All Forum Posts by: Emma Powell

Just messaged him a link to this post, hopefully he can pop in and share. It's an awesome system!

You are going after the low-hanging fruit first, books/podcasts/forums etc, which is awesome. Mentorship is very important especially if you have no background in finance or investing, an unsupportive family or friend group, etc.

If there is a paid mentorship you are considering, consumer all the free content of several of them first before deciding.

We run a free non-profit investing club for commercial real estate investing that meets every Monday night as I wanted to create a place where any money invested goes straight into a deal rather than a coach's pocket. We can't guarantee results or returns just as no coach can, but we can guarantee that investing with a club (we use TribeVest to create each club) will be in an actual deal. Too many people frustrated years after joining expensive mentorships that they still haven't found/done a deal.

If you have enough money to pay for an expensive mentorship, sometimes just putting in a hard-money fund or similar is a better plan. Those guys KNOW the market, and if you put money with someone, they better answer your phone call! That's how I got started, and when I went commercial, those who mentored me were calling me for advice and to invest: that's a win win!

Short term rentals are beginning to have their own lending products, which we have a for a STR development/subdivision we are building with some partners for 12 homes in a beachfront cul-de-sac. But even single STR homes are beginning to have loan products. DSCR is an option, but my last option: I've been able to get better loans so far, knock on wood. But most of our stuff now is large commercial, and lending is such a huge part of the process that I like to have the products as predictable as possible.

We've found the same thing and one reason we went commercial was to get loans to our LLC instead of to our personal names. My husband has several mortgages (and first lien HELOCS) in his name, and I have 0 because as a full-time investor it looks like I make negative money. In fact, now my depreciation losses are reducing his taxable W2 income, so he can't get anymore either.

It's not hurting us in any way other than not being able to refinance in our own names, so they just stay in place until we sell or refinance into an LLC loan. It took me awhile to find lenders who would do loans to residential properties to our LLC, but the rates are higher, so we have just left them there. You can use these types of loans for new acquisitions, which we do.

More, though, we've focused on commercial properties that only care about the property, our experience, and our credit scores. Much easier, though still a challenge and take longer at higher rates, but personal loans are impossible for us now. Another option to go after only seller financing deals, but I wanted to be more passive than finding those. Sometimes wholesalers bring good seller financing deals, so keep an eye on those.

The way I learned it was to try to do deals up to the point I had to put money in: if they still had legs at that point, and I had the people on the team I needed, I'd send the money and take it on. If not, I'd move on. I spent a lot of time calling for sale by owner on Crexi and Loopnet to talk to the owners, they we eager to tell me all about their property and the business.

for paid options, the broadest course I've seen is Scott Scheel Commercial Academy. Good details on all types of commercial RE investing, things I'd never even heard of despite being in the space a couple of years at that point. I didn't join the inner circle, but enjoyed the conferences, course materials, and networking.

I've since started a free commercial real estate investing club where we co-GP on deals as joint venture partners because I found there's a ton of paid education out there, but people still aren't doing deals. We function under the Investing Club as far as SEC regulations go, and have closed 4 deals with experienced operators as club partners this year. Learn by doing.

Check the document that property's state has regarding tenants' rights: in the state I invest in, it says that withholding rent for landlord disputes is illegal. You'll need to educate the tenant on the proper channels to go through to resolve the issue. I make sure my tenants have a link to that document for both of our protection. For example, if it's a maintenance issue and it hasn't been done or done to their satisfaction, I instruct them to send a certified letter and if it's not resolved within 3 days of the date of the letter, then they can hire their own maintenance tech and invoice me or the property manager for the expense. We also have to allow for reasonable amelioration to complaints before evicting on a lease violation.

If it involves an animal as yours does, get the local animal control involved (noise, dangerous, etc) to guide you through what the other tenant can do. But work with them through the pathways that are allowed, empowering them to know what they are, because sometimes tenants feel they only have rent withholding as a weapon. Animal control has solved my pet nuisance issues on numerous occasions because that has nothing to do with evictions, and they are subject to those regulations as an animal owner.

Your local Apartment Association will be invaluable as you work through these issues as well. Our state has a free support line for all landlords when we have questions, and they have referrals to attorneys and other providers like mediators. You can also give your tenants contact info for free tenant legal support with local organizations. You are in the right here, rent withholding is only legal in certain circumstances, and there are so many resources to guide through the dispute process.

Also, I really like the tenant empowerment approach of Mr. Landlord, Jeffrey Taylor, on how to run a rental business with boundaries the tenants can self-act inside of (similar to the 4-Hour Work Week philosophy of empowered delegation). It resonated with me because it's how I raise my kids and run my business, and made the connection that tenants can be easily managed using the same empowering tools that I enjoy as a tenant.

In a high-regulation are like you are in, having an eviction attorney to consult with on these issues is important, because it can be tricky. Having legal advice with the Apartment Association can no longer help is a good line item expense to have on your budget.

Hope this helps with some resources to go to as you research the best way to handle this!

Quote from @Nathan Gesner:

I'm confused. 

You said the market supports rents of $700, which is an increase of 28% over current rates. Did you misread the rental market?

You said he was selling them at $48,000 per apartment, but market value is $75,000 - $115,000. You could buy this property for $1.3 million when it's worth $2.1 - $3.2 million. Did you misread the sales market?

Does it really matter how much the market has grown? If it's holding steady and occupancy rates are good, it should perform fine. My City has a population of 10,000 and has only grown by 1,000 in the last decade. Meanwhile, property values more than doubled in the past ten years (pre-pandemic), rents rates doubled, and the rental market is stronger than it's ever been despite coal and gas leaving. Median income in your market may be lower, but cost of living is also lower. Like your market, our biggest employers are Walmart, a hospital, and the service industry that supports summer tourism. Locals can't afford to buy so they rent, which keeps the rental market strong. 

Your due diligence revealed some negatives about the general market, but I don't see anything in your post that indicates you should walk away.

I'm on board with this comment above ^^^ While I don't love small markets that aren't growing well, they do tend to have tenants stay longer as they usually have family in the area. This could have made a good flip if the numbers worked and you accounted for those factors in your underwriting for higher vacancy. Sometimes a property is cheap enough there is enough meat on the bone to account for some risk. Of course, I would have to see if it pencils to know for sure, but I definitely would have kept looking to see if those numbers held up

Section 8 just means they're using some sort of federal housing assistance, and they can bring that voucher to any community. they usually get approved for a certain amount, so they often want to look at places where their voucher completely covers the rent, or as much as possible. In a HUD community, the entire tenant base is on housing, and no market-rate tenants are allowed. The loan is held by HUD. We've looked at a few of these, but the brain damage getting a HUD loan or taking over a HUD property was more than I wanted to commit to unless I was SURE I could raise the capital for the project, which I am never sure of!

We've done some development, would be happy to chat about our experiences. First was a high rise entitlement and engineered plan design in downtown Salt Lake City, and the current ones are 250 build-to-rent townhomes in SE Idaho where I'm on "loan duty," and 9 build-to-short-term-rent luxury homes in a small subdivision in North Carolina where I'm bringing in capital through my commercial investing club members and handling investor relations

You'll want to set up some patient money to hold the land while you work on permits, but best practice is to have a long escrow period with closing contingent on at least project approval

After my first one I felt utterly wrung out! My husband joked that I didn't need to do all the hard things on the first deal But they don't really get easier, just different problems to solve.

Our first was a small 506(c) syndication for a 50-unit in SE Idaho. I found it on FB from a local friend who was thinking about selling it and just posted: it pays to have a network doing what you want to do!

Since then, we've done more deals as joint ventures with a couple of big check writers, and last year started closing deals as a club that pools our cash and negotiates for better terms, kind of like capital raisers, so we are small % non-managing members to help on asset management and protect our investment: when you bring in enough cash, you can choose what job you want!