All Forum Posts by: Bradley Chiakas

Hey BP community,

I've sold one of my assets in Houston (getting out of natural disaster areas) and am looking to re-invest in Austin. I have been running the numbers on 2-4 unit multi-family properties through realtor.com and am having a tough time seeing anything that is worth investing. ($350-$500k with minimal cash flow after NOI - Debt Service).

Is Austin that hot of a market, or am I not looking in the right areas?

Any general recs where to look in the greater Austin area for cash flow?

Thanks!

Lee

One other caveat. I do have a real estate LLC. Don't have any assets in it yet, but should I use it to have the owner sign the lease with the LLC rather than me?

Hi BP Community, I am managing a property for a friend starting next month. I do not have a PM license as I am managing only my own properties and 1 additional. I have 2 questions -He asked for an agreement for Owner/PM to be signed, can I find this online? -Is signing a lease with the owner, then sub letting on a separate lease to a tenant a viable option?

Hi BP Community, I am managing a property for a friend starting next month. I do not have a PM license as I am managing only my own properties and 1 additional. I have 2 questions -He asked for an agreement for Owner/PM to be signed, can I find this online? -Is signing a lease with the owner, then sub letting on a separate lease to a tenant a viable option?

Have 4 SFH and am looking to expand to 4 plex. I need to either sell or re-fi a condo I bought in 2013. That will give me the capital to invest in a 4 plex. I don't do 0 down stuff and I am also looking for capital to do some rehab for value add and rent increase.

Condo Details:

-Current Value $260k

-Rent $1875, (Dropped from $2375 from 3 years ago due to oil downturn in Houston)

-Mortgage 15yr 3%, total mortgage payment inc HOA/Prop tax $2375

-Remaining mortgage balance $130k

I acknowledge this is a negative cash flow property.  And I have taken maintenance, prop management into consideration during and am fine putting cash in for now.  The reason I don't outright sell is the condo is its in a high development area in Midtown, Houston.  There are massive 5 story, and 25 story developments going on blocks away. The average price/sq/ft will increase dramatically in the next 10 years.  Houston is also set to overtake Chicago in population in the next couple years.

Option 1 Sell:

-9% for closing costs, walk away with $106k for 4 plex

Refi:

-Refi to 30 yr, drop mortgage payment to $1,800

-Walk away with $78k for down payment on 4 plex

HELOC:

-Is this even an option for what I'd like to do?

Thank you both. So, as long as it is not classified as a "first or second home," then I can take full SALT deductions.  

Hi BP Community,

I have read 5 articles and am still unclear on the new $10k deduction limit on SALT. 

I am considering all tax implications before purchasing my first multi-family property.

I currently have about $150k in equity on a condo I will sell in the coming year. I would like to do a 1031 exchange and put 20% down on a multifamily property. 

I have a real estate LLC, but have not been able to title them under the LLC since all of my properties still have mortgages.

So, let's say I purchase a $650k multi family property with $15k in property taxes. Is their a way to avoid the additional $5k (beyond the $10k limit)? I don't think I will be able to get a mortgage in the LLC name since I do not show much positive income.

Thanks in advance!

Originally posted by @Matt Moeller:

Hello BP! My ownership group has multiple small to mid-size (8-16 units) multi-family properties in the Montrose neighborhood of Houston, TX. I am currently managing everything myself, and I'm evaluating options around outsourcing management on some or potentially all our units. I was hoping someone out there could recommend some good management companies that deal with smaller, privately owned apartments in this area? Any feedback would be great! Thanks! 

Hi Matt,

I own a small PM company and manage a couple properties in Midtown. Would love to discuss management services. 

Bradley

BradleyChiakas@ UrbanEstatesLLC.com

Hi Abram, I have dealt with leaks before on rental properties. My advice is to first investigate the source of the leak yourself. Use a hose or similar to see if you can replicate it. Use what you find and bring in a contractor. Be 100% sure that they guarantee their work and understand they will need to come back if the leak persists. Good luck!

Originally posted by @John Nachtigall:

I have been interested in this because everyone loves 30 years mortgages so much, but you pay a lot more in interest.   So I figure this is a math problem, and what else do I have to do on Saturday, so I plugged it into a spreadsheet. (I have social issues, but that is another conversation)

Note:  I did not use discounted cash flow, so a real banker would have different numbers.   This is a crude estimate.   But since they both have positive cash flow for 20 of the 30 years, it is not a tremendous error.  

Assumptions:  2% rise in rent, expenses, taxes, and insurance each year.   Also 2% rise in equity every year, but that does not matter since the house is the same in every scenario.   Assumed $500 in expenses add in taxes and insurance of 282 and total expenses are 782 to start (46%)

Results 10 year mortgage:

Cash flow starts at -878 a month,   it is 1119 when the mortgage is paid in 10 year.   It is 1663 at year 30

Total interest paid is 36,061.   Total cash flow at year 30 is 230,245.   Equity is 470,000    So total money made is $664,184

Results 30 year mortgage (starting now)

Cash flow starts at $44 a month, It is 245 at year 10 and the same 1663 at year 30.

Total interest paid is 131521.   Total cash flow at year 30 is 134784.   Equity is still 470000.   Total money maid is 473263.

Other notes

Straight cash flow crosses over at month 251 (20.9 years).    After that month,, 10 year has earned more cumulative cash flow

If you compare when Cash Flow pays the interest, it is month 231 for 1 year, but month 358 for 30 year.   So all that cash flow basically pays the interest for the 30 year.  

Conclusion:  I would say, looking at the numbers, that if you buy and hold, your total wealth earned is about 30% higher if you keep the 10 year mortgage and hold for 30 years.    

Note 2:   I did not compare to a 3rd scenario where you sold and used the 76,000 to buy a cash flow property.   I will say that to make 664,184 in 30 years with 76,000 you need to get 7.5% a year, which is a little higher than the lifetime S&P 500 appreciation of 7%.   Just another example of the competitiveness of real estate as an investment.  

Final note, a very modest 2% per year goes from 1700 per month to 3080 in year 30.   Raising rents every year even a modest amount makes a huge difference.   going to 3% a year earns an extra 100,000 in 30 years, so a total of 742000.   So raise rents even a modest amount each year.   It pays.

 Great analysis!  One small point, did you factor in any appreciation (investment not property) on the positive or negative cash flow?  7% S&P would be good.  Seeing as how you earn cash flow earlier on the 30 year, total money made may be slightly higher.  You are also losing opportunity in the negative cash flow from beginning of the 10 year.