All Forum Posts by: Evan Kraljic

No offense, but for someone looking at a 90 unit apartment building which I'm assuming you will be syndicating to raise money for, this seems like a question for someone who is out over their skis a bit. I would recommend that you find a local property manager who deals in this size of asset classes, and talk to them about how you would turnover units at this scale. 90 units is no joke so I would leverage your property manager for their GCs or remodeling companies who can help you out with this. For general information though, I think the Best Ever Apartment Syndication book by Joe Fairless is tough to beat for an all encompassing apt syndication book.

I think @Jake Williams owns a primary residence in Eden Prairie, he might be able to help you out with the market there.

Best time to do any renovating is while it's vacant, but that's not always doable, especially in a duplex. For my first househack, I occupied the upstairs unit and did a full remodel starting on the first floor and working my way up. First step for me was electrical because I had old fuse boxes with some knob and tube wiring, which needed to be updated so I could add overhead lighting, dishwashers, GFCI/regular outlets, exhaust fans, ceiling fans, etc. Next was plumbing for 1st floor bathroom and kitchen - I gutted the bathroom and one wall of the kitchen prior to electrical to make it easier (and therefore, cheaper) for my contractors to do their work. Ideally while the walls were opened up I would have completed plumbing for 2nd and 3rd floor too, but I was living on the second floor and didn't want to lose having a usable bathroom and kitchen at my residence. And then 3rd floor was a major project since the floor was unlivable so I wasn't sure I'd have enough money and didn't want to bite off more than I could chew to start.

I say all that to say, while it's most time and cost effective to renovate by the trade and get it all done at once, sometimes that's not the best for your situation. Looking back, going one room/floor at a time took longer, but I was able to build knowledge and confidence as I went instead of having to gut multiple bathrooms/kitchens and figure it all out at once, which would have resulted in me having to live at my parent's and commute an hour+ each way to work, taking more time away from me being to remodel my property. 

I'd meet with a plumber and see if there's a straight shot to run plumbing up to your attic. That's what I was able to do, fortunately. You can get your boilers certified for ~100-150/boiler which is part of Minneapolis's rental checklist anyways, do that before you think about replacing them. I have a good contact there, feel free to PM me. I'd be willing to talk through the renovations piece a little bit too since this forum isn't the best for back and forth.

Do you know if there has been any specifics to a rent stabilization initiative in Minneapolis @Bruce Runn? My understanding was that for the ballot it is a vote to allow the council to craft their own policy without having to have the ordinance be voted on by residents? 

I'll start off by saying that I think Saint Paul proposal definitely went too far. I'm not in favor of rent control in general based on what I've read up about it being enacted elsewhere but not including a vacancy decontrol so landlords can raise rent to market when a tenant leaves, or exempting new building supply from the rent stabilization policy were the two most frustrating inclusions to me. Also I believe they put a hard cap at 3% and did not tie to inflation at all. If new building supply is not exempt I'd expect less development which would exacerbate the affordable housing supply issue. Vacancy decontrol makes sense because as a landlord myself, I would like to have the ability to not raise rent on my tenants but if they decide to leave, rerent at fair market value. With no vacancy decontrol, I think my hands would be tied to increasing rent at the maximum allowable number (unless they put it around 7-10%, I wouldn't go that high) each year so I don't fall behind the curve. 

I will say that as a left leaning person I used to believe that rent control could be fine if properly implemented, and most landlords opposition to it was strictly out of greed. Having read up on it more, I don't think it's a particularly helpful solution to our affordable housing issues, and I definitely do not trust the Minneapolis City Council to craft a reasonable ordinance regarding it. My thinking is that they will go the opposite way (similar to St. Paul), where they say rent stabilization hasn't worked because the regulations are not strict enough, ignoring the warning signs that history has given us in other cities/states.

For me personally, I'm not too concerned about it because I think like any business you just need to grow and adapt, changing strategies if need be. One effect it would have is that the subset of value-add deals due to rents being well below market value would be tougher to pull off, especially if they don't include vacancy decontrol. With that being said, I prefer to buy vacant units so I don't have to terminate leases or drastically hike up rents upon purchasing a place, not to cast judgement on those who do so (a lease is a contract, once that's fulfilled you don't owe the tenants below market rent, nor should they expect that), but that is my personal preference.

 Definitely. Send me a PM and I can help you out. 

@Jackson Mertes If you're looking for a stepping stone into future properties (which it sounds like you are), I would highly recommend going small multifamily for your first purchase. Screen your tenants well and you should have no problem managing the property while you aren't living there, and generally speaking it will be easier to qualify for your second mortgage using fixed term leases than it would be with AirBNB income, or even the income you have renting out rooms while you live there. The second one shouldn't be as bad, bringing in rental income in the same unit you live in isn't a novel concept but loan officers can be weird about it if it's from the same unit you were living it. Also I prefer multifamily because it's easier to find cash flow which is generally more appealing to young guys like you and I, since it can fund your lifestyle and also make it easier to qualify for your next loan. I'm sure there are people out there BRRRRing single families and bringing in cash flow, but by your own admission as a 19 year old with little funds/renovation know how that's a much tougher road to hoe. For single family I agree that adding bedrooms and then renting by the room or using as a VRBO would be the move, but as James pointed out those would be at odds with each other due to location and quality of property (short term renters will be a lot pickier than some college students, as you'd expect).

The tricky part about giving realtors leads as a wholesaler is that since wholesalers are not licensed, it is technically illegal for licensed agents to pay unlicensed parties who play a role in the deal. David Greene talked about this on a real estate Q&A podcast recently (BP Show 501). He also has an older Q&A with a couple questions about wholesaling that he answered (BP Show 473). The youtube videos I hyperlinked have timestamps in the description so you can skip to the questions about wholesaling. I think David does a pretty good job of explaining these things while being mostly unbiased, although he obviously is an agent so keep that in mind with his responses.

Mike and James already gave good responses on maintenance and CapEx so I don't have too much to add there. My expense ratio for vacancy, capex, and maintenance is generally in the 15-20% combined range but I'm rehabbing up front and then self managing my properties.

For utilities, while it will vary from property to property I think a common arrangement for small multifamily (2-4 units) which you'll see is that tenants pay for internet, gas, and electric, while the landlord covers the sewer/water/garbage/recycling bill, which is all lumped into one bill, at least for Mpls. $150-160/month is a good estimate for a duplex. Most small multifamily is not separately metered for water so billing tenants could be a little tricky, but you could look into a RUBS program if you were really interested - not sure it worth it at a small scale though. 

Also lawn care/snow removal is more likely to be an owner responsibility in small multifamily whereas I've heard of people making it the tenant responsibility for single family. For me personally, I took care of it at my first househack since I was living there, and second rental the tenant and I agreed that he would take care of it in exchange for the garage and off street parking. In the future I may try to fully hire out, troubleshooting a snow blower or mower that won't start may be my least favorite part of being a landlord lol. 

For sure @Connor Mohs! The major systems to note for CapEx are foundation, electrical, HVAC, and plumbing.

For foundation, go over all the joists and exterior walls - use a flashlight if needed. For joists you are looking for anything with dry rot, bowing/splits in them, or sistered joists (shorter joist screwed/nailed into the other for support). On exterior walls, look for signs of water damage and any major cracks.

For electrical, mainly look out for old knob and tube wiring, fuse boxes for the electrical panel, and if it's a regular panel with circuit breakers open it up and see if there's any space left to add onto it, say if you want to add a dishwasher or need it for something else in the future. 

HVAC - you should be able to check the year that a furnace, boiler, or water heater was installed. This isn't as vital to get during an initial showing and your inspector should make note of it if you forget it.

Plumbing - Check for old galvanized water supply lines - these corrode over time and reduce water pressure. You could also check water pressure in the units by running the bathroom/kitchen fixtures. Copper or PEX are ideal (I prefer PEX since it wouldn't freeze in the winter and bust). 

Other big ticket items would be roof, windows, siding. These items you can just tell visually what kind of condition they're in, and you can ask when they were last replaced too. I also purchased a laser tape measure so I can verify bedroom and other measurements quickly. 

They are much more common in Minneapolis but have been done in St. Paul too, albeit sparingly. I do not have experience building one of these and you will be hard pressed to find someone in St. Paul who has, as it looks like between 2016 to when the 3rd article was written in 2019 only 4 ADUs were permitted there, compared to 137 in Minneapolis. The first article has a link to the original ordinance and amended ordinance in 2018. 

The main hurdle here is going to be cost and seeing if the ROI works out. In that 2019 article it said construction costs typically range from 140k to 320k. Good thing construction and material costs have down since 2019 though... oh wait. Not trying to deter you at all, this is an awesome niche that I'd love to explore too, but I think to do so you'd need to be buying in a very expensive area which allows the ADU and where rents/value added support the cost of construction. Rents are generally lower in St. Paul, although there are some nicer areas like Cathedral Hill, Mac-Groveland, Summit where you could pull 1500-2k/month for a 2 bed ADU. But then you're probably dealing with more NIMBYs when you want to get the ADU permitted, lol.

I'm gonna tag @Bruce Runn and he might be able to offer some advice, although I know he invests in Mpls specifically he may know a bit about building/zoning in St. Paul too? 

https://www.stpaul.gov/departm...

http://whitecraneconstruction....

https://www.minnpost.com/metro...