All Forum Posts by: David M.

I would pay off all my commercial real estate and invest the rest in something very low risk.

I like the idea of starting smaller.  That way, you can get a feel for the business with less risk.  See how you do managing 2-4 units first.  Consider the basics of being a landlord; communicating with tenants, managing repairs and maintenance can be challenging for many new investors.  It' not just "buy it and it runs itself".

I think you'd be completely overwhelmed with 15 units and that big monthly nut to crack.  Run the numbers extensively because my initial  instinct is that the numbers don't work.

Great story and very encouraging.  I think it's easy for attorneys and brokers to become jaded and to lose that 'human touch'.

I had to develop tenacity and perseverance when starting my business back in the mid 1990's.  I started an automotive business on the thinnest of shoe-string budgets; way under capitalized.  I was in a leased building, counting on a hand-shake deal to buy the property in the future. The owner was an unscrupulous liar.  Consequently, I lost the purchase opportunity.  I was conducting an extremely seasonal business and after 8 years of operation the business was insolvent.  A customer of mine happened to be a local real estate investor and he owned the land next to my business.  He admired my drive and offered me an owner-financed deal to buy this land.  I took the deal and bought 3 commercial building lots in a good location for $30,000.  I began shopping for a large construction loan to build a new car wash on the land.  I was laughed out of several bankers' offices; literally.  I took a break, refined the plan, and tried again.  I found a bank who would work with me and the SBA and the deal happened; I got the loan.  The construction phase had its own challenges.  One example was having to create a 720' sewer extension of the town's sewer line!  I made it happen somehow.  I still remember the first loan payment coming due and wondering where that money was going to come from!

Soon after I built the car wash, I was evicted from my leased space where I waxed and cleaned cars.  I was crushed.  My Dad said "maybe there's room for another building beside the car wash".  He measured the area by "pacing it out" and it looked like there was room.  I borrowed more money and built a new detail shop; no more crummy landlord!

Now the business thrives.  I remodeled the car wash and added new amazing equipment.  I sell used cars.  I bought 2 multi-family apartment buildings and plan to purchase another this year.  Never give up.  Have faith and keep your attitude right.  Look for the positive in all situations.

I own 2 multi family buildings with 14 total units.  I'm working on an off-market deal for a third which will likely close this year. My total units will be 21 at that point.  I own 3 other  businesses in the auto care industry.  When I bought my first building, it was at the urging of some good friends who were also RE investors. I saw my first building as a way to build wealth.  Yes, I also welcomed the extra revenue as a way to even out the seasonal income fluctuations of my other ventures.  All of my RE cash flows.  That said, I find a way to spend all the extra money.  The main use of the extra revenue is capital improvements; new roof, furnace, monitored fire alarm system, etc.  Even smaller repairs like painting and rebuilding decks, stairs and installing new garage doors require spending alot of money.  I remodeled laundry rooms, adding more washers and dryers for the tenants.  

My point is that the extra cash flow is easily spent on improving the properties and thereby increasing the value.  The tenants are paying the mortgage and they are also paying for the improvements.  To me, this is the best plan because I take the long view of real estate and multi-family investing.  My primary business provides my W2 (I'm an employee of my corporation).  There is freedom in not 'needing' any income from positive cash flow.

I'm looking to purchase an off-market multi-family apartment building to add to my real estate portfolio.  I currently have 2 buildings with 14 total units and the new building will add 7 more 1br units.

Every year, the local Housing Authority in my neighborhood issues a market rate report for apartments, listing fair market rents for studio, 1br, 2,3 br etc.  I use those as a guide and reference for tenants.

That said, I do have some tenants below market rate.  I have my reasons, but raising rents is always necessary over time because expenses go up. If I stay low on rents, I'm saying it's ok for me to take a pay cut.

I have 14 units and about 60% pay on time and 40% pay late( past pre-determined due date).  I learned to relax about this because everyone pays.  To me, it's time to act once the rent is not paid by the next month ( due date). Then I have an in-person conversation, not a written one.  That's my personal style; not threatening or hostile, but more of a " hey, lets see if we can get this back on track, otherwise you'll probably have to move back in with your Mom...".

If your money is so tight as the landlord that you are maximally stressed over rent coming a few days late, you need to work that out on your end and not create a problem where there really isn't one. 

I have one tenant who has been with me since I bought my first building.  He is always helpful and accountable,  shoveling snow alongside me on winter days, keeping me informed about issues as they come up, etc.  He eventually put a new roof on my building and did an excellent job!  He is late with the rent every month, but he always pays.  I know to count on his payment and I know it will be late.  I'm a realist and I know that kindness and cooperation go both ways in any good relationship.

I used a heloc for down payments on 2 apartment buildings; an 8 plex and a 5 plex with a beauty salon.  I set the heloc up on autopay and left it alone ( set it and forget it).  I noticed later the principle wasn't going down then realized the terms were 'interst only'.  I altered my autopay to add principle payments.  Now, I am able to pay off bigger chunks with a goal of being 'zeroed out' on the heloc by 1/1/25.  Aggressive, but achievable and good peace of mind with one less debt.

Just because something is expensive doesn't mean it's fraud.  Yes, car mechanics do it all the time.  Had anything repaired at a dealership lately?  They charge $400 to diagnose a check engine light!

When you need others to do these things for you ( change lightbulbs and batteries?!?), expect to pay market rate.

I also operate a car detailing shop.  With inflation and rising costs of everything associated with running the business, detail prices have risen to a high level.  Am I defrauding customers? No.

It seems like this has become personal for you.  

I like to use a rents deposit box that tenants can use to put their payment in.  Then I send a text a few days before rent is due; " reminder rent due friday". Then I text on due date or the day after; " rent in box?".  Works for me.  Some tenants actually text me to say rent is in box without prompting~ WOW!

You could add a clause in the lease stating the penalty for late payment.

I like the idea of electronic locks.

I would identify the items that need updating and plan accordingly; roof, furnace, etc.