All Forum Posts by: Joe Sauers

All,

I would like your feedback and comments on my business plan, which is to acquire small apartment buildings out of state. To start out, I currently own a duplex and a five unit multi family property, which I rehabbed, leased out, and currently self manage for the past 5 -7 years. I have been saving the cash flow from these properties, and am ready to invest in an additional property. (I also have about $100,000 of equity that I could extract from these properties if I chose to).

I am looking at small apartment complexes in New York, Ohio, and Texas, (to name a few) which seem to offer better returns than properties in my local market (Philadelphia). The properties I am looking at are 15-30 units, for $350,000 - $600,000, with actual cap rates of 10-13%, currently 90%+ occupied. I like the idea of more units for the money because it spreads out the risk of a few vacancies drastically affecting cash flow. My intentions are to hold these assets long term, build a rental portfolio for the passive income, which will allow me to continue my full time job and supplement my income. Providing this next property works out to plan, I would like to continue repeating the process as often as possible, approximately once per year.

I realize investing out of state will require the use of a property management company and travel expenses that come with that, which I will factor into my analysis.

I believe the biggest challenges will be:
1. Ensuring that I am investing in a good area
2. Traveling to the area to inspect the property, neighborhood, and management companies in person before purchasing
3. Finding a competent broker to represent me
4. Hiring the right property management company (not necessarily the cheapest).
5. Dealing with any major issues such as capital improvements, replacement of management company, etc.

So my questions to you are:
Any recommendatons on how to tackle my top 5 challenges listed?
What am I missing?
What do I need to tweak as part of my plan?
Why should I not pursue this business plan?
Anyone with experience doing anything similar?

I appreciate any feedback, good or bad. Thanks, Joe

Don, thanks for replying. I was hoping you would reply. I actually came across your website earlier in the week and learned a lot about what companies like yours do, which helped me in putting together my info. Here is a little more details about the deal.

It is a property at the tax sale. I have already done a title search so I am aware of the liens and judgements on the property, which are all factored into my maximum offer. The problem is going to be that I may only need 150K of the 300K I am requesting. It really depends on the competition at the sale. Do you think this will scare many private lenders, or hard money lenders, away from the deal?

Do you think the investor may want a clause in the agreement that they will profit a minimum of $25K, no matter how much or how little I borrow, (providing I get the property)?

Regarding a repayment strategy, my plan is to refinance through a community bank within 3-5 months after I have made some simple improvements and have the property stabilized. I plan to hold long term.

Do you know anyone who might be able to help me in PA? I have found some names through google, but always like to work with someone who is referred or recommended.

Thanks for your valuable insight.

Hello all,
I am in the process of trying to structure a deal to present to a private investor. I have found a multi-use income generating property worth 900K, and believe I have a chance at it around 400K due to the current owner's financial situation and life events. I have 100K of my own to put into the deal, along with perfect credit history, and a good reputation with the private investor I am about to approach. I am in search of 300K. I was going to propose 10% interest and 7 points, which, if my math is correct = $51,000 profit for the private lender. That would be a 17% return on the investor's money. Based on what I have read, it seems that this is inline with what a lot of private lenders are looking for. I have the mindset that I need to offer a healthy return to receive that amount of a loan on our first deal.

By the way, I have prepared an ''investor's packet'' on the property showing all of the details, including a detailed financial analysis, pictures, my personal credit report, a personal financial statement, a statement of my experience, and a case study of another similar style property that I successfully rehabbed.

If I approached one of you guys with that proposal, what would your reply be?

Do you think I should reduce my offer going in, so I have room left to negotiate up?

Thanks in advance, Joe.

I have a tenant who just moved in a few months ago and has just requested permission to add her co-worker to the lease as a room-mate. I will obviously perform the standard background check that I put any other tenant through. So far the existing tenant has paid on time and not caused any problems what so ever.

My main question is how to handle the lease. Do you guys recommend just creating an addendum to the existing lease, or rather cancel the existing one and write a new one with both tenants names.

Also, how about the security deposit? I currently am holding one month's security plus last month's rent from the original tenant.

I'm open to everyone's opinions, since I have never encountered this situation before.

Thanks in advance.

Thanks for all the replies. I do have an attorney that I will consult with, but the knowledge and experience on this board is so immense that I thought it would be a good question to ask.

One final question. Let's say the tenant's lease is not very good in the eyes of the landlord. Would anyone consider a "cash for keys'' offer to the tenant, and if they agree, incorporate that into the estoppel letter? That dollar amount would be factored into the offer of course.

Thank you Mike and Harrison. I have heard the term estoppel before but never knew much about it, so I will read up on it. What if the bank tells me they don't have a copy of the lease, and / or what if the current tenant tells me they can't find their copy of the lease?

I am looking at purchasing a multi-family residential property that currently has a tenant in it that I have come to find out is not the ideal tenant. It is a REO property and a source has told me they are not paying the bank the rent that is due. I currently do not know how their lease reads, but shouldn't I be able to give them 60 days notice to vacate? Do I have to provide a reason? If so, can I just say I want to remodel the building and need it vacant to do so? Or, do I have to hand them an application like I would any other tenant, and once I see they do not meet the qualifications, get rid of them at that point? My ultimate goal would be to remove them ASAP. Any ideas? Thanks.

Jon, I like your ideas and will probabaly use them. Showing the written qualification criteria up front should help weed out anyone not serious. Let me know if you think of anything else. Thanks!

Here is my situation. I have recently acquired a REO property in a very desirable part of town. It has (4) 1BR units, on top of a storefront. The store front is occupied, so all is well there. I am performing some remodeling and sprucing up to the 1BR units, and should have them ready for an April 1st move-in date. I have posted a preliminary ad stating that the units are being updated and will be ready for April 1st. I have received over 20 inquiries, and am wondering what you guys think is the best way to move forward. Should I have an open house for a weekend and collect as many applications as possible, or should I just try to set a schedule and meet 3 applicants per hour? Also, will applicants be hesitant to pay the application fee if they see many other people interested, but only 4 available units? What am I forgetting? Thanks guys.

While reading this, I thought about a current situation I am in. I am considering bidding on a REO property that the former owners are still living in. It is a great deal and from what I know another offer has already been submitted. For some reason, I have that gut feeling that if I purchase it, they would trash it before moving out. Has anyone been in this situation before and have any advice for me? Should I gamble?