All Forum Posts by: Erik W.

It depends on....
1) How developed is your ability to deal with difficult people?
2) Do you already know your state's landlord/tenant laws?
3) Do you have a list of reliable, honest, hard-working, reasonably priced contractors at least 3 persons "deep"?
4) Do you have a lease ready?
5) Have you established house rules for things like quiet hours, who parks where, whether or not pets are allowed, etc?
6) Do you want fixed rate (smaller units) or variable rate financing (bigger units)?
7) How do you plan to handle pest control?
8) Does your city/municipality have any special laws or regulations that apply to certain number of units insofar as registration, having a business license, etc?
9) What's your pain level? When one tenant calls, eh, not too bad... when 3-4 of them are calling, it gets more interesting.
10) What is your time availability to deal with issues? On that note: are you going to self-manage or hire out management?
There's probably at least another dozen, but that's enough to make this one most critical point: when you go big... you go big or you go home... and there's little time or space to make mistakes. Bigger deals also compound issues. When the tornado rips the roof off your 10-plex, now you have 10 dislocated tenants and need Mr. Big Contractor. If you have a duplex, your handyman can probably cobble something together temporarily.

Larger units also require things like professional lawn care, a cleaning crew, and a part-time/contractor maintenance crew. You and your spouse/significant other won't be able to keep up.

If it were me in your shoes, I'd start small. That's what I did: I started out with one small SFH. Then another. Then a duplex. Then two more duplexes. Then a four plex. Fast forward 18 years... we now own 25 residential units and 29 commercial units. I still self-manage, but I have a contractor team, nice software, and a bundle of knowledge accumulated over 18 years in the trenches.

That said, some folks dive right in and get 300 units. They're impressive. That would kill me. As a wise man said, "Know thyself."

I'm not sure exactly what you're asking for. Transcripts of talks?  Scripts?  Sales pitches?  Etc.

My best advice on finding private money investors is to start with people you already know.  Begin casually, such as "Hey, I'm looking at this apartment deal that should be a good cash flow investment.  Do you know of anyone who might be interested in learning about that and possibly getting into that kind of deal?"  

This "soft" tactic accomplishes 2 things: 

1) You aren't promising the world.  You're saying "should be a good investment."  Always under promise and overdeliver.  Too many newbies act like they've found THEE next Disney World, when if fact it's probably just an okay deal that will return 8 - 10%.

2) You aren't directly asking them to participate, which is uncomfortable if they feel pressured to say yes or no to the deal for themselves personally.  They may need time to think about it, and when you push people right away they tend to say "No".  They'll either tell you some names to talk to and broaden your circle, or they might say "not off hand" and then a week or two from now approach you after they've had time to think it over.

One of the best investors I ever connected with came from breakfast at a local diner.  A long-time friend knew what we were doing and said, "You need to meet this guy."  So we each spent $7-8 on meals.  Had some fellowship.  Told some stories.  Next thing I know, I found a guy who was in for 6 figures.  Who knew?  I didn't.  But my friend who introduced us knew I was looking for people who wanted to invest, and he new a guy with quite a bit of capital.

Start out reasonably sized, deliver everything on time or early and on target or better returns.  If you prove yourself trustworthy, the money will be knocking at your door soon enough.

Hi, I'm under contract to purchase a 12-unit resort on a lake about 40 minutes away from my home.  Guests will stay between 2 - 30 days at at time, with most stays being 2 - 7 days.  I will be handling advertising, reservations and collecting payments, and my onsite manager will be handling the day to day tasks of turn overs, check ins, check outs, coordinating contractors, etc.  There are good reasons for why we have it set up this way that I won't go into at this time.

To help us coordinate our efforts, I would like recommendations on a software package that can do the following:

1) Link up to online nightly rental bookings like AirBnb so we can keep track of all bookings on one calendar, but still allows us to book outside those platforms for repeat business.

2) Automates emailing any PDF e-signature pages for any legal disclaimers / "stay" agreement / liability waivers for using the swimming pool, etc.  Basically, takes care of the sign-in process in advance of Guests showing up.

3) Allow for adds-ons like boat rentals, ice for coolers, and other miscellaneous up-charges.

4) Is accessible to more than one person so that my onsite manager can log in each morning to see the bookings and turnover schedule to give to our housekeeper.

5) (optional, but nice) Allows Guests to pay for their stays thru the software.

I appreciate your time in advance!

@Jai Reddy, we have two 6-bay workshops (12 bays total), a self-storage facility, and a small retail property (2 units).  Under contract presently for a 13 unit resort with boat slips on a nearby Lake that is very popular and we're turning it into nightly rentals.  We acquired our first commercial property in March 2020, and so far they've been considerably less hassle to maintain.  One nice thing about the workshops and the storage facility is they are large metal boxes on concrete slabs.  From a maintenance standpoint, they are much harder to damage and easier to work on since electric and plumbing is all exposed instead of buried in the wall.

@Spencer Gray, I invest in the MidWest (SW Missouri) and am collecting all my rents too. But, the CDC moratorium hasn't expired yet, so a tenant could still potentially qualify for it's protection.  I am doing okay since I screen my tenants carefully and make sure they have almost as much stake in paying as I have in collecting.  They want positive references from me and to better their lives.  Taking advantage of non-payer status protections is not their game plan.  And yes, it expires very soon...month-end I believe.  So we may all think this is past us for good now.

You sound like a knowledgeable person, so no doubt you are fully aware of the 5 strict criteria a tenant must attest to in a sworn statement to qualify for the moratorium's protection.  So, that does make it hard for non-payers to take unfair advantage of it.  But I believe this is a sign of the times.  People now view housing as a right to be provided and paid for, and not necessarily always by them.  Sure, the Mid-West is still a common sense, safe place for now, but I see not reason to expand my residential portfolio now that the Govt has demonstrated it has both the WILL and the CAPACITY to interfere in such a way.  

If it weren't so cliché, I'd say, "It's the principle of the thing."  But there is also political movement behind this: no one looked out for land lord when this was passed at the national level.  Places like the ones you mentioned are expanding rent control and tenants are howling for "Cancel Rent."  Where do you believe this trend is headed: better or worse for residential land lords?

I'm not selling off my residential portfolio yet, but I have noticed that commercial units (non-MF) and nightly rentals were not impacted by any such legal injunctions on collecting rents.  Business as usual.  Therefore, when given the choice to expand in an area with moderate risk or almost no risk of moratoriums, I choose the far less risky.  Make the same (or better) money with far less hassle.

Moving into commercial property (not multifamily) and nightly rentals.  2020 / 2021 has continued to suffer from CDC moratoriums, and now that the Govt has indicated it has both the power and and the will to make it impossible to collect rent from residents, I see that as an unacceptable risk going forward.  There are other ways to invest that do not carry that risk.

I'm a fan of digging for diamonds in my own back yard.  I know the area, the people, the laws, and where the best pizza & beer places are.  Opportunity is everywhere, and my view is once you get into an area of 50,000+ people with a growing, diverse economic base that has reasonably good climate and access to transportation and entertainment.  People want to live there, by default, so they will, and your investment will prosper.

Btw, you know the old adage about "best" anything, right?  The "best" of anything depends on your preferences, tastes, goals, etc.

When I started investing in 2006, I didn't know words/phrases like Cash on Cash and ROI. I also didn't know real world numbers and percentages. It took awhile to learn them.

What I found out is what many call the "1% Rule" which states that to BREAK EVEN, a property rent for at least 1% per month of the total "all in" costs, regardless of whether they are paid cash out of pocket or borrowed.  So a $100,000 property would rent for $1000 a month, total.  Your property will rent for $1800 a month and total paid is probably around $190,000 once you add in your closing costs.   Close enough for now.

$150 / month for Maintenance/CapEx is low. I do 5% for CapEx and 10% for maintenance, and on this property that would be $270.

$250 / month ($3000 annual) cash flow on approximately $50,000 invested is 6%.  True, you will also get depreciation to reduce your tax bill on other earned income, and you will also get amortization (loan pay down) and possibly appreciation, but 6% is pretty meager.  I could whip that easily in the stock market over any given 5 year term, as the S&P 500 returns 10.7% average annualized rates since the early 1970s.  And stocks come overall with far fewer risks and complications.

Without knowing much about your market or you goals, it's tough to say if this is a "good" deal.  If you have money to invest and your real estate is appreciating at an average rate of 5% compounded, that plus your cash flow over the next 10 years should make this at least an okay, if not reasonably pleasant deal.  

Don't sweat it too much.  We learn a lot from our first deal and get better as time goes on.

I don't get it.  You went into this deal "knowing" how appraisers reach a value, yet you did it anyway, and now you're asking how can we fix what you know the appraisers will do.  This scenario has the cart in front of the horse.  The issue needed to be addressed before making the offer.  

Worst Case: You may be stuck with 12-24 months of cash tied up until you can prove the appraiser's numbers were off and a new appraisal is warranted.  There isn't much you can do to influence the appraiser. They have rules to follow and are supposed to be beyond influence by Buyer, Seller, or financer.  "Supposed to be" is one possible way to salvage this.  I've seen appraisals all the time magically come in at a couple hundred bucks off from the purchasing price of hundreds of thousands of $$$.....like they can actually get THAT close!  I don't know how it works out, but sometimes it appears the lender's desire to do the deal factors in.

One other spot of good news is every commercial appraisal I've had done recently is an average of three approaches: income, cost to build, and comparable sales.  The appraiser will determine how to weight each approach based on local market conditions that vary from location to location.  So even if the appraisal comes in low on discounted income, your plan might be salvaged by excellent comparable sales.

Good luck!

Master meter utilities are the bane of any investors existence, unless you somehow figure out a system to monitor and/or control usage.  As others have said, first check what is legal in your area.  Next, whatever is legal: DO IT!  I don't care if it costs $4000 per unit for separate meters: you will hate life the first time you get a $600 water bill from a toilet that a tenant let run all month and "forgot" to tell you about.  Ask me how I know.  Happened to me twice before I learned my lesson and bit the bullet.

I paid to have an older duplex split on two water meters at the street.  Water use went down by 50% vs. when I was paying for it.  Funny how that works.  I kept rent the same as when I was paying water instead of giving a rent increase that year.  Then the next year I resumed normal increases.  That was 10 years ago, and the meters have more than paid for themselves 5 times over.  

Only sub-meter as a last resort.  Reading meters and back-billing monthly is a pain, and ultimately if the tenant doesn't want to pay you're still stuck with meters on running full speed and have to evict.  

I don't want to pay ANY utilities, ever.  Especially now that the Govt has showed us they can and will make evictions impossible for 18+ months.  Utility companies can shut off for non-payment.  I can't.  That's considered constructive eviction.  Ironic, isn't it, that one party can get away with it while another cannot?