All Forum Posts by: Bryson Cox

I have a property currently under contract but I wanted to get some advice from other investors out there who could weigh in on our situation. My parents are currently renting (paying $4500/ mo) and want to use the house hacking method to get into a property that could be an investment long term, but also doubles as a fun place they can work on fixing up. The approach here is to focus on something multifamily with for long term tennants or short term rentals so they could use as their own residence for a couple of years before moving out and using the rent to cover the morgtage. 

The demand in this area is crazy high! All of the properties that hit the MLS sell within 7 days!

Purchase Price: $1,000,000 (about $480/sqft)

- 2100 sqft of livable space

- Lot size 5000 sqft (zoned to build a 3rd unit)

- 3/2 downstairs unit totaling 1200 sqft (market rent would get between $2200-2400/mo)

- 1/1 upstairs unit totaling 900 sqft (rents for $1800/mo with current tennant)

- 10-15K would be invested in adding a fence for privacy and turning the front and side yard into nice walkable sitting areas with seating. The home is on a corner and the areas in the yard are currently filled with big thick bushes which act as privacy protection as there is nothing but a shorter wall around the front and sides. The hope is to increase amenities for my parents which will allow us to charge more rent for tennants long term as well. 

- There is a rare 6 car parking lot in the back that could be used to build a 3rd unit as it is zoned for it. 

- It currently wouldnt break even as a rental investment, and when they move out in a couple of years it probably still wouldn't cash flow much. Instead of paying about $54K/yr (4500/ mo) that would go to someone elses rent they want to put it into this property. With the current tennant, their overall living expense would lower to around $3400/mo so they will save about $13k ($1100/mo) a year right off the bat.

The other option for them at this time would be to buy some $1million dollar home that is nice and fancy and doesn't have areas to build value or collect rent. This is hoping to turn a retail, home purchase into something that is more investment minded. But I want it to make sense long term.

Any thoughts or opinions are appreciated greatly!

Comparables in the Same Area:

#1.  Duplex

1656sqf livable space

1943 sqft lot size

3 bedrooms1 F/ 1H Bath

• Upgraded inside and out, not crazy fancy but has been updated

Pending now for $725,000 ($437/sqft)

#2. Duplex

1252 sqft livable space

3814 sqft lot size

3 bed/ 2 bath total

Sold for $800,000 ($639/sqft)

01/03/2020

#3. Triplex
1996 sq ft

5bed/ 3 bath total

Sold for $925,000 ($462.5/sqft)

on 01/27/2020

Personally, I live in a state (CA) where marijuana is legal and wouldn't want to set any hard rules that would turn possible renters away. I know that cigarette smoke has been proven to turn walls inside a home or car yellow/brown but a local property manager I know made the comparison of marijuana smoke to a candle, sage or incense. What is the difference between marijuana smoke and a strong scented candle that fills up the whole entire room? Sometimes my wife has 3 or 4 candles on in the house at once. I understand there could be problems with the marijuana smell seeping into the neighbors units but I haven't ever had that issue. 

Thanks for the story...keep us updated on how it all progresses! Best of luck!

I personally I feel like a lot of older people replied with "go back to school young man!" just like my father yelled at me haha.......but there are some things to ask yourself here. 

Why did you quit school? Was it the money?? 2 full years of school at a university might be around $60k more tops. If you get good at sales and realestate then you will easily be able to pay the back much faster than people who get a job right away and stay there. 

Did it feel like a waste of time?? Because much of Real Estate can feel tedious or a waste of time at first. It takes a large amount of long term dedication...slowly chipping away until you establish yourself and breakthrough with a successful business. 

I think what most people telling you to go back to school are making the point that you are going to deal with adversity that is much tougher in real estate than in college so if you quit halfway through with that....whats going to keep you from quitting real estate when the going gets tough there???

I know a degree can feel pointless when wanting to have a career in real estate, but it's more about creating a foundation of experiences and challenges that add to who you are as an entrepreneur. And it is true that it will be hard to find a decent job if you realize after 5 years that real estate isn't for you. 

A degree is nothing more than a safety net. You don't need it but I personally found myself going back after quitting school for 4 years. And like everyone said....the real estate isn't going anywhere!  

@Martin Neal

Thanks for the story and all the details! It’s great to learn from other peoples early experiences

@Alexandra Chaploutskiy

Crazy story! Thanks for sharing!

@Hunter Robertson

To get a great deal doing cold market, you need to focus on doing high volume at an efficient and fast rate. Because of this, you need to not be afraid of having some people react badly to your offer. Because out of 100 cold market attempts, you are searching for the 1 or 2 who will say yes and a certain percentage are going to naturally disagree with your pricing. Some sellers have an inflated idea of what value is at times and that’s their right. Be confident in your sales pitch and price that works for your business model. If they can’t respect your bottom line then they don’t understand business.

Wow thank you all for the amazing replies! I haven't had time to respond individually but this was very helpful advice and I appreciate all the effort. The PM company does have a great reputation in the area but I do feel there must be a reason why the occupancy is so low. The units are in need of repair so that probably doesn't entice people to stay there either. I will discuss with my team about making steps to raising occupancy! Even if that means lowering the rent for a little while until the units are filled. 

Thank you everyone!

Hello....

I wanted to get people's opinions on how much is normal for a property management company to charge? Currently the management company for my 13 unit apartment complex is charging 10% of all rent collected as well as the first months rent on a unit that becomes rented out. With this added bonus for them filling a unit, the total management expense comes out close to 13-16% of the total gross rent collected which seems high to me. I also fear that this first months rent bonus for getting a unit rented out takes away incentive for the company to get renters to renew their lease. Thoughts on this??

The company has a good reputation in the area but after analyzing my numbers, I found the units have been occupied less than 70% on average the last few years. I am dealing with a C Class neighborhood but should expect closer to 80% occupied at the very least, am I right? Average vacancy rates in the area have been from 16-10% but my property has roughly 30%+ vacancy rate. From everything I've researched this is not good enough. How do I hold my property management company standard, especially when I feel they are charging me so much?

Should I approach them about performing better? Or try to negotiate a lower property management fee? 

Any tips or advice would be greatly appreciated. 

Hey! I'm not sure if you're still wanting responses on this post but I'm working with a lending broker based out of Orange County and have some insight from my experiences right now. 

Right now I am financing an 8 unit apartment complex with the purchase price at $360,000. I plan to get a 30 year commercial loan and my broker is telling me that 6.5-7% is more realistic for an interest rate using a complete underwriting process (3 years tax returns and credit check). And even further, the minimum cash down is about 25% although I'm looking to put down more to drive up the monthly cash flow.

On your other calculations, the current management company I use to manage my portfolio takes 10% of the monthly gross cash flow (and they are really good at what they do so I'm I love the no headaches). Also for closing costs, I calculate between 3-5% of the purchase price....your estimation was close but I always estimate conservatively to protect my calculations. 

But your idea is right on point! I've analyzed deals all over Southern California and most of the time the inflated purchase price gets rid on any possibility of positive cash flow. The best way to get cash flowing properties in these areas are finding a place that needs serious work, investing that rehab to increase the value, re appraising after the rehab and then pulling out as much cash as you can on the refinance (thus lowering the cash youve put in out of pocket and hopefully giving a good return on your cash)

Hope this helps!

Bryson Cox