All Forum Posts by: Bryan Petrinec

I have developed a business in construction/remodelling that was initially designed to support the 34 properties we have. It has taken off and have an interested partner. I am looking for a small business attorney that work with me to separate the construction/remodel side from the property management side. Currently it is all under a single LLC but not sure if this needs to shift to a C corp and looking to take in a partner on the construction side so need to make sure everything is separated and protected. Any recommendations of someone to work with?

I would prefer someone local to the Austin TX area, but struggling to find anyone in the area that has experience in what I am trying to do.  Best I can find is small business succession planning but can't get a call back from anyone.   So reaching out to the community to see if there  is someone with experience in this area. Thanks in advance

I'm sure this topic has been covered but the only posts I can find close to this topic are several years old and given the changes in lending over the years, I am asking again.  Please forgive the length of the post but trying to provide relevant background. 

We have a portfolio of investment properties in the N. Austin/Georgetown TX area - 11 buildings / 34 doors (a mix of 4-plexes and duplexes), 10 of which have conventional mortgages and 1 is paid off.  

The last group of buildings we purchased were six 4-plexes.  They were in rough shape when we bought them and knew that this was going to be an "investment" beyond the closing date.  The price was good, the rents at purchase were below market, and it was fully occupied.  We had a 5-7 year plan to get these building back up to a livable standard, get rents up, etc.  Unfortunately, the level of differed maintenance was more severe than anticipated and the 100% occupancy was propped up with people who hadn't paid rent. So long story short, in the past 1.5 years, we have renovated 9 of the 24 units, installed new roofs on 3 of the 6 buildings (this was known at purchase), and replaced 8 HVAC systems.  The initial plan was to renovate as vacancies became available.  However the previous landlord's criteria for tenants was breathing and could pay when they signed the lease- not after. I have gone through several more evictions and although 9 are renovated we still have 4 vacancies that are in the process of renovation.  On the renovated units I have been able to raise rents over 20%, have gone through proper tenant screening on tenants I have placed and have had no issues with the current tenants.  Although the timing was accelerated significantly, the overall investment was not a surprise.  

Then add in the perfect storm - longer times to get renovated units rented due to covid.  May of 2020, one of the duplexes was struck by lightning causing a rupture in the water heater gas line and had a significant fire.  Luckily no one was hurt, but we are just now finishing up on that project now.  About $180k in repairs (mostly covered by insurance, thankfully) but has had related expenses that were not expected in April of 2020.  Then add in the winter storm in Feb where there was record cold temps for a record setting duration and add in power outages.  8 units with frozen pipe related issues some with expensive emergency repairs.  

Got into real estate in late 2017 understanding the risks and thought we had a decent operating cushion for emergencies.  All of the units generate income, just not fast enough for the amount of issues we have had to manage.  

(So much for the short version)

I am looking at 2 options - 1 selling a building to generate cash OR get a loan against the paid off duplex. I would prefer to get the loan and maintain the current portfolio if possible. The one that is paid off is the one that had the fire so both sides, inside and out, are brand new. 1 side is leased and we just got the CO for the other side last week and getting it rent ready now. ARV is in the $450 - $485k range. I would like to get $175-200k out of this which will allow me to finish up the repairs at the 4-plexes and then just deal with general maintenance issues. My question is on the loan - what vehicles are available? Fanny/Freddy are out - already have 10 mortgages. 5 were just refinanced - not enough equity for cash out but lowered the monthly debt service by about $800/mo. From what I have seen, business loans can use collateral but are shorter term, so I am concerned about the monthly payment.

Is there anything out there that I can get a close-to-conventional mortgage on 50% ARV on an investment property??

If you made it this far, thanks for the interest.  Let's see what options I am missing.  We have great personal credit scores, but would prefer to keep the loan in the business if possible.  

That is a little on the high side but not ridiculous.  I run a handyman business and do property management/maintenance.  I charge $75 per fan with the fan being provided.  If I need to get the fan it is cost +10%.  To replace a garbage disposal, I charge $225 and that includes a 1/2 horse Badger disposal.

I highly recommend @Jared Crouch.  He focuses on RE investors and has helped me grow my portfolio over the last few years.  

Bryan

Cedar Park is a hot market both for sales and rentals so neither is a bad choice.  @Joe Niedert, what does "assumed a property" really mean?  Ultimately it depends on if it is a good deal or not.  Are you making $100/mo or $1000/mo after all costs are paid?  If the rents are not covering the costs, then you are gambling on appreciation.  Although a very safe bet right now in CP, is that what you want?  

You also need to look at what you can get with the proceeds of the sale.  Prices for everything are high so to sell and buy back in the same market doesn't give any gains unless you can find a great deal, and they are out there if you look.  So if you are planning on a 1031 exchange, you should start looking before you sell to make sure you can get that rental in the sweet spot.

@Jon S. selecting a property manager is like selecting a tenant. You need to do your homework, screen them and ask for references including addresses of properties they manage in your area.  There are good ones out there, just like good tenants.  If you are chasing rent every month, getting tenants that pay on time without being asked would be my first suggestion.

That all said, I manage 34 doors and just started investing about 18 months ago.  Luckily, I was a project manager in a past life so I already have some of the skills needed, but I have been drinking through a firehose learning how to do this well.  There are a lot of resources out there and right here at BP to help.  If you intend to continue to do this yourself, which is what I intend to do for now, invest in getting better systems in place.  There is a point where spreadsheets work and at some point you will want to upgrade and possibly hire someone part time to help.  

Doing it yourself is less expensive, but dont think it is free.  And as you grow make sure you have the teams in place so you can continue to do a quality job.

Thanks @Nathan Gesner and I understand that there needs to be something in it for the broker, but I am intending this to be a stand alone business.  In addition to this venture I already have a remodeling company so I intend for both to operate out of the same location.  So the exposure to the broker would be minimal, at least that is my interpretation.  What are the broker's liabilities?  Mabee if I have a better idea of what the risks are, I can develop a strategy to mitigate them for both parties.

Is there a Texas broker directory?  I agree that the mom & pop's are the way to go, but they are also harder to find.

Thanks again!

I am managing 34 units now as part as my portfolio and considering going into the property management business and include properties outside of my own portfolio.  So in Texas, I would need to get a RE license or partner with someone with an RE license.  As I hate having my future dictated by others, I would prefer to have that credential so not to have issues in the future.  I also intend to act as an agent but only for a handful of deals a year to supplement the rental income to purchase more properties.

So before I invest the time and money, I wanted to see if there are brokers out there that would support this approach?  In discussing with my current RE agent, this could be hard to find a broker due to the potential liabilities and low number of deals.  If there are brokers out there that would be willing to work with this structure, please pm me as I would like to learn more before I move forward with the above.

Bryan

Hi Ray, as a CP investor myself, location is key.  You need to more careful in areas like Killeen, Bastrop, Buda as the wrong side of the RR tracks or highway can make a huge difference.  I would recommend that to buy where you know.  I have found good deals in the Leander, Round Rock, Georgetown area in the $250k range for a duplex. Those areas are more stable, but a little more pricy than where you are looking.  

Get teamed up with an investor focused realtor.  I recommend @Jared Crouch as he has made a huge impact on my purchases over the last 2 years.  Zero to five duplexes that all cash flow in the last 18 months and potentially more soon.  

If you are focused on those areas, get a realtor from that area, so you might need a few. Best of luck!

Please add me to the list.