All Forum Posts by: Corey Conklin

@Allen Duan

You are correct. To keep the same number of units as the existing hotel you would need to keep them all to studios. I'm not a huge fan of studios for LTR, they don't perform well at all in my area as there isn't a crunch on affordability like bigger markets. 

I have also thought about combining some units to make them bigger but that is at the sacrifice of losing 15-20 units. I've tried underwriting it both ways but there isn't a close comp at all in the area I want to do this conversion so there isn't a great example to look at to see if it could work out.

If it's not something being done in bigger markets, it's probably for good reason and helps me understand what I'd be getting into and I'll need to continue to dig into it.

It would be easy to understand why it is so hard to find a good property manager if investors would look at it from the other side.

A property manager is paid very little to do the hardest work in real estate investing! They are getting their butts kicked day in and day out while you, the investors, sit back and collects a check every month. They are the ones handling the late-night calls, the needy tenants (and owners), chasing down payments, dealing with bed bugs, providing financial statements, leasing, maintenance inspections, property marketing and so much more. We expect them to excel at all of this while keeping your costs at a minimum. Seems realistic to me!

With the boom in real estate investing and the growing demand in the need for property managers there seems to be no way that this model is sustainable. Unless investors come to terms with the quality of service a company can provide at the rates that they are willing to pay.

@Steve Meyers My fault I should have been more clear on the splits. I was figuring them getting paid on your net commissions after paying for the brokerage fees, signs, flyers, and any other resources needed to close the deal not on the gross commissions. 

The only reason I would pay them so well, personally, is because I hate doing every task you are asking them to do with the greatest of passions. So for me to avoid those tasks and being able to focus on meeting with clients and closing deals (which I really enjoy) it would be worth every penny. If they were really good at bringing in quality leads in all (3) areas of your business that would be a huge win.

I don't think I would pay them hourly but if I did I would have to be diligent and provide clear KPI's that need to be hit daily, weekly, monthly. It would take a lot of work to manage. But if you are able to manage that you could potentially keep more of your profits.

I live in Kansas so what makes sense for hourly wages here may not make sense in your area so it's hard for me to provide a solid hourly wage number for you.

The upfront costs and fees for a good property manager are peanuts for what value they can bring. That is only if every PM were created equal and did a good job. Unfortunately that isn't the case. Vetting through and finding a good PM company is harder than you think. It's even harder for newcomers.

I agree with @Nathan Gesner, if you have an understanding of the process you should try to self manage to learn the ropes on your first properties. You will make mistakes but you'll learn your lessons and get better. As you scale you will have a better knowledge of how to vet a property management company and can outsource at that time.

@Steve Meyers Here are a few questions I have that I think are important.

Why should a motivated, go getter work for you? What do you bring to the table for the assistant that would make them want to hustle for you? Do you have a well known brand in your area that makes it easier to do their job? Or are you just another average real estate agent/investor in your area? Are you able to give them training, guidance, or mentorship?

You should start looking at what you can offer to the assistant and not just what they can offer to you.

Personally, for a great assistant that needs little guidance I would pay them 40-50% of your commission on sales/wholesaling and around 20-30% on the profits on your flips. I'd pay them more on the sales and wholesaling piece because that's easily something they could funnel to themselves if they are truly great at generating leads and cut you out completely. Flipping takes a lot more work on your end that isn't as easy to take on themselves. If you want to pay them less then you will probably need to find a rookie that will need much more guidance and mentorship, which comes at a cost.

I think your focus should be on how you can help make your assistant the most money possible and not be on paying them too much.

I have an opportunity to acquire a smaller hotel (56 rooms) that needs a full renovation in a smaller market in Oklahoma (town of about 30k people). It seems like this door count wouldn't work well to convert it back to a standard hotel and I've thought about converting it to a MTR. 

I see a lot of people do this with single family but wondered if there was anyone who has done a hotel conversion into a MTR.

Any help would be great!

In my opinion buying with cash is never a bad idea if you have the means to do so. Since you have the opportunity to do that you can absolutely get started by buying property with cash while you can work on getting the right lending partners.

Most people getting into real estate are normally looking to leverage because that's their only option, You fortunately don't have to leverage to start. 

As others said in previous comments, leverage is a powerful tool if utilized correct. Continue to study how to use leverage wisely but don't let it deter you from buying a property now.

Insurance and property taxes are a huge concern! I'm seeing massive bumps in my taxes and insurance that aren't cooling off (15-30% increases every year). I have reached out to several insurance companies trying to shop numbers and have met with the county a few times to argue these outrageous taxes but even that isn't enough to keep these costs under control. 

@Addison Amorosi I've used TurboTenant for my small portfolio. It's super easy to use. You can do everything you need for free or pay a small yearly fee and get a lot of great features. 

If you can pay cash I would go that route as it offers you a lot of flexibility.

If you decide to lock up a 90k down payment, closing costs and rehab costs your going to have close to 150k in the deal with virtually no way to get your money back for a few years with the current numbers. If you are good with that and want to play the longer game its not going to hurt you.

But if you aren't paying with cash because you don't want your money locked up in a deal the above logic doesn't seem to meet your goals.

What does the ARV look like once you get the updates completed and rents raised to market value? If you think you'll see a good increase it may be worth it to pay with cash to buy (you could leverage this with your offer and potentially get a better purchase price) and get the rehab done. Work on getting the rents raised in the next few years and do a cash out refi. Hopefully you get most or all of your money back in less than 2 years with the value add work you did. Sure you will have a larger chunk of money locked up in the short term but you will see it returned way faster than going the traditional route. Not to mention you will also see a positive cash flow in the 2 years that you are doing value add work without having to pay a mortgage.

Just thought I would offer another way to look at it. Good luck and hopefully you find a way to make it work!