All Forum Posts by: JR T.

I will show you what I've bought later this week so you get an idea of a starting point anyway. If you're well financed you can offer low prices with a 10 day close, no contingencies. You should have enough padding built into the deal for anything that would have been found in an inspection, you're already at the bottom dollar so the home inspection is no longer a negotiating tool. Better to just close - landlording is the business of time. For multifamily that's sat on the market for several months the owners are thrilled. But you have to use judgment and can't be too cheap or you find yourself taking forever to get a deal, sometimes you have to pay a little more to keep the machine moving. I usually average out the last 90 days actual rents collected, divide that by .016 for a starting point and then manipulate that number based on how good/bad the property looked at the showing. Authority Settlements in Urbana can close fully insured titles FAST! We went to contract on Friday for a 3 unit building and we close Wednesday.

You won't get very many deals done. And when you do get them done it will be the hardest core landlording imaginable. That means that they're talking about buying leased 20 caps.. think about how crazy that sounds. You gotta put in labor and processes for every point of return over 5%. At 5% you can get a little slice of a CVS and not have any headaches. 

Your landlord headaches will get left outside with the 15 points of return you find yourself light each year.

Your best option would be instead of putting 20% down every two weeks buy a property outright every ten weeks. 

Problem solved. No need for credit, insurance, slow closings.

@Logan Hicks sending you a private message with my contact details.

I'm sorry to say it, but stories about turning these types of properties into a winning portfolio are largely pipe dreams. If you were to carefully account for every single expense associated with those properties you are probably overall negative cash flow - you put in more money and time than you take out.

It's actually an OK place to start out though. Your focus now needs to be getting your loans paid down with cash from your primary occupation. Once you have actual cash flow on the properties and respectable LTVs consider adding a single very carefully planned "perfect" acquisition to your portfolio. You'll have a very clear idea of what you are and aren't looking for after getting these 3 back on track.

@Ray Arends We were seriously considering offering property mangement services in Hagerstown because the service quality is so universally bad. The problem is the amount of work you have to put into those lower rents isn't covered by the management fees. The lack of capital backing the properties rent rolls is directly reflected in the amount of work you have to do out there.

I'm heavily invested in Hagerstown and based in Frederick - so if you're ever going to or from let's get together and have lunch. If you don't have any good landlord stories you won't have to wait long for them in Hagerstown.

Just a few thoughts...

Do not expect to get a deal out of your first or even your fifth direct marketing campaign. The response rate is low and your conversion rate is about that of any direct mail/telemarketing operation (i.e. dismal). You are still experimenting with how to build your mailing lists. If you built your list by driving around you're not going to have enough volume. 

Do not expect the people responding to your mailing to be particularly motivated. If they were truly motivated sellers the house would already be sold - it is not a hard task to find someone to buy your real estate.

Now some good news: When you do finally get to a deal - it will be a very good one! This is PROVIDED you do not get desperate and do a bad deal to get over all the rejection that comes with this type of marketing. You don't have to have a high success rate in marketing efforts to be very successful in real estate - you need to buy right. Every dollar is made when you buy real estate not when you go to sell.

Pros to using a REALTOR: I recently closed a direct marketing deal. It was a 3 unit apartment building that had gone off the market. I had my commercial broker send a letter on his firm letterhead. His company has been a big developer on here since the 1970s and when the seller called he said, "I get a lot of mail about houses, but when I saw BROKER NAME I knew maybe it wasn't ********."

Which brings me to: You most likely aren't going to be the first person to write these people. Many many of these offer letters, enticements to call, whatever get mailed out. Established companies leverage public databases to generate lists that blanket a whole state - because if you're going to keep an office full of people busy you have to send a crapton of mail (see above). 

And I'll close with two suggestions: Go ahead and get pre-approved for the financing. The key to getting a deal done in this space is to close fast. If you're talking about a 45 or 60 day closing period somebody is far more likely to shop your price around before they sign on the line, to get a good deal be prepared to close in 10 business days. 

And why not get your REALTOR license? You should be able to recoup the costs through your own market activity (plus some), you'll gain plenty of useful knowledge you didn't know you needed to know and as a mechanical engineer I'm certain you can handle the 60 hours of coursework and exam. Incidentally, I'm not a licensed REALTOR but I think it's a good path depending on what your circumstances are getting into real estate. I promise you'll never say "gee I really wish I wasn't a Realtor." I've said many times "I wish I had gotten my license and could save $6,000 on this purchase today."

Funny but perhaps confusing @Brent Coombs.

Just to help clarify what I perceive your point to be is that if the home is so underwater that the bank is willing to write off a portion of their loan if you just find them a buyer WHO CARES how it cashflows out in rents? Get a property that isn't underwater and it should cashflow even better and be paid off sooner. 

Don't waste your time in deals like this. You don't actually make any money at them because they take forever to put together and you will have to attempt 20 of them before you get one to close. You're better off to just get a part time job.

@Account Closed The issue is he's got a culture going of just selling people all the insurance they will buy, not what is appropriate to their needs and objectives. His arguments all point to liability only but his sales pitch is that same old comprehensive policy. It's a bad culture, a 10 minute perusal of his website reflects it immediately and it comes through consistently when he writes about insurance. It's understandable - when you're starting out in business you have to take every deal you can get. But then you're supposed to get professional and start holding yourself and your staff to a higher standard of excellence that makes your business get big and stay around through generations. 

Was the revenue for the coin laundry gross revenue for 12 months for a 31 unit building? Do you happen to know how many machines they're operating? Thanks for that, it's a useful data point. I've been considering putting some coin op units into my multifamily buildings, but I haven't seen actual numbers (including yours) that suggest there's any worth to this idea so far. Thanks in advance for the additional info.

My best thought about this is I wouldn't be so quick to fire the maintenance guy who works for his rent. This guy probably knows the place inside and out. I would keep him through the transition and see what he's like to work with. These sorts of folks are often way more valuable than an employee you're paying a crapload more money to have who clocks in and out, takes their breaks, etc. Nothing wrong with that, but the live-in types typically make that place their life. He might have more value than you initially saw, but probably doesn't know how to show that to you except by doing a good job.

The others are definitely gone, rents need to make it to market even if it means turning over some of the tenants (prudently with a strict eye on vacancy control). My main concern is what is your explanation for the high vacancy with below market rents situation? Something isn't right there - either you're not right about the market rents or something else is keeping people away from there - what?