All Forum Posts by: David Moore

@Milena S.

I would add two things.  When going to Home Depot, go at 7:00 am, and see which contractors are coming in at that time.  Then you know who the go getters are.  Contractors that come into home depot at 7:00 am to get supplies is a sign of a potentially good contractor.  Another thing I advise is pick some small part of the work to do yourself.  On the first one, even if you leave just painting on room, or putting spackle in wall cracks....doing will bring confidence.  We worked side by side with our handyman on all of our first 5 buildings, and after being basically the same as you starting out, now I can put in sheetrock, electrical (inspected of course), sand wood floors, install Pergo flooring (used that skill to put pergo in our home hallway), and even install windows.  Not that I want to do that work myself, but having done it, I know how long it should take, and how expensive it should be.

@Allison Jones

We started with 4 SFR in a small town where we have family in Minnesota. We then bought a four plex in the Twin Cities, down payment with equity we had in one of those properties. The key is to know what your own priorities are. We are a two yes outfit. My wife and I have to both say yes to a property before we even consider pursuing it. In due diligence phase, we have to find a value add opportunity, or we just move on. We also highly value cash flow. Another key issue is time. A beat up SFR will take rehab time.

There are several steps you can take now.  First, find a realtor who is also an investor...there are likely some right here on BP in your area you can connect with.  Find a portfolio lender.  There will likely be several banks in your area that are investor oriented.  If you find a good investor/realtor, she/he will have all the contacts you need.  That's how we found ours.

Next, go look at a bunch. I looked at 20 four plexes before I found one where the numbers worked, and the value add was there. It takes time. Right now, we see opportunities in SFR again, so we are pursuing deals in that range, because we know our own priorities.

@Jason Medina

Welcome to BP!  I have to question your approach.  If you have a track record of being good at flips, why not go back to doing flips?  Instead, you are wholesaling in an area you don't know, leaning on others, and trying to get wholesale deals 1500 miles away.  Being an IT manager does not mean you cannot do something you are good at.  Why not use your IT skills and networking to build a team that does flips instead?  You have as little time wholesaling in Jacksonville as you do in LA. 

Do you think it is possible that you saw a strategy that should have worked, but didn't, in Columbus?   Is what is bugging you more the mistakes you admit in Columbus, and you feel a need to recoup those mistakes.  Believe me, I get it.  But take time for joy...you paid off your debt.  What an accomplishment.  

There are still other options you can pursue more in your immediate area and do well.  You've shown you are good at paying debt.  Why not consider becoming a private lender?  I know LA is pricey.  I get it.  But you may have more opportunities locally, because you know your own market.   

@Kendrick Smith

I respect other strategies people have suggested.  Certainly, if you know flipping and can manage contractors, and know your market, there is money there.  But my wife and I choose a different idea.  We have another business plus our rentals, and I have a full time job, we enjoy our jobs.  We aim to plow 80% of our cash flow each month into either paying down debt, or lines of credit, which we use to obtain, you guessed it, more properties.   We like the Dave Ramsey book 'Total Money Makeover'.   My banking partners like to see good credit score, and low utilization of lines of credit. 

We also pray about our investments, and ask God to bless what we are doing.  We only make offers on properties that achieve a really good cash flow, and where there is a value add.  

@Vincent Plant

I agree with everyone here...just one caveat.  In our lease, rent is due on the 1st of them month, and no grace period.  If not paid by midnight on the 1st, we impose an 8% late fee, every time.  

@Sanjoy V.

A few things I want to comment on...other points have been well covered.  First, you have to be careful who you listen to.  The tax guy is giving you a lot of fear.  If you've done your homework and know your numbers, his fear and criticisms will be of no use to you.  When I first started investing, I was told by people I would lose my shirt.  A lot of people have fear about taking chances.  I applaud you for taking chances.

Also, $50.00 to $100.00 per door under market is like not being under market at all.  I look for value add, especially in a C property.  If you can only get another $50.00 bucks, how is that a value add?

The assumption that the property management is good is a risky proposition.  I've not yet seen a good PM, even when other property owners say the PM is good.

Last, dig much deeper.  You haven't mentioned what the building was bought for last.  Nor, have you mentioned that you have seen the lease roll.  How do you know the seller didn't stick bodies in the units with awful credit, with great deals, to make the building look more occupied than it really is.  And finally, throw out the pro forma.  Pro Forma is science fiction in my book.  Lastly, this is a $6 million deal only if you pay $6 million.  The price is not $6 million.  The price is what you will pay for it.  

Also, ask someone else you trust, or someone like @Jay Hinrichs to examine the deal, after you have all the information.  I have a good friend who asked me to review a 16 unit building he wanted to buy.  I waded into a ton of data, and told him to run, and run he did.  

@Pavel U.

I noticed the product on landlord locks was the same they sell on Amazon, so I ordered the smart key from there.  We installed two different new lock sets with smart key on two doors, and then I used the smart key to make all the locks on the same key.  Wow, was that fun!  But I don't see the master key that opens all doors.  Is that only on landlord locks?

@Brad Schaeppi

Why would there need to be an eviction on a month to month lease?  In this case, I'm fortunate, as this tenant is on 100% public assistance.  She will go where the assistance goes.  I have actually learned my current practice from Homeline Attorney Landlord training, here in Minneapolis.  With month to month leases, I don't even have to give a reason for telling the tenant to vacate.

I will use your strategy for fixed term leases.   Thanks for the idea.    

There are other factors to consider.  My 4 plex in Crystal is located within 1/2 mile of the future Bottineu north blue line.   That is good for two reasons.  First, tenants will have access to light rail.  But more importantly, it will be located within the future development zone.  The land beneath my four plex will become quite valuable when it comes with tax free financing for higher density development.  

The tenant class is poorer, and I've had a few more problems than my SFR renters. Takes more of my time to manage the tenants. That's why I share @Dan Coleman 's strategy to look for buildings with few breakable parts.  I look for buildings with no dishwashers, and sans ceiling fans.  Less to break, less to fix.  

There is no competition at all with the big boys.  They are in another universe.  I will say the more doors you get, the easier it is to have a vacancy, and the higher your cash flow will be.  

I hope none of you have experienced this, but in my four plex, I had a tenant give notice who was trying to dictate terms to us.  Constantly difficult and really exhausting....the kind of tenant that can wear you out.   We replaced her with a great incoming tenant, and I thought all is well.  Turns out another tenant in the building has suddenly started with the same type of behavior, trying to push lease terms, and trying to dictate when we can send our service guys in, always on their terms, never meeting half way.  I'm wondering if recent court cases in Minneapolis against landlords has fostered tenants thinking they can push us too hard.  After a week of grief, and expenses, I looked over my lease, and cited where my tenant had fallen short of it.  I set a meeting for Saturday, sent a letter citing her violations, and a second letter to make my point clear.  The notice to vacate letter.  The lease is month to month.  So I'm giving her notice.   If she comes around and sees the light, we may be willing to vacate the 'vacate' letter.  I don't like vacancies in the winter, but I really don't like this tenant activism.  Wondering if anyone else has noticed this.