All Forum Posts by: David Gonzalez

Hello @Neil S..

Let me preface by saying that I do not own any Real Estate. My advice comes from my experience working as a property manager and as a leasing consultant at apartments ranging from 191 to 445 units. I have also observed how other property management companies in my local area work.

My first suggestion is to buy in an area you feel comfortable with in a market that meets your investment criteria. Though it is always good to buy as many units you can afford the location of those units is another very important criteria. More units do lower your risk and will help you achieve economies of scale sooner. However if the units are located in a bad neighborhood you will either net less money and/or have more work managing the asset and the tenant base. I would rather buy a good asset with fewer units that attract better tenants then buy a fair asset with tons of units that attract difficult tenants. Even if the smaller unit apartment community nets me less the energy I save can be used to expand my portfolio. 

As for the managing I would suggest you hire a property manager. In the last 10 years the property management industry has exploded both in the quantity and quality of the managers. I am sure in what ever market you are looking to invest in there are many property managers that would gladly help you with your apartment. Instead of hiring the people my self I would have the property management company handle personnel issues and I would use the time I save to manage the company and the asset not the people. If you want to minimize your work pay more for the property management company and provide incentives if they meet your needs. A property management company that does what it says and is proactive more then pays for itself.  

If you decide to hire a resident manager (instead of a property manager) you will be exposing your self to more liability and may have more work managing an employee who may not know how to manage an apartment building. What ever you save in the front end may be more then lost in the back end by the problems they create.

In summary choose the best asset you can afford in the market you want to invest in. Spend your time finding the right property management company and not getting employees to manage it. Also have money in reserves to cover loses you would naturally incur as you build the knowledge you need to own the property.

If they are on a lease you can't raise it. If they are month to month you can raise it but only 10% per year. I would be cautious about raising the rent based on the number of residents you might encounter a Fair Housing Issue.

@Lukas Zupan how has the Real Estate market in OKC changed with the price of oil? Is it still an oil town or has it started to have a more diversified economy?

A NNN property is good depending on your goals. If I had $20 Million I would use enough money to buy an Apartment that is worth ~$2-3 million (keeping the rest of the money in the bank). I would spend a year or so to understand how to manage it as an owner and to know all I can in my desired market (such as the major players and sub markets etc).

With knowledge about the asset class and desired market I would spend a couple of months to find the right team to help me create a fund. I would take what I have left and combine it with other investors money to buy assets I already pre-qualified in my target market.

Get a secured loan at a community bank.

Get the tenants to sign an estopel saying what the terms of the lease are and have the owner credit you the rent and deposit. Get a feel for each tenant and put aside money for an eviction if you need to do it.

Starting out I would suggest you either invest by your self or invest with a partner where you are active in the property. Your first couple of deals you won't be making home runs. You will be making singles and doubles. Syndication is great but I wouldn't suggest you go that route unless you know how to identify a syndicator or you have money to burn when you learn from your mistakes.

I would check your local tenant laws but if they sign on the lease they would have tenant rights. In California the tenant would sign the lease and the co-signer/guarantor would sign a separate document stating they are the co-signer/guarantor. Another thing to check is to see if the mother makes enough money. In California I have seen tenants needing to make 3x the rent and guarantors needing to make 5x the rent.

Would be easier to use creative financing instead of changing the legal use of the Property. If it's not zoned residential you won't get a residential loan.

Interesting how each states laws are different. Not sure how Washington works but in California a lease greater then 1 year needs to be written. Even if I had a verbal contract for a 1 year lease I couldn't just kick out the tenant. I would have to go through the proper procedures because the tenant has basic rights I would have to respect. I would suggest you seek legal council and build a case. If he takes you to court I would show the proof (in court) and counter sue him. I wouldn't talk to him about my evidence so he wouldn't be prepared if he took you to court. Talk to him respectfully but don't show him your cards. You have basic rights that need to be respected!