All Forum Posts by: Drew Shirley

In Texas, if a natural disaster renders a rental unit uninhabitable, the tenant can terminate the lease and move out. Not a good deal for landlords. Check with an attorney.

I've bought and sold two single-family houses and I can tell you that the experience did very little to prepare me for purchasing an apartment complex. 

The reason Cardone recommends larger buildings is so you can hire a full time manager and actually pay him or her enough money so that he pays attention to your building. There are a number of other economies of scale which are discussed extensively on this site. If you want to manage your own properties, Godspeed. Cardone doesn't. I don't.

Cardone also says that if you're not buying a bigger deal because you don't have enough money, you're looking at it the wrong way, because every real estate investor runs out of money if he or she wants to do more than one deal at a time. He also thinks there is value in thinking big, which I absolutely agree with.

Cardone's point about a personal house you live in is that it is not an asset producing income, it is debt that you are hoping will appreciate. I agree with that -- but I don't agree with the idea that buying a house is for suckers. I just don't think you should buy a house with an eye that it's going to make you rich. Unless you're 19 years old. 

I thoroughly disagree with Cardone's argument that only a small percentage of people should go to college, even though I understand that the value of a college education has drastically declined over the years. 

@Levi T. Even if you did that, in Texas you could still not tow the car for non payment of rent. You would need a separate parking agreement with a separate fee -- and honestly, the way I read it, you'd probably have to subdivide the property so that the parking lot was a separate parcel. And even then, I'm not sure you could do it. 

Good luck.

Your interest rate is 4.5% but your cost of capital is higher unless you're paying interest only. On a 4.5% loan at 25 year amortization, your cost of capital is 6.67%, in fact (yearly payments of principal and interest on a $1MM loan are $66,699.90).

I understand you're buying for the value add and the re-sell, but I'm going to have investors with a preferred return, so I need cash flow on day 1. I want to buy value-add but I never want to assume I can improve the property. 

Look at it through the idea of return on investment. If you spend money but that money doesn't allow you to raise rents or lower expenses, then you're just spending it to spend it. 

On the other hand, if you spend $5,000 per unit and increase the rent by $100 per month, that's a 24% return on your money and that's hard to beat. ($1,200/$5,000 = 24%).

Similarly, if spending money increases the appraised value of your property for the refinance, that might be worth it. Remember, though, that 3 units will be valued based on comps, not the net operating income, so you won't necessarily have a more valuable property just because you spend money on it. 

I'm a Texas lawyer so I looked up Texas law only. 

This is not legal advice, I'm not your lawyer, etc.

The Texas Occupation Code only allows the towing of vehicles from an apartment complex parking area in certain circumstances. The nonpayment or late payment of rent does not qualify, and any lease provision that conflicts with the statute is void. 

Now, the statute does allow the owner of a parking facility to restrict a portion of the spaces and tow any unauthorized cars in the restricted area, but again, I don't think that would allow you to tow the car for nonpayment or late payment of rent.

Not to mention the practical implications - do you really want all your tenants to hate you?

Hey Tom, how much does your money cost? If your cost of capital is 6%, you can't really buy at a 6% cap rate unless you don't care about cash flow. Right?

Seems like in every one of these threads there is always a dire warning about violating securities laws. No one ever seems to mention the good news, which is that you can freely advertise and solicit an unlimited amount of money from an unlimited number of verified accredited investors. 

Don't believe me? Here it is, straight from the SEC website under Regulation 506(c). The SEC literally calls it a "safe harbor."

And you don't have to verify accredited status before you advertise or solicit -- just before you take the money. 

The only catch is that you need to check your state's security laws to make sure there's not an additional layer of regulation. In Texas, all federal exemptions are automatically exempt under state law as well.

Congrats on the great deal.

Jeff, if your property was flooded due to the controlled releases of the Barker/Addicks reservoirs, you may have a claim for inverse condemnation for the reduced valuation of your property. Feel free to PM me for more info.