All Forum Posts by: David Grabiner

Leverage is a tool it is neither good or bad, it all depends on how and when it is used. Having paid off properties will provide higher cashflow per unit but what is your return on equity? I think anytime return on equity falls below 8% it really is time to asses whether it is the best use of the money. Take this example:

Purchase a house for 100K cash with 10% cap rate.  10 years later the house has appreciated 3% per year for a total of 30%. Now the house is providing a 7.7% return on equity, at this point you would be better off with an index fund and have no headaches.

@Jimmy Moncrief I guess you already meet and talked with my dad (Steven) about financing a deal we are looking at. I hope it works out and we can do many more deals together, the product as he described it sure seems great.

Well for 20% you better be providing 100% economic occupancy and savings on all repairs. I think you might find landlords willing to pay 18% to 20% if you could save them say 5% on all repairs (should be easy with your gross discounts) and guarantee 98% economic occupancy.  Or maybe charge 15% and you keep all rents over 96% annual economic occupancy so if annual economic occupancy is 100% then you will be getting a 19% fee. This would mean you would have a very vested interest in getting good tenants who stay and pay on time, and that is exactly what the landlord wants as well. Just because it has been done one way historically doesn't mean you can't change it up. 

@Robert Gilstrap

I do understand that a true professional manager can save an investor time and money, but as a person who likes to run the numbers I think things should be quantifiable. So I'm sure a good PM could find a set price that would work for them and not have to charge extra for everything but it is too tempting to charge extras because then they know it means they will always have extra money coming in if they have to do any work. Which I think is backwards because it doesn't provide the correct incentive.

When I said making money I ment getting income I didn't mean making a profit. So the PM should only be getting income If I'm getting income as their primary job is to make sure I get income out of my property. Whether I make any profit will depend if I invested wisely. Lets take your example of $1000 per month, at 12% that works out to $1440 per year. Marketing a property once a year, 1 hr of work. Showing property 5 hrs of work. Signing lease 1 hr of work. one call a month from tenant 12 hr of work including work inspection of completed repairs if needed.  Quarterly inspections 3hrs of work. Book keeping for one unit 12hrs. For a total of 34hrs of work just for that one unit. So that works out to $42 per hour. Yes, I think paying someone paying $42 to complete those tasks is quite generous. Now hours worked will be higher on some units and much lower on others but I think this is a fair break down for hours worked on one unit if someone is a professional and has systems in place to manage multiple properties. 

@Robert Gilstrap

@Robert Gilstrap

Ok so then charge 12% or whatever it is that you need to do your job correctly. My thought is that the PM should only be making money when I make money, they shouldn't just charge extra for everything that requires work.  

I haven't used a PM company so I don't have any direct experience with them but I would use one If I could find one that was good and charged a fair fixed price. I have seen several properties run by PM's and they are more often then not a big mess. Tenants have trashed the place, repairs have not been done in years, and even the units are empty and the manager didn't even know it. Now some of this could be because the owners didn't want to put any money into repairs, so it might not all be the PM's fault but it doesn't give a good impression of the PM either. 

My wish list would be:

1. Regular inspections, preventive maintenance, and scheduling of large repairs when needed. Basically keep the house in the same condition it was when It was handed over to them.

2. A set 10% fee. and that is it. No leasing fee, no repairs fee, no eviction fee (after all it is your fault you didn't screen the tenant properly), no marketing fee, no empty unit fee. etc. It should just be a 10% of gross rents collected and any actual costs  such as repairs, lawyer fees, utilities etc should be recorded online with a picture of the bill to prove it. 

It just bugs me that someone charges a percentage of rents and you have to pay them again anytime they do any work. 

Yep he spammed the Chattanooga Craigslist with about 10 listings, something isn't right about him for sure. I think if someone doesn't want to bother the tenants he could just say that an accepted offer must be in place before the property is shown.  I can understand that, then you make an offer and see if it will work once you go to inspect the property if the repairs are more than expected you can back out during the inspection period. 

What kind of experience do you have doing flips? If you are a semi experienced flipper and you are just looking for way to get more down payment money then more than 50% of the profit is very expensive way to get that money. You would be much better of paying a hard money lender. If you are new and just getting into flipping and you see this as a way to get experience and make some money than it might be worth doing some deals even if most of the profits go to him. But please consult the experts on how to set up the JV. After you have gotten experience and if the flips work out then you can start investing on your own.

However, If you have no experience then why does your client want to partner with you?

@David Dachtera

Not trying to speak on behalf of Chris but he stated he was a lawyer in his opening argument :

Then he made a few well thought out points that to me made a lot of sense, And I am interested to hear counter points but calling someone a newbie, or a cold medicine drinker is not going to help anyone get a better grasp of the subject.