All Forum Posts by: Neil Schoepp

I think that's going to be challenging to accomplish. You may have to move over to MHP's to have a shot.

With that being said have you considered taking the 10% hit now to buy a deal with leverage. If the numbers work it may be worth considering. Yes you will take a hit now but you will be able to take advantage of things like depreciation (now) and capital gains (at the exit). Otherwise you will be paying income taxes on all of that cash flow later on down the road when you take your withdrawals. 

If you are set on using your retirement account and leaving the funds there have you considered investing in a syndication. There are plenty of top self individuals out there that are trustworthy it's just a matter of doing your homework, asking for referrals and  jumping on the phone and seeing who resonates with you. These usually are returning 7-8% while holding the property and then that jumps to 12 - 15% annualized after the sale. 

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There are many ways to create wealth using real estate as the tool to do so. Bring your questions and let's discuss them. This month we will be concentrating on underwriting a deal. The numbers never lie!!!

@Baahir Starkey

First let's define cash flow so we are talking the same language. 

Cash flow is the income you have left after you have paid all the OPEX  AND debt servicing on a property. Way to many people minus the expenses from the income and call that cash flow. This is more specifically cash flow before taxes. So 300 X 12 = 3600 (annual cash flow)

The next number you will need is to add up how much cash you took out of your pocket to acquire the asset. Down Payment and closing cost. Let's say 40-kay.

Take your annual cash flow of 3600 and divide by your out of pocket cost 40000 that equals your Cash on Cash (COC) of .09 or 9%.

Only you can decide if that is a good number. I personally shoot for nothing under 10% I know some investors that are happy with 5 to 6% and still others that won't touch anything under 15%.

Now you gave a range so if you end up at 350 a month that's 4200 annually and a 10.5% COC. $400 would do even better just make sure of your numbers don't believe you can get, KNOW you can get.

With all that being said the average is 8 to 12%. 

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@Juan Alvarez

Yes it's possible to have a meter for each unit, for each utility. So in your case of a duplex you would have two electric meters, two water meters and two gas meters.

Now with that being said you would also need two electrical panels on the inside of the house with separate wires running to each unit. Separate gas lines running to each unit, etc. Usually this is not cost effective unless you are going to do extensive work on the property and as mentioned everything must pass inspection. Its a bit costly but allows you to lower your expenses and have less paperwork. More often then not it's more cost effective to implement R.U.B.S. If you are looking to recoup those expenses. 

It's good to see you are out there building out your knowledge. I've come across way to many people that have purchased on Pro-forma for example and have gotten burned. Keep pushing forward.

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@Juan Alvarez

Don't ever be sorry for asking questions. That's why we are all here. We all started in the smae spot you are at right now.

Using the search feature in this group has provided me with some great insight when I haven't understood a phrase. That's always a good place to start. I'm not saying don't ask I'm offering another avenue of research.

Pro-Forma translated to english just means what the property is projected to do. So in this cast if the whole property was rented out and it sold for the asking price it would return 9%. It's a ploy brokers use to get your attention. The only Pro-Forma I ever pay attention to is my own using numbers I came up with from my own knowledge and resources.

Not sure how a tri-plex is at 25% occupancy. There is either one apt rented therefore 33% occupied (1/3=.33) two apts rented (2/3=.66) or three rented in which we would be at 100%. 

All bills are paid by the owner sounds like the owner is paying water/sewer/gas/electric/ so essentially the rent includes the utilities. Sometimes in MF you pass off the cost of the utilities to the tenant through either the units being metered for the individual utility gas/water/electric or you implement R.U.B.S (Ratio Utility Billing System) it's a way to charge back the utilities to your clients when the property is master metered (it only has one meter for the entire property). 

Every single property in the country has an official survey done to very specifically mark out the property lines. Sometimes the survey is available and the seller will give it to you. In this case it is not and the bank may require one. It's no big deal just a added cost during Due Diligence (DD) but something that should be done as you want to make sure all of your improvements are actually on your property.

Enjoy your journey, it's going to be a good one.

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@Damaso Bautista 

I did the same thing back in March. Spent 4 days meeting with brokers, Pm's, Economic development, banks and drove over 50 properties. I even drove the outskirts of this area but not the specific area. Can't cover everything in just one visit. I guess it's time for trip number two. 

By the way I have a great little air bnb I stayed at if anyone needs a place. Five minutes from the airport. Nice size studio. No affiliation just fellow investors that are doing a bang up job.

I hail from the MF space so I think along those lines.

This is a classic mom and pop operation where they are afraid to raise rents or become to friendly with their client and now fall way behind. I would push the rent, explaining to her that this is your business. With that being said I would give her a bit of notice meaning from day one be transparent and let her know what is going to happen. I would step her up, so for example 100 the first 6 months then 100 more the next 6 months leave it there for a year and go up to market so the first year you have two bumps and then the start of the 3rd year you go to market. This way the property will stabilize. I would also offer her something for her apartment. New appliances, New paint, New lighting / plumbing fixtures, a dedicated parking space, new carpet or carpet cleaning, ceiling fans, etc. I wouldn't offer all of those but I would look to add value to her living conditions as I bump the rents. Generally speaking I like to get back my money with in 3 years depending on the rent bump and improvements I do. So in the first year you receive 1800 in increased rents, the second year you have 2400 so by the end of year two you received an extra 4200 in rents. You can probably do a stainless steel appliance package for 3000. This way when her friends come over it's not Kyle raised my rents he is a slum lord it's oh the new Landlord, That's Kyle he's so sweet look at this fridge and how about this matching stove he installed, not like the old landlord, he wouldn't do anything for me. Always look to add more value to your client than you take in payment. You may ask her what she would like I can paint your unit or install new fixtures through out which would you like. She may hate the color and be glad to get new paint. You just never know. Always look to add value to her.

@Damaso Bautista

Keywords are well Key.

Thanks for the help, Greenville, SC should ping now between your post and mine. 

I sometimes get to specific as I was inquiring about a specific neighborhood San Souci, not Greenville (though they are practically one in the same) But you are right on the money I should have cast a larger net. Thanks for the suggestion. 

@Tj Hines
Thanks for the suggestions!

Those things are already in motion (GADC).  Both the county and San Souci have plans. I'm waiting to hear back from the county office. But they are salesmen and their whole purpose is to attract business to the area, I do not believe they would mis-lead me but they may not give me the entire story either. Kinda like brokers they know taxes are going up but they still use the old numbers in their OM, for example. Then when asked they will come clean. 

I'm looking for boots on the ground because there are certain things you can only tell, see, and feel from experiencing the change or lack there of that is happening. Kinda like the vibe of the area.

A local investor will be able to tell me if flips are happening, if those flips are moving quickly or not, are people moving into the area that are making higher incomes that the demographics haven't picked up on yet. Are they seeing home prices tick up a bit, etc.

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@Greg Gillespie House hacking is a great way to start off. If you choose that route remember to consider tri-plexs and quads in addition to duplexes. Also, during under writing it, make sure you include property management even if you will self-manage:

1. If you are self-managing then you get paid. We always get paid for our time this is a business not a hobby.

2. One day you may not want to self manage. 

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