All Forum Posts by: Christian Rojmar

@Corey Nielsen, a lot of people use 15%ish for CapEx and repairs (I have a spreadsheet with $ numbers based on various costs which will fluctuate based on age of property etc.), 10% for management, and 1 month of vacancy (8.5% but 10% may be better for multi - I am not super familiar with numbers on multi). As for insurance, to get a good approximation, best thing is to call around and get quotes. Is the property in a flood zone or not (makes a big difference). $50 just seems low to me for a triplex but it may not be...

@Corey Nielsen Capex and insurance seems very low for a three unit. Management fee - even if self-managing, typically want to include it in calculation? Vacancy is VERY conservative and 7% interest is high as mentioned previously.

@LaQuan Bates A realtor may be able to provide more insight. However, based on my experience, setting you up for alerts is free and very easy for an agent, you just need to be specific with your criteria so that you are not bombarded with emails about properties that you have no interest in.

As for how to approach an agent and get the email alerts set up, go to some REA meetings in your area and ask other investors who they use as a realtor. Contact multiple realtors and discuss your goals, how they can help you, and how you can help grow their business. Some realtors do not work with investors at all, others specialize in helping investors, and most does some sort of a mix. I have found that some realtors will keep you on the email list whether you buy or not because it is an automatic process while others cut you off if no progress is made. I think it becomes more of a problem if your realtor is able to find and send you properties that meet all your criteria and you still do not acquire the properties, or if you keep asking them to run comps etc. without any next steps being taken.

FYI, before talking to a realtor, I would suggest that you get a loan pre-approval letter from a lendor and sit down and write out your exact goals and criteria as it will help them understand what you are looking for and it will show that you are a serious buyer.

You may want to start looking for a portfolio lender (it seems that Jacob may be working with one as he has 38 units with the same local bank). A portfolio lender typically does not restrict the number of properties you own.

@Ronnie Holbert Yes, you should certainly build up a reserve fund for the property in case you have some major repairs that needs to be done. And I would personally not advice to consider CapEx as a percentage but rather a $ amount (I typically have between $160 and $200 in CapEx for SF homes depending on size/condition/location but that is just me). For example, CapEx in Cleveland may be 30% of income while it may only be 5% for the same home in Cali due to massive difference in home values compared to the difference in CapEx costs. Also, even if you manage the property yourself, most people advice that you consider a management fee (typically about 10%) in your calculation for when you scale and/or do not have time to manage the property yourself anymore.

@Stephen Nava I sent you a PM.

@Gaurav Bhasin The below article discusses the operating expenses in more detail (what to include and what not to include) and may be helpful as well.

https://propertymetrics.com/bl...

The below blog post is a good read and should answer most if not all of your questions.

https://www.biggerpockets.com/...

@Dan H. I think we agree on the Capex and it is unfortunate! You certainly seem to have vast experience in your local market. But I was trying to ask (may not have been very clear) how you determined your capex early on in your career. My point is, whether you are out-of-state or local, you will be able to pin point capex over time with more experience but when you start out, unless you are a contractor or work in a similar industry, you have to network and call around to get an understanding of labor rates and material rates. I never said you need to just call a PM and they will provide you labor rates - I think that is a mistake. I believe you need to talk to many people and once you have enough information, you can make informed decisions. Over time as you do many projects in the particular market, you will be able to pinpoint much more accurately what the true costs are locally or out-of-state.

And I get your point of a newbie not having to use a PM. I am just speaking to the analysis part. I believe unless you are planning on just buying a couple of properties locally and manage yourself, you should always include PM costs in analysis before making a decision to acquire - but that is just me.

I touched on all the other advantages you mentioned previously but I think we can go back and fourth forever on this topic. In the end I agree with you that there are benefits of investing locally and managing a team may be slightly easier, but personally, I believe the benefits of out of state investing far exceed the risks unless your local market happens to align with your goals - LONG AS YOU DO YOUR HOMEWORK. If you half-a$$ your work leading up to an investment, you may be able to save the investment locally by busting your a$$ spending a lot of time for little benefit while giving up on the investment out-of-state. So I guess it depends on what type of investor we talk about. I am very analytically driven and detail oriented personally, and so I assume that everyone is, and speak from that perspective. May be that a lot of investors just gamble and buy properties hoping that appreciation will save them or hoping to get lucky. That may work in a 10 year bull market locally or out-of-state but will end badly for most imo.

Good talk!

@Ryan Janssen Beautiful rehab! Inspiring, great job!