All Forum Posts by: Jim S.

Sent you a PM.

Cashflow is my number one goal but to gauge appreciation potential/rent growth I look at:

• Location (market) - Census trends, average price to rent ratios, employment rates, landlord/tenant laws, tax rates (1% in CO is very different from 4.3% in upstate NY)
• Location (submarket) - Schools, crime, walkability, "path of progress" trends, distance to downtown/jobs, public transportation, commercial development

@Kris Mead

Neighborhoods matter more than markets in terms of tenant issues and I’m in a C- area that is luckily turning a bit for Albany. Yes, I had to evict some folks that didn’t pay rent for 4 months (and fire the property manager that kept stalling the eviction process bc he didn’t want to deal with it). They wrecked the unit before they left.

Overall good learning experience and I profited from the whole thing anyway. Since they made such a mess I ended up renovating the unit and converting it from a 1bd to a 2bd and for $10k in renovations I now get an extra $3600/year in cashflow. That's a great ROI.

It's a shame they passed all of these anti-landlord laws recently. I have a triplex in the mansion district (near downtown Albany) and was looking to start buying some 5-20 units in the area but now I have zero interest. 

I don't want to end up getting stuck with a rent controlled property in 5 years. 

If you lived down the street I would still recommend hiring a professional third party property management company. So will any commercial lender you try to use to get a loan on it. Unless you want to start your own management company from the ground up I think it's a losing proposition on your pay per hour, legal liability, and overall stress.

Find a reputable property management firm before going any further. They can likely recommend a good buyer's agent (for properties this size you can still get away with using one at least in my investment market) and probably have relationships with local banks as well to get a commercial loan. 

@Brad Helmholdt I bought a couple 4 unit properties recently in STL and now I'm trying to get a small multifamily (12-20 units). 

What size properties are they? I have a few good commercial & residential lenders that have been great that I could put you in touch with.

If you have enough cash laying around to buy 6 outright including repairs, then maybe you could do ~9 per year. I'm guessing that is not the case. You need to wait 6 months to be able to get the increased value included in your refinanced amount.

Before trying to do 12 properties your first year I would recommend making one deal work properly and according to your plan. Figure out which market/sub-market you want to target, decide how you will do marketing to find such a great deal on a cosmetic rehab, and then get a team in place (agent, contractor, property manager).

Leverage works both ways, if you have a positive return it amplifies it. Same principle applies if things go south. I would look to learn quickly and acquire slowly rather than the reverse.

You could refinance immediately if you wanted it based on the original sales price. Otherwise if you want conventional financing that is based on the new appraised value it is 6 months.

If it's your first deal I would not expect the rehab to take only 2 months unless you already have a team in place or it's just a cosmetic rehab in which case 25% will be difficult unless you bought it off-market.

Hi Brad,

Is 5.5 the cap rate for properties that small? 

5 units is basically the worst possible number for an investment property. It doesn't qualify for conventional financing, it's too small for Freddie Mac's small balance program ($1MM+), and it's fairly low yield for a cash investor as well. A typical buyer will have to go to a bank and at least in my markets the rate on a 5 yr balloon note is ~5.25% which a 5.5 cap would be too low of debt service coverage for a bank to lend on.

The number one thing on your list should be interviewing property managers. Look on BiggerPockets for PMs in your area, there will usually be 1-2 names that come up consistently. Have them start advertising once a few rooms are ready for photos so you can have the place rented by the time your repairs are done.

They will be able to get the place rented with well screened tenants and prevent a lot of long term heartache. You can lookup endless stories of poorly self-managed properties on this forum, that's the best future seller of a property to deal with.

Don't transfer to an LLC, you won't be able to get a conventional loan. If you find a good property manager they should be able to direct you to a good local lender that works with investors. If you want to transfer to an LLC after the fact there are ways to do it, personally I use umbrella policies for 2-4 units rather than risking a bank calling my note due when interest rates go up in 10 years.