All Forum Posts by: Bryan Satter

Good morning BP! Happy to hear your thoughts on the following:

10 units (9 buildings). Almost all section 8 housing, with leases. Purchase price + closing =$820,000. Assumed appraisal $890,000

Verifiable current rents = $10,180/month

How to pay for it: seller financing for $400,000 @ 10% for 12 months. I will borrow $450,000 (to include some capX reserves) from friends and family and pay them a blended interest rate, averaging 8% for 3 years with an escalator to 10% if I renew for years 4 and 5. 

The plan is to get a mortgage after year 1 to cash out the seller. As for cashing out the investors, either refi after 2 years to see what else can be pulled out to pay them back, or worst case scenario, after year 4, sell 2-3 properties to pay them back.

Does this seem like a reasonable exit strategy - namely seeing if I can pay back investors via refi, or selling off part of package if necessary in 4-5 years? Doing so essentially enables me to own the properties without using any of my own $$. Does this seem unrealistic? 
Appreciate the insight!!

Just for more analysis  - using these numbers, "profit" after vacancy, taxes, insurance, interest and 20% for repairs/CapX reserves is 2% of gross rents for year 1. Once owner is bought out after year 1, it increases to 11% for year 2...

Hello BP peeps!

I am wondering if anyone out there is a full-time out-of-state investor. What I mean is, the cash flow from the properties is how you support yourself. Plenty of folks invest while they are working. Working a full-time job is not much of an option for me right now, however. I would like to develop a model where I can purchase properties out of state and build up enough of a portfolio that it provides $5000-6000/month in income. 

At present, I have been investing for 5+ years. Everything is out of state. I own 28 units. My strategy had been to just use the cash flow to pay down mortgages and set myself up for retirement. But circumstances being what they are I may pivot to using cash flow to live on today. I was just wondering if there is anyone who has built a successful system out of continually buying remotely and being able to pay the bills as a result...

Thanks in advance!

@John Warren - thanks for your input! You are spot on. Conversations with planning and building were fruitful. Ultimately we found a right of way existed on the property making it impossible to rezone, plus any changes to the units would require codes to be made current which turned this into a massive project I was not ready for. It became a walk-away. But I am glad I didnt say no until I knew why I was saying no! You never know!

I recently put under  contract a 20-unit motel in rural Tennessee with the intention of converting the units to studio apartments. The fix ups (that I know of) include adding kitchen efficiencies to each, replacing carpet with vinyl flooring, painting, replacing a roof and adding laundry machines. 

I am in the midst of due diligence period as we speak. Anyone ever take on a project like this before? I have a million questions and I am hoping to get them answered in the coming weeks. If it works out, it could be a cash cow. If it doesn't, could swallow me up. I will only proceed if I have all my questions answered to my satisfaction.

But any advice/insight/experience to this type of project is greatly appreciated. You can always DM me as well to discuss as I am sure I have 100 questions if you are willing to chat!

Thanks!!

@Charles Carillo - What you suggest is ideal - I am just saying that with the current PM I am using, the impetus is on me to remind them/ask for it. Which I should I suppose - it is my investment. 

However, @Dick Rosen has the much more customer-service/value added approach. That is a great offering - you have to be among the elite few PM who is that proactive! 

I think ultimately I need to be the one to take the lead and demand my PM provide regular feedback on units. It is annoying that they charge me an extra $150 to go out to the property but everyone;s goal is to make money, so I am not surprised. 

Thanks to you both for your feedback and insight!

As an out of state investor I am dependent on my property manager to update me on status of property. We talk regularly, but that doesn't mean I am always fully aware of any potential deferred maintenance or tenant treatment of the place. I had one property in Texas (I live outside Boston) that the PM never checked in 2 years. Rents were collected, all was well. Until tenants moved out and we found they had been smoking and did expensive damage to ventilation units, as well as other damage. 

In general, how do other out of state investors keep on top of routine maintenance? Gutter cleaning. HVAC maintenance. Furnace servicing, etc.? Or even multi-year tenant treatment of the units? Do you have a schedule that you keep? Do you have PM go into property with any regularity? 

Thanks!

I bought my first 4-5 properties without ever seeing them in person or even meeting my PM/real estate agent face to face. The key to me was trust. I looked for a market where I had a good friend that lived there. I asked her who she would recommend as an agent/PM. Since I knew my friend well and trusted her, I knew she would steer me int he right direction and I could trust her recommendation.

After several phone calls to the realtor she put me in touch with, the realtor and I developed a strong bond. I followed through on a purchase. Then another, and now we have a terrific relationship. The realtor now calls me about deals she sees. But the only reason I went through with it was because I trusted the person on the other side based on a relationship I had previously formed.

Obviously do your homework in a market. But try and find somewhere where you know someone you trust, who can even go see a property or two, just to ease your mind...

Goodluck!

I am considering properties in Toledo. Mostly in the university area if possible. I am out of state investor. Have a good boots on the ground contact there, but looking for any input of other investors who have experience in this market. Properties are not terribly expensive and seem to yield good cash flow. Appreciation doesn't seem likely. Mostly looking for cash flow in a value-add property, and just equity through principle pay down. Nothing crazy. Just get rich slow stuff! 

I have had great experience with this strategy in suburban Nashville as well but properties tough to come by in that market!

Thanks in advance BP!

Howdy Kumar! 

Did you factor in condo fees in your deal? $1400 + condo fees + insurance + considering 10% for repairs (maybe more for cap expenses like a condo assessment) does not leave a ton of meat on the bone for cash flow/reserves. If you are convinced of solid appreciation and are not worried about putting any cash in your pocket then maybe... but one month of vacancy will blow any extra $$ you have in reserve.

It took me awhile but I finally got comfortable with out of state investing. I found a friend in a quality market, and had them refer me to a real estate agent they trusted as well as a property manager. Best thing I ever did. Much better metrics/opportunities sometimes when you look outside your own backyard. Plus with a PM, if something goes wrong, they handle it. All you do is write a check. It is a great way to go!

Good luck amigo!

@Chris Purcell nailed it. One call to PFCU and they answered all my questions and seemed like the perfect place to help. I just needed that push. I had tried other CUs, some other banks that came up on a Google search, some other recs from people... thanks for making the obvious answer appear right in front of my eyes... The BP network is the Patriots of onlien forums. Always a winner!