the seller's rent rolls and leases. In retrospect, that was probably putting a bit too much trust in the other side. A bit like shaking someone's hand and taking their word for it.

Now as an agent, I think estoppels are a great idea. It is an extremely easy document for anyone to fill out and ensures there are no confusions or misunderstanding after closing.

The standard contracts we use in Florida do not stipulate who specifically should present it to the tenants, so it could be the Seller, the List Agent or the Property Manager, depending on who is involved and what is most convenient. 

Hope this helps. Let me know if you have any other questions. Congrats and good luck on purchasing the portfolio!

Exactly. A good agent will help the Seller understand the worth of his property and market it in a way that communicates that to the public. Make sure that the agent you pick really understands your specific market. Best of luck on the sales and I hope you make a boatload of money from the proceeds! :)

@Dennis L. I totally get it Dennis. I was a landlord of 200 units, self-managed, for 15 years, before deciding I wanted a change. My main point is that regardless of what you decide, knowing what market rents are will help you properly value your buildings, for purposes of selling it, or even keeping it and putting a property manager in place. You might be surprised to find that your rents could be raised enough to afford a property manager AND increase your cashflow at the same time. 

As an agent, I am constantly looking for self-managed properties where rents are low. These are the best deals for my clients. Often the seller doesn't understand the value of his buildings because they are thinking with the wrong rent/income information. My buyers benefit from this. 

You don't want to sell your buildings in this condition, where the person buying it is getting an amazing deal because you didn't maximize your income or even understand the value, before listing the property. If you are going to sell, make sure you do everything you can to get top dollar. You've worked hard for years and have earned it!

Hey David. My opinion is that Debt is not innately good or bad. Not all debt is the same. And not everyone has the same goals in life or is in the situation. Robert Kiyosaki has a great definition of good and bad debt in Rich Dad/Poor Dad that goes something like "Bad debt is debt you have to pay off yourself. Good debt is debt that someone else pays off for you" (meaning the renters). 

You mentioned the hypothetical of having 5 200k houses and after 3 years, having 1 mill of debt and 1 mill of assets. If its me, I would not purchase 200k homes that I thought would be worth that same 200k in 3 years. One of the best things about real estate, is FORCED appreciation. If I'm going to buy that 200k house, its because I think if I put in 30k in upgrades, Im expecting that in 3 years it better be worth 250k+. So id be making a goal of in 3 to 5 years, of having those 5 houses be worth 1.3 million while owing under a million.

I also wouldn't purchase properties unless I felt confident that rents were going to continue to increase, so that I could increase my cashflow in the future, which increases the worth of my properties and gives me more opportunities to refi and pull out yet more money for another deal. 

Personally speaking, I love debt. To me, debt means growth and new opportunities. But I never have and never will buy, or recommend my clients buyer, properties that don't have good future potential for rent increases and appreciation. Is that helpful?

Lisa, 1 other point to consider when assessing a property and looking over their numbers. I find it quite regular to see unrealistically low Property Management expenses presented by the Seller. You will at times see an expense line that shows 5 or 6% of rents as the PM fees. This is not likely in actual practice. It depends on your area, the size of the property, etc. but I'd say 8% to 10% is more likely. And if they are charging 6%, they might be taking other fees that bring the effective rate closer to 8 or 10%. 

Having said this, I am a big fan of utilizing a property manager, unless you love it and want the management to be your day job. We self-managed a very large portfolio ourselves for years. In retrospect, it was one of the main reasons we stopped growing as fast, because we were spending our timing managing instead of acquiring more. Hope this helps!

 

There are already a ton of good suggestions so I'll refrain from repeating what has already been suggested. But the first thing that jumps off the page when I read your original post, is that your ROI is LOWER than 10 years ago, and that it sounds like you have done minimal rent increases in that time?

I do not know your specific market, but Id strongly suggest you speak with a local property manager that can help you asses what market rents should be with your properties, both in current condition, and also with renovation plans put in place. My properties rent prices have doubled in the past decade, so its hard to imagine lower ROI on those properties, if at market rent. Having a good understanding of how your current properties should/could be performing if income is maximized, will help you decide what is the best use of your time/money.

Hope that is help. Best of luck! 

The great thing about Real Estate Investing is that its not a "One Size Fits All" situation. What is best for you and your family is likely different from what I need and want or someone else does. I think its very important to keep Timeline in mind when making real estate decisions. 

Earlier in my career, most of the acquisitions we made decisions mainly based on present day cashflow. Years later, we realized we were shortsighted and that are largest successes were the result of some properties enjoying far greater appreciation and rent increases than others. 

Monthly cashflow is very nice( and fun) but I personally try to avoid it being the main factor in deciding on a property. I am more likely to "overpay" 10% on a property if I LOVE the future potential of the building/area, rather than get an "incredible deal" on a property where the income or value is less likely to increase. 

Best of luck! I am an agent in the Tampa Bay Area. I deal mainly in MFH, though I am interested in STR as well. Reach out if you have questions about my market specifically.