All Forum Posts by: Diane Bartley

@Walt Waters - we have a very thorough tenant-screening process as well as a part-time property manager. We are not at the scale where we need someone full-time, but agree that having local property management is key.

Welcome to BP, @Walt Waters!

I am an out of town investor (with family ties to Louisville) and, with a partner, have purchased several smaller (5-unit and under) multi-family properties in nice Louisville neighborhoods in the past 2 years.

Good ones do come up on MLS, so don't give up. Of course the areas you are mentioning are in very high demand, so anything good there goes quickly. Best way to proceed is to check MLS daily, have your financial analysis/model ironed out and ready to plug in numbers once you see an actual property so you can make a quick decision, have a great realtor (like Mya Neubauer - you can find her through BP) ready to take you through available properties ASAP/preferably the day they're listed, have your financing lined up, and be ready to make an offer same day when you see a good one.

Good luck!

A little more background on Old Louisville zoning - it was designated a Traditional Neighborhood Zoning District / TNZD (I believe around 2000) and that's how it can enforce all of these additional requirements on external appearance of the property (which btw if you want to change anything about the exterior as @Clay Smith described you would need to file for a Certificate of Appropriateness / COA) as well as what the property is permitted to be used as (single family, duplex, multi-family). 

Most of the multi-family properties in Old Louisville are old single family homes that have been chopped up into multiple units. As long as these buildings have been continuously operating as multi-family properties since before the TNZD was established they are grandfathered in and you will be OK. But if not the zoning folks can demand that you return the building to single family or duplex. Critical things to look for as far as establishing continuous operation as a multi-family is that each unit has a separate LG&E meter (also essential to keep costs under control as several others have mentioned), a separate entrance, a separate kitchen, and a separate bath.

@William Morgan - great question regarding our partnership - at this point we're 18 months in and going strong. We have several multi-family properties in Louisville that are doing well and generating positive cash flow, and are getting ready to acquire another one. 

In my experience a partnership can be an excellent way to combine complementary strengths in order to realize a shared vision. We've dealt with our share of unexpected issues, of course, but that hasn't slowed us down much, and I always enjoy jumping on the phone with my partner and talking through our plans. 

Great feedback here from everyone! 

@William Morgan - I think a partnership can be an awesome opportunity for both sides. If you approach your partnership agreement and your subsequent interactions from the perspective of making money AND taking care of the relationship, I think that gives you the best chance of succeeding as a business and ensuring that everyone remains friends.

A few other scenarios to think through: make sure you decide up front what happens if you decide to split up the LLC, but you both want to keep the building. Who would get to buy it from the other person, and at what terms? Better to nail it down now than fight about it later. Also, let's say everything looks good when it's inspected, but there is an unexpected expense up front (like, say, a water pipe freezes this winter and you have to shell out a bunch of money to repair broken water pipe plus add more insulation etc). Who pays for that, your partner? In that case, is that money a capital contribution, or is it a loan? If a loan, in what order is that money paid back (as in, you pay him back the loan first, and then resume payments on your half of the down payment)? Finally, if for some reason something happens and you are forced to sell, in what order is the money paid out? What if there is not enough money to cover the mortgage AND the complete down payment from your partner and whatever you have paid in - who takes the loss? Again, I'm not saying this is likely but these are the kinds of things it is important to think about up front.

And, in addition to working through possible failure scenarios (very important), it's also key to make sure that you plan for success! For example, what if your partnership goes really well, and you decide you want to invest in another property? Would you use the terms in the operating agreement from your existing LLC, or would you plan to structure another one? Not saying you have to figure out the complete framework of another structure up front (that would be premature) - but would be good to think about whether or not this LLC is designed to cover one building, period, and anything else would be a separate conversation, or whether it's designed to expand.

Good luck and keep us posted!

Hi @Christina Shearer - welcome to Bigger Pockets! I jumped into REI in the fall of 2013 through the unbeatable combination of BP information and connections and it's been a fantastic experience.

Just over a year ago we formed a partnership with another BP member and have since acquired three small multi-family properties. One of the best pieces of advice that I read initially was to figure out what you bring to the table as well as what you're lacking. Then figure out a few approaches that you could use to fill in the gaps. Maybe you can fill in the gaps by honing your expertise through research & analysis, maybe by doing some hands-on learning, maybe by building up a network of connections with certain skills, maybe by partnering with people who have what you lack and lack what you have, or maybe it's all of the above. I'm not talking analysis paralysis here - but taking a little bit of time to think through this before jumping in was incredibly helpful for me.

Let me be clear that although the partnership approach is definitely not for everyone, it's working quite well for us. We all did a lot of due diligence before making it official and were also extremely detailed about expectations (exactly who is responsible for what). We're having a great time growing our business and also genuinely enjoy working with each other.

Best of luck to you!

Welcome @Sierra Thompson - you've definitely come to the right place to launch / accelerate your REI journey. I had been thinking about getting into real estate for years but finally got started in fall of 2013, when I stumbled onto BP. BP was a tremendous help both in getting up to speed on critical information and also in enabling me to connect with key people in the Louisville market.

I very much agree with @Clay Smith as far as how essential it is to build a strong financial base. Getting into the habit of tracking Net Worth on a quarterly basis and Net Income (how much of the money that you make do you actually keep) on a monthly basis has been tremendously helpful to me in defining, and then advancing, my REI goals. I'm also constantly inspired by the personal financial prowess of early retirement guru http://www.mrmoneymustache.com/.

Let me point you to a great intro article on BP that really helped me get focus on where and how I wanted to get started ("The Top 100 Ways To Make Money In Real Estate"): http://www.biggerpockets.com/renewsblog/2012/09/02... - I loved reading through this list and thinking through exactly what niche would work best for my resources and personality.

Best of luck to you!

Hi @Mya Neubauer  - that's great to know that you've had such a good experience with Airbnb in Louisville! 

I've been curious on what the numbers would like to convert a standard apartment rental into an Airbnb listing (including additional taxes, cleaning, furnishing, etc. etc. etc.) I know it's a different situation hosting folks in your home, but would still love to discuss your experiences more with you at some point. 

I just purchased my first rental property this year as an out of state investor (we live in the DC area and prices are completely crazy here). I was considering going it alone at first, but I ended up meeting a fantastic local investor through BP and we ultimately partnered on this deal, and are now considering our next project.

I know that going it alone can be done, but the partner route is working really well in this particular situation. Based on my (admittedly limited!) experience, I would strongly recommend getting to know local investors through BP, having good conversations with them, and who knows - you might just find a complementary partner to work with.

@Perry - this is a very interesting question and one that I think about regularly as well. We live in Northern Virginia and bought in summer 2009 for a 12% discount off of what prices were at the peak (DC area never dropped as much in value as many other places around the country). Now that we're in recovery mode (or maybe a bubble), prices are back up to where they were previously and have even edged higher, and it definitely gets one thinking.

In order to determine what to do, if anything, I would ask what your big picture strategy/vision looks like. These are the scenarios I tend to think about:

1. If you love the area AND would be happy in your house for the foreseeable future AND don't want to downsize in order to realize the appreciation while maintaining similar payments, I would ignore the bubble and keep paying off that great low interest rate as scheduled. After all, prices rise and fall, but it doesn't necessarily mean you are in a position to take advantage of it. (In my situation, we are already living in a smaller house so downsizing is not an option, and we are locked into a very specific location due to proximity of family.)

2. If you love the area but would be fine to live in another house, maybe a duplex as you mentioned, keep trying to find something where the numbers work out. Have you run the numbers - would your current home be a profitable rental? (Mine by the way would not - it is a great to live in and the appreciation potential is very high, but it would not be a profitable rental.)

It also sounds like this extra cash wouldn't really make a big difference to your current major life/business/investment priorities. So probably best to just ignore it and soldier on. As an inspired follower of Mr. Money Mustache, I repeat his mantra of "$x assets and $x coming in from cash-flowing rental properties and a paid-off house" - and then I get to retire early and do whatever I want. :-)