All Forum Posts by: Dan Shelhamer

@Russell Brazil is this specified in your lease agreement?  Does it need to be?  Did you tell the tenants you would be doing this when it happened?  Thank you for your input!

I currently have 5 rental's, and am looking to move on to my 1st BRRRR deal. I have never done a full rehab before, and I got a quote from my contractor for $42,000 (3 bed, 1 bath, 850 square feet). He included all the supplies (drywall, kitchen cabinets, tub, vanity, toilet, paint, floor, lighting, doors, installing washer/dryer hookups). I think I may want to buy all of the supplies myself, and only have him charge me for labor.

How do most investor's handle this?  Do you usually get 1 total price for a rehab or do you only get a cost for labor?  Does this seem like a fair price?

The other day I received a text form my tenant "I'm just returning from vacation, and it appears the water inside the house was frozen from the tips of the faucet, and I believe the pipes froze and possibly busted".  

Well, I had a plumber go out to fix the issue, which was 9 busted pipes, and luckily he got to it before the water in the crawl space reached the furnace.  The plumber informed me that there is a vent in the crawl space so if the furnace was on this should have never happened.  The tenant told me he turned the furnace down when he left for vacation, but that it was on.  I paid for the repair which was $1800, but does anyone have any experience with this?  I told the tenant afterwards what the plumber told me, and that the thermostat needs to stay above 65 degrees if they ever leave the house again.  

Does anyone have any similar experiences and is this something I should put in my lease to cover this in the future?  I feel like it's almost an impossible situation to win.  It's basically my word vs. the tenant's.

@Kevin Romines great info! What about if you take title in your personal name and then do a warranty deed or quit claim deed into your LLC?

@Derek Kirkwood

I am having trouble uploading the image.I will bullet point everything they have included.  Thanks so much!

• Purchase price $479,000
• Current cap rate 7.59%, stabilized 10.3%
• Current GRM 6.12, stabilized 5.8
• Current rents $6,865, Pro-forma rents $7,250
• Vacancy loss/collections at 5% ($4,119)
• Current total expenses $41,894, stabilized expenses $33,303
• Current NOI $36,367, Stabilized NOI $49,347
• Stabilized cash flow $25,541 / 21.33%

Also, below are questions that I have sent to the seller.Please let me know if I have left anything off as this is my 1st Pro-Forma that I have every analyzed.

Questions for Seller:

1. Expenses seem extremely high.
   1. Garbage is $93/month. How many dumpsters are at the property and how often do they pick up garbage?
   2. Landscaping is $3,985 for the year.  What does this include?
   3. Snow removal is $6,099, seems extremely high.  Was this for 2016?
   4. Are the Utilities paid for by the tenants?
2. Why is no money budgeted for reserves or management?
3. Current expenses listed at $36,367, but yet it says 2016 actual is $26,267?
4. Vacancy and loss is listed at $4,119.Was this from vacancy or from tenants not paying rent?
5. Any evictions in 2016/2017?
6. Is any money reserved/budgeted for repairs and CapEx?
7. Based on these figures and 8% for repairs and 8% for CapEx, it is a 6.75% Cash on Cash return and yearly cash flow of $9,073.20 with a Cap Rate of 6.73%.

I currently have 3 SFR's and a recent duplex. I am looking to scale up, and very interested in this 10-unit. However, I have never analyzed a pro-forma before. Hoping more experienced investors can take a look at this and see if their is anything that seems off, and if this seems like a good deal at the listed price of $479,000. Also, some questions that I can/should ask the seller.

Personally, I max out my 401K with the $18,000 limit and then my company matches another $3,000.  I constantly struggle with only wanting to put enough in to get the match from my company because my returns in Real Estate are 2-3x what I get on my stock/mutual fund returns.  However, I also don't want to have all of my money in 1 investment vehicle.  I consider my 401k as "icing on the cake" when I turn 60.

All great points above. In addition, let's say you want to have $100k passively coming in per year. Most stock investors will say then you need 25x (4% rule) what you would like to see come in passively. In this case, $2.5 million invested in stocks to throw off $100,000/year after taxes. However, I can tell you that in my market at least, if I have $2,500,000 invested at 22-32% COC returns (what I am currently getting), I will be making $550,000-$800,000 after taxes.

Congrats @Collin Garbarino, keep up the great work!