All Forum Posts by: Douglass Benson

Alex, you are certainly killing it! Congratulations!  I choose not to invest as you do only because I prefer cash flow and I only buy properties.  I never sell them. I have used private money for down payments but quickly paid off the investors to get them out of the deal after two years.  Being a Michigan investor has taught me that cash flow is king, appreciation is a surprise and equity is meant to leverage for more purchases! Best of luck to you!

The question is "Is this building done?" meaning, is there nothing going to change with this place?  Do you believe that you have nothing of value to give to this property to move the expenses or the revenue?  We NEVER use current figures to determine value because...why would you unless you were not going to change a thing.

When you say "lower class B" I am thinking class C.  A class C property isn't class C because of the season.  It is Class C because of the state of the property or the state of the neighborhood.  

If it is because of the property, my guess is that you don't want to keep it at a "C" so that means you are going to be putting money into it.  It also means that you are going to be running it (hopefully) more effectively than your predecessor so your operational costs may decrease as your cap ex will increase.  Your revenue will increase as well.

If it is because of the neighborhood, I would move on to another deal...

Get each of the units separately metered.  You can have all the gas bills sent to you, but you need to be prepared to eventually charge the costs to the tenants.  You can set up a split that makes sense and gradually increase the tenant ownership of the gas bill until they are at 100%.  Any new tenants should pay their own gas bill on day 1.

I am sounding like a jerk here, but it is hard to state what I am about to state and sound kind and gentle...smoking is smoking.  If it is outside, it is still smoking.  The reason we don't allow smoking, of any kind, on our PROPERTY is because while the cigarette, cigar, pipe, joint, etc. is burning, it can still release an odor, cause things to burn and leave a butt or tobacco behind when it is done and thrown away.  Does it matter less to you to have your balconies burnt or reeking compared to the interior of the unit?  Is there anyone living below the balcony?  Do you have anything protecting them from ashes, butts, etc., falling down to their unit while this guy is innocently smoking on his balcony?

I don't care how good a tenant this guy is, if he is a smoker, he shouldn't be good enough to live in one of your buildings.  

Start fresh with someone who is not a smoker.  

You might have a couple of dollars going toward Maintenance, Repairs, Property Taxes, Insurance, Legal, Trash, plus your own time and expense that should be factored into the deal.  

My thinking is $45k could possibly be 20% down on a $180k building with a few more units, but that is just me.  

We invest primarily in mid-Michigan.  We are value investors, so for us a "good" deal is a building that is tired, run down with less than desirable tenants located in a decent to good neighborhood.  We buy buildings exactly like that, pour money into them to make them the best in the market and throttle the daylights out of the rent while we are increase the caliber of the tenants.

Our first apartment was a 4 unit that was built in 1885 as a boarding house and converted to 4 one bedroom apartments.  We bought it in 2003 and own it to this day.  We are now at 81 units and trying to grow, but growing is harder than it used to be!

Jeff, I am invested in Lansing and Holt with small MF buildings - two 12's, a 16, a 17 and a 20 unit building.  We are cashflowing nicely and are finally starting to enjoy some appreciation as well.  I think you should look for buildings similar in size to my own.  You obviously have the chops to know to stay away from bad neighborhoods.  Take what you know and go more and more toward multi-family.  

Stay on top of your properties and your tenants.  If either one of them goes bad you need to fix it.  Tenants more than likely cannot be "fixed", however they can be removed.  Make it happen  - addition by subtraction.  It isn't emotional, it isn't mental, it isn't physical, it is business.  Own your business and act like you own it.

I purchased a 20 unit and a 17 unit in Lansing in 2015 and nothing since then.  There is too much compromise in the other buildings that exist.  I am looking for neighborhood first, building second and the neighborhoods are scaring me off. 

What people don't seem to understand, is you have to be able to determine what kind of people would be comfortable living in the neighborhood that your building lives in. 

Assuming your units are nice, little else matters...  

I invest only in the Midwest.  That is about to change in 30 days or so but for now - 

1. Call a commercial broker in your area or within 30 miles and ask for Sales comps in the areas for similar buildings.  

2.  Look up sales information on the local Register of Deeds website.

3. Go to Apartments.com or Showmetherent.com or Rentometer.com and try to determine what other units in the area are renting for.

4. Call a local appraiser and ask them for cap rates in your area including the area of these apartments.

5. Using what you found in Bullets #3 and #4, determine the value.  Keep in mind that the figure you come up with has NOTHING TO DO WHATSOEVER with what you will end up paying, but it can help you to establish value.

Adjust upward or downward after you have walked the units.