All Forum Posts by: Dan Gandee

So True! Appreciate the insight!

O damn! I didn't know that. WOW! What happened to capitalism? 

Hope I got your attention because the City of Eugene got mine! Phase II Rental Protections just went into place and we are seeing some big buzz in Facebook investing forums and on the local news. 

According to KVAL News, "What are the Phase II renter protections?

Phase II renter protections center on three main policies:

• -Limiting the amount of money a landlord can charge for a security deposit, equal to two times the cost of monthly rent.
• -Processing applications on a first come first serve basis.
• -Relocation assistance."

The impact to this is huge because now there is going to be a centralized database for all evictions filed, for cause or no cause. This data will be available to help them justify their need to overstep their legal authority and regulate rental property further. Also, with the passing of SB-611 at the state level, this creates a toxic mix of rental protections that should push a Mom&Pop landlord out of the business. 

The long term impact includes the following:

-Less compassionate landlords who are willing to be flexible with late payments, evictions, or delayed move outs

-Less supply of rental property due to single family rentals being liquidated and sold to buyer/owner occupiers 

-More competition from bigger REIT's (real estate investment trusts) and real estate holding corporations who can weather limited returns

-Less incentive for real estate developers to rehab and hold properties long term in the local area

-Less flexibility to keep rents affordable without falling behind and keeping up with market rents to appraise at exit 

-Less business in the investment property sector due to lack of supply, including realtor commissions, title and escrow fees, handymen and contractors, property inspection fees, appraiser fees, mortgage lender commissions, and bank refinancing profits 

-More headaches for property management companies having to navigate complex and controversial client demands on their property 

-Less qualified tenants using the first-come, first-serve basis for applications 

Now BEFORE EVERYONE thinks these laws are just horrible to invest here, I want to conclude with some of the major PROs of these laws:

-Less competition from entry-level investors, meaning more deals will be had by liquid and well financed investors looking to scale with the roadblocks in mind

-Higher valuation of rental property over the long term due to supply and demand constraints 

-More stability in the quality of management and landlord professionalism 

-More 1031 exchanges from older investors looking to move assets around more frequently to dump low performing properties 

-More incentive for real estate developers to only build large unit multifamily that will not have regulations for 15 years (from certificate of occupancy)

-More expectation from tenant that they will receive an increase each and every year (more implementation, means more frequency to experience)

As always there are two sides of the argument, but I firmly say that I can still be profitable and make millions of dollars here in Oregon, but with a little more caution and strategy. Pivoting is going to be key and value add projects with no-cause evictions is going to cost more, but will be worth it over the long term. 

Thoughts?

Dan Gandee

One of the biggest problems I see when listing millions of dollars of investment property is that the seller has no proof, track record, cookie crumble trail, or P&L of successful ownership to validate the GRM/CAP/PPUNIT/COCR. And nearly 80% of the time, the MLS or commercial property listing has false, incorrect, or misleading financials. You must dig deeper to figure out what the seller is or has been neglecting to inflate those figures prior to going active with the listing. In doing so, we discover countless issues to cap rate valuation and expense ratios.

I've created our due diligence checklist we provide all of our clients that you are free to make a copy of! (There is probably something missing because this is the marketing version) 

Make sure to ask for the basics prior to writing up an LOI or offer. If they can't provide you this, then you need to hedge risk vs. reward of your time looking further into the property.

1. Current P&L (Trailing 12 at a minimum) But Prefer Last 3 Years 

2. Current Leases In Place 

3. Current Rent Roll 

4. Current File of All Tenant Issues (Delinquencies, Notices, Evictions) 

5. All Utility Bills 

6. All Insurance Statements 

7. Copy of Schedule E (Last 3 Years) 

8. List of All Capital Expenditures Completed In Last 3 Years 

9. Any Litigation Both Pending & New 

10. Copies of All Inspections Completed Last 5 years 

11. Permits & Regulatory Paperwork 

And the list goes on...(Believe me Multifamily Investors...There is much more to ask for so don't freak on me!) 

I can get away with running a simple APOD with just the current rent roll, leases, P&L, and utility statements, so there is some fast tracking you can perform to pencil the deal, but once you do accept an offer i.e. go into contract, make sure to ask for the full gamut of items. 

When I first got started, my commercial broker was lazy and they slacked on providing me Schedule E's which once we did get them noticed they were money laundering cash payments from tenants' rent. LOOK DEEPER PEOPLE! 

If you have any questions - Reach out to me! Happy Investing! 

BEGIN RANT (Because It's Very Common With New Investors) 

Just wanted to share how many investors want to "feel" like they are getting a bargain or a deal, and then let a deal go over $5K-$10K in difference in price. Now let me preface this forum post by saying I'm not talking about markets where $5K to $10K is a high percentage of the purchase price (lower priced markets with limited returns). 

Typically what I see when this happens, it's because they (the investor) don't know the true components of long term wealth building, forcing appreciation, value add plays, or repositioning of property management/expenses. True cap rate stabilization.

They are too concerned about saying to their buddies that they got the seller to come down one last time, that they completely missed the opportunity to acquire and HOLD the asset to perform the necessary valuation changes. 

Literally see it each and every week. They will let countless deals go over their emotions and not their investing criteria. 

Stop bickering on price, and start looking at the bigger picture. If the deal doesn't feel "right" or you feel that $10K will never be made back in value add, then move on, but don't just let deals go on "principal" of your negotiation preferences. Nearly 9 times out of 10, you'll never be successful in this business. 

How to avoid this?

1. Start by understanding the true underwriting valuation at ACTUALS vs. PRO FORMA 

2. Start looking at your MAO as the ideal price, but look where potential savings can occur elsewhere.

3. Don't just buy at list price, but buy where it makes sense. 

4. Make sure your financing is in order and your cash on hand to close is accurate. 

5. Stop looking at deals as a battle with the seller, and start looking at them as an opportunity of change of ownership. 

6. Know your market appreciation velocity and how fast you'll make up a overpayment in price in equity position. 

7. Ask for other terms in the deal to be reconfigured, and don't fixate on just the price. 

8. Remember, some of the best deals you'll do are the ones you decided to pass on. Not just because you got pissed off at the seller. 

9. Don't blame your broker or wholesaler for the deal going south. They just are a connector to motivated sellers or potential deals. 

10. Always be nice to the seller and ask them to reach out if things change. I've acquired tons of deals by putting gratitude before emotion. 

And remember, sometimes the DEBT you take on is MORE IMPORTANT than the PRICE YOU PAID for the property (i.e. owner financing). 

END RANT (Mic Drop). 

Just thought I'd reach out to those who have portfolios (over 25 doors or 15 individual properties) and ask how often you go through a ranking type spreadsheet of the properties you want to keep, the properties you want to 1031, the properties you want to sell or owner finance, and the properties you need to create action plans on, or keep on your radar for better property management? 

I've created a pretty good system to look at these numbers quarterly from importing Stessa, P&L's, and tenant requests/repairs. 

Just thought I'd get some feedback from the crowd? Thanks in advance. 

I only write offers that make sense to ME. I don't care if it makes sense to the seller. Never split the difference, only buy deals that make sense to your investment criteria or you will suffer in the long term. 

I have a BRRR property that I need to rehab and looking for any special sauce anyone has been successful with on removing smoke odors?

Sorry if this the wrong forum for this but I want to get this property turned around quickly. Thanks in advance. 

Dealt with this exact problem in your market (where I grew up and started investing) and found a few solutions. Local credit unions we started with and asked them if we would deposit say $50K into their bank account (and let it sit) would they fund a $50K deal on portfolio. That worked some of the times. Next, we reached out to smaller hard money lenders and asked them if any of their clients would be open to first position on our projects or BRRR's. That route seemed more effective. All in all we ended up finding a PML who stayed with us until we moved all of our assets out of Ohio and back to the west coast where we could catch faster appreciation and bigger flip mark ups. DSCR we could only get down to $75K no matter how we sliced it at the time. Good luck!

Let me be break down some very simple advice..."Don't hire an agent just because they can sell your flip fast or look polished. Hire the agent who owns investment property themselves and/or is or has done what you are trying to accomplish!" 

(ENTER tons of naysayers and argumentative responses) - All feedback welcome. 

Why?

Because they understand how important your cash position, financing, and long term investment journey is to your survival in this industry. 

They have made the same mistakes you have not made yet or are going to make in most cases.

They can show you how to pivot quickly and exit with minimal damage if necessary. 

They have a long list of investors from all different asset classes that can be potential buyers to your finished product or exit. 

They aren't going to "steal your deal" in most cases and they want to have you become a "repeat customer" by having integrity. 

They understand how to underwrite quickly and tell you when a deal is a deal. 

They speak your lingo and know your buying habits. 

They aren't hungry for a commission check because they have their own passive income. 

This is 100% why I try to tell everyone not to hire the first agent that shows them a home or responds to their FB post on a private group.

What happens if you don't?

You are at risk of making the wrong decision at the wrong time, forcing you to hold longer than you need to or sell for a loss.

You are at risk taking advice from someone who hasn't seen the unforeseen circumstances that can occur, creating stress and anxiety. 

You are at risk of partnering with the wrong broker who's going to lead you down a path of minimal profit/cash flow deal flow. 

You are at risk of listing your flips with someone that doesn't have a marketing machine built to create multiple offer bidding wars. 

You are at risk of making bad 1031 decisions and putting yourself in a upside down LTR. 

Ask questions like:

1. How many deals have you done with investors?

2. What is your investment strategy?

3. Do you have any references you could share of investors you work with?

4. What's your experience with commercial and investing lenders? (i.e. Hard Money, DSCR, Bridge)

5. What's your next move in investing? 

6. How do you underwrite your deals?

7. Do you have good contacts to contractors and other referral partners?

8. How can you help me achieve my investment goals?

9. What's the biggest investment mistake you've ever made?

10. What's the largest investment you've done yourself AND worked with a client on?

I was investor for a decade before running a high performance real estate team specializing on investments. This is exactly what I would ask!

If you are an agent just starting off and want to work with investors then my best advice is to find a mentor and find the DEALS. 

Learn every metric possible and know how to underwrite deals like a champ. 

End Rant.