All Forum Posts by: Chris V.

 I agree with Marco; I'd just hear what they have in mind etc. Get as much info as possible. Ask if the are currently negotiating with any other buyers. If you think it sounds like a good deal you will want to bring in the professionals though, because from everything that I have heard these apartment complexes have a lot more ins and out than your regular old triplex or fourplex. There are few bigger pockets podcasts that deal with buying commercial property and one of those was detailed enough to give you some pretty good idea of what you are getting into. I would definitely listen to those first. On those podcasts they also suggest some books specific to this topic I think 

Good luck and let us know how it went!

Hi Abraham - I should have made that clearer; I did not go  through the downturn myself. Just like you I started buying when things were in a safe upward trajectory. However I know people that did go through it and they have rentals in the lower end of the market and they were ok (not affected). Probably because they were in the low end of the market and did not buy any duplexes at $400 or $450K...:)

If I had to I could lower my rents (quite) a bit to fill vacancies and still cash flow positive. However anyone buying at financed duplex or triplex at Stockton Retail prices today is going to have a hard time lowering rents and cash flowing positive. I am buying a few properties myself right now and the only reason I feel somewhat confident at these prices is because I will be able to absorb any shorter term hiccups that I might have on the new properties with the cash flow from my other properties. Once I get the new properties "dialed in" I think they will perform fine but not awesome. 

If someone had only just enough money for the down-payment on one of these properties and did not have any other disposable income to absorb unforeseen events I don't know if I would recommend them to buy it at today's prices... Its definitely not a no-brainer anymore like most were in 2013. And with prices going up and inventory being low I think we are going to see people enter the market that must charge higher rents just to break even. Or even cash flow negative hoping for appreciation to bail them out.

PS: You did not mention how much you are paying for your property manger, but if you found someone that gives you peace of mind I bet it's well worth it!:)

Thanks for bringing this up! I have the same problem now and then and I am SURE it's not just you and me. The last month is a very vulnerable period for a landlord. Because lets say the damage deposit is one months rent, which is typical. The tenant tells you they will move out on the fist of next month. And they just don't pay the last month. By the time you are pretty sure they are not going to pay you are two weeks in (because just like you said, they were by then already consistently paying late). Now what are you going to do; get an expensive eviction process started while they are going to leave in two weeks anyway? On top of that you risk pissing them off to the point of damaging your property. So yo are just left to hope they will not leave damage and cleanup that is disproportionate to the time they had been renting. Lets say there is a couple of hundred worth of damage or cleanup. Good luck finding someone what wants to go and try to collect a "small" amount like that. And how much time do you really want to spend chasing something you will never see again. And they people don't care because they were system gamers with nothing to loose to begin with.

I have not found a good solution for this myself. In theory the best solution would be to never get someone like that in your property to begin with.:)) So easy to say. Care full screening, helps but I found it to be not fool proof particularly because a certain type of asset class attracts a certain type of tenant. So to some extend you have to pick between bad, not so good and worse:).

I always try to get a double or even triple deposit if I can before they move in if there is any reason there might be an issue. (check your local laws). If they turn out to be great after a year or so I don't mind refunding some of that either.

Depending on easy it is to find a new tenant quickly (and if they are on a month to month) you might consider asking them to leave right away if they start paying late. I have tried to work with people* who were "starting to get late" and unfortunately I have so far never seen that end with the tenant being back on track. 

*The reasons I worked with them were rather selfish I must admit...:) For example if they live in a unit that I can NOT market without remodeling and I do not have the money or time to remodel, I find it is in my interest to try to get them to pay for another while, even if in the end I only see half of the rent.  As long as they are not creating issues for other tenants  this is still better than no rent for an empty unit me paying the utility bills on top of that. Once I am flush again and am ready to tackle the rehab I can always turn up the heat.

I am really hoping that someone else here's going to come up with a great way to navigate this!:)

When you say "could rent out for..." does that mean they are currently vacant? If so why? Also as someone else above mentioned you will need to evaluate the operating costs. 

You will also need to make sure you know what it needs as far as major repairs / capital expenditure? If it needs some work right away to get/keep it rented that is not necessity a problem unless you don't have the money. If you cant rent it out unless you spend more money but don't have not money because it's not rented that can go wrong quickly.  I have never bought a property that did not have a lot of surprise repair expenses.:(

That all being said, if I could find a deal like that in my area I'd definitely be interested:)

Just find and then look at all the numbers for both expenses and capital expenditures and the decision will become almost a no-brainer!

Good luck!

Hi Abraham - While I don't have data to back it up I would think that lower income multi family would be about as recession proof as you can get for all the obvious reasons. While they might move around the city/area to find a "better deal" I have not found low income tenants to be very mobile in the sense of "lets move to Austin because there are lots of jobs there". Bar cataclysmic Detroit style events, I think lower income tenants will be around, economy good or bad.

As far as timing for buying in Stockton now... I don't think this is awesome timing. If you are comfortable with out of state investing I think there are WAY better cash flowing deals out there. Personally I am not comfortable with that sort of investing and I don't have the proverbial trusted "boots-on-the-ground" in any of those markets, so I am staying in my Stockton comfort zone for a while, knowing that I am not getting the best in cash flow I could get on a national level.

That being said, I am in the process of acquiring 3 additional properties, but I would describe none of them as awesome no-brainer deals.:( I am buying because I think that prices will continue to go up for a while and that if I don't lock in that equity now at the current low mortgage rates I will have to look very very hard for something that even cash flows at all... Or wait a long time.

Who is your property manager? And it sounds like you are happy with them? I am very interested to hear what your experiences are.

 Hi Tom - Did you get a chance to drive those multifamily apartment buildings in Stockton this weekend? I am very curious to hear what your impressions were, if you want to share.

As I think I mentioned I am not ready to move into that league myself yet, but I do like to dream a bit. So in that context I have been eye-guzzling this one: http://www.loopnet.com/Listing/19651794/621-Hale-R...

I drove out there to have a look a few weeks ago and I liked it from what I could find out by walking around it. No frills, but the feel it gave me was a lot better than what I am used to seeing in Stockton. I drove around the neighborhood next to it had the same feeling, much more positive than what I have become used to seeing in Stockton.

As as Stockton MFR landlord I have been debating myself on the "school district" question. Don't get me wrong; for SFR rental I *totally* see the point. Someone moves in with small kids and will not leave until they are out of school and maybe never. Great!

However, for small multi family (lets say a 2 bed 1 bath triplex) I am not too sure how much of a difference it makes what school district the building is in. Tenants without kids will not pay extra. And people that live in a 2/1 with kid or even kids are probably not very likely to stay there very long. While I think most rational people would agree that having your kids in a good school district is very important. However, but most people that end up with their kids a 2/1 in Stockton are either 1.) in a transitional unstable period of their lives (divorce, job relocation, getting away for some other are or situation), or 2.) not very good at making important live choices altogether. In which case its doubtful they will pay significantly more to invest in their child future.

The conclusion that I draw is that when buying 2/1's, the school district should not be a big consideration. Area / neighborhood of course is, but if all other factors are the same I, I don't think I'd put a lot of premium ($$$) on the school district when buying those types of units.

Am I wrong? To short sighted? I am very curious to hear others options on this!

Hilarious situation! Never heard that one before. While I would always try and behave ethical and respectful towards people in general I would (fron experience) recommend to channel your altruistic needs elsewhere. 

The bad news here is not that they would like to live in their old unit, (which given their situation is understandable)  but the fact that they just moved back in without asking first. That does not bode well. If you do decide to "help them out" for a period of time make you do it for your own reasons. I would not worry too much about what "the neighborhood" thinks either. They will A. Not know or care, B. Understand you are getting rid of squatters or C. Don't understand, but how does that case affect you really? If anyone talks to you about it tell them the truth and ask they what they would do in your shoes?

The bigger lesson here is: Always change the locks: right away.:))

Your coach sounds like a time-share sales person I almost came to blows with once. I found they too don't take rejection very well...:) Anyway it sounded like you already knew what you *should* do when you made your first post, but sometime you just need to hear someone say it:)...

Anyway, have you considered that since you are obviously willing to invest in learning about this and also seem to not want to reinvent the wheel on your own, you could choose to "invest" some time instead of money, but finding someone that already do this and offering to help them do whatever they need help with for free? As a kind of internship apprenticeship? 

You'd get the chance to see first hand how that stuff works in reality instead of just listening to all those cutesy anecdotal evidence "rag-to-riches" / "fool-proof-method" stories. You'd potentially build some contacts. You'd learn how to do some practical leg work and it would not really cost you any out of pocket money and the best thing is that you can get out of it as soon as *you* feel that the "internship" is not offering you enough benefit. As soon as you have build up some trust, most people will love to talk to you about how they do business. I think smart people realize that real estate is not a zero sum game. You could even try to work your way towards a situation where you'd do some deals under their "eaves" and you'd pay them a percentage. That way you never loose any money out of pocket... Anyway, just saying, there are more ways than A: Go it alone or B: shell out lots of money for a guru who has figured out a trick that worked for him (at that time).

PS Try to listen to all the Bigger Pocket Podcasts in descending order and you'll find that you're putting down a pretty good foundation to build your particular real estate niche on top of, whatever that might be:).