All Forum Posts by: Brian M.

@John Warren. @Jazmin Carranza, @Tracy Streich - Thank you very much for your feedback. I'm glad that there is some consensus on the issues we have been observing. I'll need to think over how we proceed from here. 

What are your expectations of your property manager from a maintenance perspective?

We are currently trying a PM out for the first time and we've given them a triplex to manage. As a landlord, I tend to react very quickly to maintenance requests if they are urgent. If I get an urgent request at 10 PM (i.e. heat is out in winter, water pipe breaks, etc.), then I'm there within an hour to address the problem.

In the past 5 months, there have been 2 instances where a tenant called the PM with an emergency maintenance request. In the first instance, the basement unit tenant's apartment flooded due to a severe rain storm. The PM notified me the day after the call-in and took another day to go to the property and start cleaning up. They likely would have waited another day, but I told them that they needed to get there the second day.

In the second instance, a tenant called at 7:00 PM on Friday with an emergency request that the heat went out on a cold evening. The PM did not respond that evening, so around 10:00 PM, the tenant contacted me directly and asked for assistance. I followed up with the PM and the Maintenance Manager at 10:00 on their cell phones and I did not hear anything back from them until the following day.

Are these response times typical of your experience with PMs? If not, what timeline matches your expectations?

The PM contracts with a general contractor who, in addition to doing their own work, acts as the maintenance manager for the PM. Is this type of arrangement, where management of all general maintenance is farmed out to a contractor a typical arrangement that you have seen?

Thanks for your time,

Brian

Thanks everyone for your feedback - it is much appreciated!

Thanks very much for your insights, Sterling! The color you picked out is a very nice option. I'm going to go to Home Depot and take a look at it. Just curious - does the unit have floor lamps or recessed lighting? I noticed that colors look a lot different depending on the amount of light in a room.

What is your favorite vinyl plank flooring color(s) to use in your units?

I am working through making some cosmetic updates for a recent multifamily apartment building that we purchased. We are ripping out carpets and replacing the flooring with vinyl plank flooring. We are planning on painting the walls a very light grey with a hint of blue. 

We are looking at either a more modern grey-tone flooring or something with a little brown in it to be a little more traditional. The type of tenants in this area are usually middle-income and can range from a single 20+ year old to a 60 year old married couple and everything in between. We'd like to pick a color that will appeal to a wide-swath of tenants and still be appealing in 20+ years (i.e. not pick a color based on a fad alone).

I've included a couple examples of the options we are looking at so far:

Grey-toned with a little brown: https://www.lumberliquidators....

Very light brown tone: https://www.lumberliquidators....

About the same brown tone with lines between planks: https://www.lumberliquidators....

Thank you for your time,

Brian

Perhaps another good question to ask, in addition to the above questions, is:

If you don't carry liability coverage, what factors contributed to your decision?

Also - feel free to message me if you'd prefer to discuss these items offline.

Hello everyone,

I have an LLC that purchases and holds performing notes. Payments are collected by the note servicer. I'm looking into purchasing liability insurance as a risk mitigation technique for lawsuits caused by negligence. This would likely be in the realm of errors and omissions - i.e. did the servicer fail to provide the correct notice, incorrectly calculate payments reduction in UPB, or a borrower files a suit if I am put in a position where we are trying to renegotiate a delinquent note (either myself or the servicer). I know some would say that it is the servicer's responsiblity to carry liability coverage, but that will certainly not prevent a suit from being filed against my LLC.

I have some questions and would appreciate your feedback:

• What type of insurance do you carry to help mitigate these risks and who is your insurer?
• What is the approximate cost of this coverage?
• Do you have an insurance agent in mind that you recommend who has experience helping shop around this type of coverage? 

Thank you for your time

Follow up question on the Notes option above. As the principal is being continually reinvested for the 5 year period, is the annual compounding at 7.67% correct or should I be using the 11% IRR instead?

The withdraw rate, I think, would remain the same at 7.67% so that the principal portion is continually reinvested in order to maintain the same amount of cash flow. These values would be:

Future Value: 200,000 * (1.11)^5 = $337,011

Future Cash Flow (safe withdraw rate) = $337,011 * .0767 = $25,849

Does this sound right or do you think that my calculations are off?

Thank you,

Brian

Hello everyone,

I'm a long-time reader of the Bigger Pockets forums and have just created my account to become more engaged in real estate related discussions. The forums have many amazing individuals with extensive experience in a variety of areas and I certainly look forward to connecting with the community. 

I'd appreciate your assistance in comparing note returns with those from the stock market. I'm considering diversifying and holding some re-performing notes in addition to rental property and stocks and am trying to determine the respective ROI and cash flow of these investments over a 5 - 10 year window. Let's make some assumptions here so we can operate with the same set of variables.

• Stock market returns compound 7% annually in our test case and no funds will be withdrawn during the test period
• Stock market withdraw rate will be 4% annually at the end of our test period
• Re-performing notes each have the same set of metrics:
  
  • Annual IRR = 11%
  • 30 year period of performance
  • Cash flow is continuously reinvested in new notes at the end of the year (Dec 31st)
  • The notes will not become delinquent or be paid off early during the test period
  • Note servicing costs are ignored for this analysis
• Our test period is over 5 years
• The cash invested will be $200K for each option
• Taxes are ignored for this analysis
• Our goal:
  • Determine final cash flow for both investments
    • This will be the "safe" withdraw rate that does not require principal to be withdrawn
    • For stocks, it will be assumed to be 4%
    • For notes, this will be the annual cash flow - return of investment capital (let me know if you think this is the wrong statistic to use)

Stock Investment Option

Future Value: 200,000 * (1.07)^5 = $280,510

Future Cash Flow (safe withdraw rate): $280,510 * .05 = $14,026

Note Investment Option

Average ROI = ( (total payments - note price) / (note price) ) / period of performance

Total payments = 200,000 * .11 IRR * 30 years = 660,000

Note price = 200,000

Average ROI = ( (660,000 - 200,000) / 200,000 ) / 30 years = 7.67%

This means that the difference between 11% IRR and 7.67% ROI is the return of capital each year which equals 3.3%. These are the average ROI and return of capital values over the life of the loan. If we are to use a compounded value for annual return, it would be the 7.67% ROI because this will take into account the return of principal and prevent "double counting" of the principal from the original 200,000 note purchases and the annual purchase of new notes with cash flow.

Future Value: 200,000 * (1.0767)^5 = $289,403

Future Cash Flow (safe withdraw rate) = $289,403 * .0767 = $22,197

Conclusion

Based on this analysis, cash flow for the note investment would be higher by $8,121 annually after 5 years.

Question

Do you think this analysis was done correctly? If not, what elements am I missing / calculating incorrectly?

Thank you for your assistance!

Regards,

Brian