All Forum Posts by: John Umphress

Marlen Weber, it's been fine.  We had to do some lender required repairs - finding competent contractors always a challenge, even if your properties are in the same town you are!  I feel OKC is more a steady income play, rather than an appreciation play - one reason we invested there.  In a hot market, lot more money chasing deals.

@Maxwell Manatt, have you asked the seller for monthly P&Ls going back several years? On the deal I closed last month, the system the seller used could not generate T12s so I asked for and received monthly P&Ls going back five years. This gave me a great look at expenses (when and how much) and changes in rental income. It was helpful in developing an accurate pro forma (for the lender AND for myself) and I was able to build a T12 from the data. Good luck!

@Price Paramore, thanks!  The biggest potential obstacle (stumbling point, really) was whether I could find competent property management.  Hire the wrong one and a good purchase can go sideways - it can then be a lot of work to get it back on track.  The broker who helped us purchase the 8 unit in SA is managing it (or, his company is.)  The PM we hired in OKC is the same one who is managing some MF for the attorney I had assisting me.

Worth repeating that if you are purchasing OOS property, you really should hire a local attorney.  They know the laws, regulations, probably know the title company, and they know the landscape.  I paid a lot for 6 weeks worth of work and it was worth every penny.   We likely would not have closed by the contract date had he not been involved.

@Jason Seay, thanks!  The OKC market looks pretty solid or I likely would not have looked at it.  I had a certain amount of money to invest and a net income target - also wanted to limit my leverage.  (At my age I'm not looking at growing a portfolio via leverage.)  Appreciation?  Probably, but that will be for my kids to worry about!

@Account Closed, neglected to answer one of your questions.  The only equity partners are my wife and I. 

@Account Closed, It didn't exactly happen overnight!  We bought a house in downtown Austin in 1995, lived there for six years, moved when we outgrew it, and then rented it out as a residence.  In the meantime (2003), we bought another house just down the street from that one.  Over time the neighborhood was rezoned and our first residence became a bar and the second a restaurant.  The restaurant sold last year and the bar this past May.  So not exactly a get-rich-quick scheme!  We ran negative cash flow on the house that became a restaurant for nine years (we knew that was likely going in) and during the bust our first house was vacant for 15 months.  Cashed in some of our retirement funds to make payments, drove older cars and didn't take expensive vacations but we knew we would come out ahead in the end - so far, we have!

@Drew Eldridge, it was on Loopnet.  After I visited the property I asked for and received historical income and expense data from the seller.  They had had a dip in income that was reflected in date provided per the listing.  Income/expense over time showed that the property had good potential.

@Alex V., the owner was a contractor who bought the properties in 2010.  Didn't dig into ownership history too deeply, but there were a lot of bank-owned MF properties trading at that time.  They did extensive upgrades post-purchase, so a lot of the elements have been updated.  Current state of the property is pretty good for 45yo buildings.  Have some repairs that the lender required to be completed in the first year but loan funds were placed in escrow to cover those.   Vacancies, except for a period in 2015 - 2016 (management issues) has been below 5%.  Cap rate at purchase is 7.6.  Biggest deferred maintenance item is one parking lot needs to be resurfaced.  Rents are maybe 4 - 6% below market - we will gradually increase them to market but it's more important (at least to me) to keep them fully leased.

@Account Closed, we still own the 8 unit in SA which we purchased in 2017 (another 1031 exchange.)  I looked pretty hard there this year but couldn't find a property that was a good enough value or a good fit with the funds we had to spend.

@Rhett Tullis not to worry.  I ran various stress tests/scenarios.  At 20% vacancy I can cover debt service, put funds in reserve for cap ex, and still have a decent income.  My leverage is pretty modest.

@Rhett Tullis, the lender in their inspection identified some issues that need to be corrected within the first year - funds to complete those put into escrow.  My inspection identified a few other issues, including a need for a new roof on one.  Seller reroofed prior to closing.  

Appreciation would be nice but that was a secondary consideration.  I had a net income target in mind as this will be a good portion of our retirement income.   So long as we maintain it, update as needed, keep it fully leased and peg rents to the market we will do fine.

Sorry for that double post!