All Forum Posts by: Joel Florek

 We have to meet up at some point for a networking session. Sounds like I could do some good learning from you! What are your average rents and unit make up?

 We are all guilty at times of talking about things we dont have experience doing as if we are experts. Was hoping to hear stories from people investing in rural areas and it's turned into a great thread! Would love to connect and talk more.

 When people say that they can get 5% rental increases every year for the next 7 years. Or they assume that they can sell at a lower cap rate then what the current market is at. They assume that they can still refinance the property at the 5 year balloon with the current rates we see today. They pinch all of property management to 5% or

 I have actually thought a lot about that and have a short list of other investors who I like that I would be willing to offer a seller 2nd on to take over my portfolio should I need to make a change in my life quickly. Thinking through the exit strategy is a bit more important I think. 

 Great question. They pay $290 a month for rent in a unit where other long-term tenants pay $680. They mow the lawn at one of the 3 properties in the town, clean the common areas when needed, salt and snowblow the walkways during a storms. As mentioned they also answer maintenance calls for me, call contractors to get the issues resolved and do showings for me when I schedule them. They also drop of rent checks at the local bank for the tenants who dont use computers. I can view the checks online to record who paid, how much and when. They are retired and love having something to do. Since they never travel too far it works out really well. 

With respect to contractors, I have established the following: plumbing, HVAC, painting, lawns(for other properties), plowing, electrician(never needed), and I use Home Depot to deliver new appliances and take away old ones. For bigger projects, I still take those on myself. Eventually, I will hire them out but I will hand over my weekly property management duties before I let go of the capital improvement projects. I save a lot of money and hassle getting my hands dirty and do enjoy the work. Helps me understand what is going well or not well with the properties and plan for the future. Its my sweat equity. I have standard paint colors, flooring, and other things which makes the process easy for me. I picked up a small tool trailer and set it up to carry all my tools and leave room for supplies. Since I am mostly B class most of the time a tenant turn requires no cleaning or renovations unless I decide to update the unit and bump rents. Basically, emergency work gets hired out and I handle scheduled capital improvements. During winter I only need to do a few minor projects so I will only get my hands dirty for about 3 or 4 days from Dec through April. When we have warmer weather and see more turnover I usually spend 3 or 4 days a month getting my hands dirty. 

 Scale is important to build some systems around the business. For me, the 23 units I have are more than 400 miles away. I go up every other month to check on the portfolio, meet with my banker, and take care of some projects. Might spend 2 to 4 days working in the town. My parents lives about 75miles away so my wife, daughter and I stay with them. Ill drive to the properties and spend 8 to 10 hours working while my wife and daughter get to visit. Ends up being a great vacation for us and keeps us close to family. My resident manager opens doors for showings, meets contractors, does weekly drive bys of each property to ensure things look clean and as they should. I still manage all the leasing remotely, pay bills and record rent checks. 

@Mike Hoherchak in my opinion if you are buying a quality asset that cashflows and can provide moderate to strong returns you are in great shape. If you can lock in long-term fixed financing going after the small stuff, as long as you are ok hanging on if valuations turn around, you are ok. But if you are buying stuff just to buy and or really stretching the underwriting you can get yourself into a lot of trouble. The challenge is so many start to stretch the underwriting and it leaves fewer deals resulting in more people trying to stretch the underwriting to get a deal done. It is a vicious cycle until something forces a shock to the system. Stay patient and stay focused on the real goal with all this craziness and every day is always a good day to buy. 

 There is some really terrible stuff out there. All my properties are square, have up to date plumbing and electrical and I would live in every unit that I rent. If I dont feel comfortable leaving a tool trailer over night I dont want to invest in the neighborhood or town. I have come across a lot of enticing opportunities from a numbers perspective, but this is about lifestyle so you have to say no to those properties. There are opportunities, just takes time and patience. I picked up my first two deals in 10 months. Then it took 18 months before I found another deal and the 4th got under contract only a few weeks after closing on the 3rd deal. Havent done a deal for 14 months now... Would love to get great deals all the time but would rather hang on and enjoy what I have and wait for the right play that I am comfortable with. 

 In the small town where I invest my 16 unit was purchased at a 9.5 cap 3 years ago. I added $1200 to the monthly rent roll via rental increases without renovations. Still another $800/mo that I can get out of it which I should be capturing by mid-fall next year. So the potential is to operate at a 12.3% cap. 

Smaller multifamily, 2 unit and 3 units can be picked up for 15 cap or 20 cap as is and even have some upside. I have only picked up one of these properties. But those usually come with their fair share of weird stuff which I don't like to deal with much. So I have passed on a lot of small opportunities(except that one I mentioned) just because the headaches dont seem to be worth it for me. I like to get the C+ tenants and then to B+ tenants. I haven't played with A and I stay away from low C to D stuff. 

 Thanks for the opposing view. All are valid and I cant argue against them. Longterm my plan is to get into the metros and I have started that with an 8 unit I picked up last year. I do sleep easier knowing I have assets in a stronger market long term. 

The draw to some of the smaller markets is I happened to start investing in one of these and it has been fantastic for me. Once you find something that works really well, its hard to turn a blind eye to focus on going in a different direction. Maybe its too small of a mindset and that limiting belief is holding me and others back.... All good food for thought. 

One of the things I think is interesting with small towns, especially in farming regions, and ones with tourists hooks is that they have a form of industry that is always going to provide a base. That protects from completely falling out. When you see vacancy rates at 0% or 2% its just crazy to me. Search in some of these little towns and you find 0 places for rent publicly advertised, but then you dig into it and there are a few hundred units in small multifamily properties. That is a strong position to be in as an owner. Then again so many large cities see strong occupancy rates as well with the only threat being the rapid development of new complexes.