All Forum Posts by: Daniel Reyes

Hi Shannon,

Congratulations on your purchase in Tampa! This is one of the most important real estate markets in the US. I wish you continued success!

Daniel

@Chase Gochnauer

Hi Chase,

Thank you for posting! And congratulations on growing your property management venture.

Regarding asset management, the size of your venture currently will not require a full time asset manager. Typically, when portfolio or fund managers are growing and they finally don’t have the time to manage the asset performance themselves, they will hire an outsourced asset manager to perform the work. The standard fee for this arrangement is 1% of effective gross income per month. It’s important you have a quality asset management agreement in place so as to know what the AM is and isn’t responsible for as well as understanding their scope and authority.

I have a few agreements. Please feel free to send me a message if you are interested in seeing one and/or continuing the conversation. I wish you well!

Best,

Daniel Reyes

@Sean Wilt

Hi Sean,

Congratulations on starting this exciting journey!

The standard property management fee for single-family rentals up through small multifamily communities is between 7% and 10% of total monthly revenue. With the exception of select corporate expenses, all associated fees are passed through to the client. In effect, each client will be maintaining a P&L for their assets, and you will be managing it. The fees for larger multifamily communities range between 2.5% to 7%. The lenders on these deals can have significant influence over what managers they approve to manage the property.

Please feel at liberty to reach out to me directly if I may assist. I wish you well!

All the best,

Daniel Reyes

@Matthew W Croulet

I wish I was as smart as you in high school, lol. You will do well 😉.

@Ivan Barratt

Thank you for your feedback, Ivan! My interpretation is: learn the technicalities of the financial model and see to it there are improvements in the model over time before you step away and pass it along to a hire or outsourced professional. Thanks again!

@Marsha Fils

Hi Marsha,

Thank you for the question. This is essentially the same as if you sign for student loans or a car note; you are agreeing to pay the lender back or be foreclosed, repossessed or garnished, etc. For the full recourse, or normal home mortgage, your qualifiers are your credit, income, down payment and signature on the loan.

Please let me know if I can assist you further.

Daniel Reyes

Hi Ashly,

Thank you for posting! I admire your persistence as the real estate market is very competitive across the nation today. Very encouraging to read!

I am curious to see your underwriting on this deal, as your financing and business plan for the asset will of course result in your figures and your cap rate. What is your investment strategy and hold period? (Value-add, reposition, 5, 7, 10 years)

In general, I would err on the side of caution when you are underwriting 4 unit properties and below (quad/duplex, etc.). With regard to the general market, these are treated like single family homes, so I would be concerned with making assumptions on value appreciation. You may be only looking at cash flow, so this is open to discuss. I believe before anyone can provide you with valuable insight here, we need to understand more about the deal, strategy and capital structure.

Might I suggest considering multifamily investing (5+ units)? You might find yourself more interested in this from an investment standpoint :).

I look forward to your follow up. All the best.

Daniel Reyes

Hi Brad,

Thanks for posting! Congratulations on finding a good deal. There is an agreement involved with acquisition fees, and we should first get an idea of what "information" you're providing and how. 

Depending on the details regarding the deal and your involvement. For example, if you are sourcing, underwriting, performing due diligence, and partaking/advising in the negotiations, you may be able to arrange an acquisition fee (.5% to 2% of the purchase price). If you are in fact only verbally telling them about the deal, consider it a kind gesture to your investor (no fee).

I wish you the best! 

Daniel Reyes

@Jason Behrens

Hi Jason,

Yes, great question.

One of the primary purposes of an LLC is to limit your liability. And, one of the primary ways our economy grows is by leveraging credit responsibly. As such, and in order to maintain the ability to continue lending, lenders also limit their liabilities by requiring a personal guarantee on investments they deem risky and are extending credit to. So an LLC is disregarded when the lender is underwriting and assessing risk to make a yes/no decision on providing capital. For various reasons (mostly economic and industry-driven), a single-family home is in general a riskier bet to a bank than a 300-unit multifamily community.

An investor can (and if you stick around long enough, probably will) get sued by a tenant. Being sued by a tenant and financing are distinct from each other and as such should be treated accordingly (apples and oranges, or apples and gorillas).

The LLC structure has many benefits in real estate investments. From a lending perspective, the risk is just inherent in the single-family home investment. The single-family home financing will require a "full recourse" loan, meaning the lender has rights to assets beyond the real estate collateral, regardless of the LLC. In a "non-recourse" loan, the lender has no rights beyond the real estate collateral, whether owned by an LLC or not.

A scrupulous attorney can also pierce the "corporate veil" of an LLC too, so even this is not 100% liability free.

I wish you well!

Daniel Reyes

@Chase McArthur

LOL!

This is brilliant, and valuable insight Chase. The analytics lifecycle representation is spot on. I'm more convinced now this service can, and probably should, be productized. Specifically, I can see this potentially being a low-risk, transparent, and even lower cost (in the long run) solution to family offices, HNWI, developers and even university endowments looking to deploy capital. Perhaps we can revisit this topic in the future as a business opportunity ;).

This can is the gift that keeps on giving! Take care, Chase. Thank you again for your focused responses.

Daniel