All Forum Posts by: Jonathan Bui

Construction is definitely for a different phase when you have a strong grasp over property ownership. The logistics and financial management is completely different and much less forgiving if you want to grow your portfolio. The level of work involved will be significant with limited returns unless you are well experienced.

Buy, own, hold, and manage. Those skills will be your foundation.

0 Votes

Las Vegas, Nevada

RE agents will tell you everything and anything they think a client wants to hear in order to get the sale. If they don't close, they don't get paid. Is it their obligation to do the investment due diligence? It's always your DD as the investor. Never trust, but verify. And these days there's nothing to verify because the tailwinds have past; there are only headwinds.

1 Vote

It's going to be a long process (3-6 months) even with an attorney. The courts will decide on the speed of eviction. But depending on the case, the tenant can be responsible for the legal fees incurred. You'll be able to garnish wages up to a certain point, hopefully they are gainfully employed in a stable area that would allow you to do this.

Were they properly and thoroughly screened as high quality tenants?

0 Votes

Los Angeles County, California

Quote from @Caleb Christopher:

Do you have specific cash flow goals? Will you be using the BP calculators (or alternative) to determine "pure" cash flow so you find a deal that really works. I see you're after reliable tenants, so I'm not going to argue about the area you're targeting, but make sure you can still handle a bad tenant. If your success hinges upon only having/finding great tenants, you may be in for a rough ride.

I ask because my existing rental house actually only brings me $150 "pure cash flow" after I ran it through the BP calcs. It felt like way more, but I wasn't previously saving appropriately for maintenance and capital expenses. $1,600 in rent (ie: risk if a tenant is not in) for $150 in cash flow is not ideal, now that I've got a clear picture of what's actually going on! But it's where I am and I'm OK for now, but future deals will have higher requirements.

I'm just analyzing a BRRRR deal now that may bring $190+ in pure cash flow on a house with rent payments under $800! That's way less risky for me in the case of vacancy. Better return vs risk. compared to the larger more expensive property.

What would be a more accurate percentage of rent that you would allocate for maintenance and capex now that you see more realistic numbers from your properties? 20-25%?

We're looking at potential deals and some of the agents often present very rosy scenarios of rents, coc, and minimal expenses.

0 Votes

Quote from @Henry Lazerow:

I completely disagree with above posters. Self managing out of state is very easy if in class A or B+ market. Realtor handles keys and handyman helps as needed. Tenant puts keys back in lockbox when they leave. The numbers do not work well with managers in 2024.

You'll need to pay a greater premium in those neighborhoods with the tight inventory most of the time. Assuming the house is in great condition and previously well maintained throughout, then as needed work will probably be okay assuming you have the experience to discern what needs basic handy work and what needs a specialist. And on top of that, operational & managerial experience so you actually know what you're doing. Otherwise you're leaving many things to chance.

Even at your own primary residence, unforeseen things happen all the time and your due diligence is probably not going to be equivalent for an out of state rental.

0 Votes

Quote from @Ned Carey:

@Jonathan Bui I went with an LLC from the begining. The reason is I assumed I would grow to a size where it would benefit me. I am in Baltimore and lead paint lawsuits are a big issue. One probem with transfering a property to an LLC is the liabilty of anythig that happens before the transfer, you are still personally responsible for.

I now have close to 20 LLCs It is a nightmare, expensive, complex, and an accounting disaster. there is a lot to be said for keeping it simple.

Another factor is will you be a sole member of the LLC? I believe in some states a singe meber LLC amy not protect you at all. (FL is where I think I read about it here on BP).

An LLC is never perrfect protection. You are always responsible for your own actions. If while driving to a property an behalf of your LLC, you run over a little odl lady, both YOU and the LLC are responsible.

I chose an LLC for the extra protection but there is a cost.

What do you think of series LLC's? I know not all states allow them, though I've heard that some investors will form it in a different state and then register it as a foreign series LLC in the state where you hold the properties. Though if there are any issues with you taking legal action because of this, then it would be null.

0 Votes

Baltimore, Maryland

Create a list of things you would hire for and be happy to see in your dream property manager. Start interviewing as many property managers as possible and see who is the best fit for your ideal manager. You won't hit everything on your list but know exactly what you want and don't want. If something breaks and they're not shopping around for deals with contractors, is this the person you want to be working with?

Even if you're one state away, is it worth traveling over there to address the issues? You'll probably get exhausted with this so you need a PM who serves at the ground level so you can focus on higher value tasks.

0 Votes

Quote from @Ned Carey:

@Jonathan Bui virtually all mortage loans today have a "due on sale" clause" But that is only one issue. Another issue is that your title insurance is no longer any good becasue of the new owner. Having a loan in your name for a property owned by an LLC has potential to allow a creditor to pierce yoiur LLC. (by itself probably not enough but combined with other factors it could happen)

Arguably you have commited bank fraud. You have gotten one type of loan but used it in a way that was not intended and not allowed.

People who cut corners like this are likely to cut corners in other ways that may cause the LLC to be "Pierced". In other words a court can say "you are not running this like a real business so the court detemines that yiou dont actually have an LLC and you own all of this in your own name"

The proper way to do it is buy the property in the LLC and the LLC gets a loan in it;s name.

Most new investors do not pay near enough attention to the law. NOLO Press and others have books on LLC and how to run then. NOLO books are intended to be self help. I dont recomend do it yorself law but I ido recomend people learn the basics of bussiness law.

Good points Ned. Did you go with an LLC right when starting out or was there a more appropriate transition point say one or two years later?

0 Votes

Baltimore, Maryland

Quote from @Stetson Oates:

Hello,

Sorry for the issues you are having. I will say for HVAC units, sometimes it depends on the contractor you are using. I've had contractors come to my properties and tell me I need an entire new system at a cost of $6,000. At that point I remembered I had a home warranty policy. I placed a claim, and the tech came and replaced a capacitor for $75. I got the tech's contact information and used him on all properties. He ended up being a fantastic contact for me.

Many times it is a capacitor. That is an easy fix.

0 Votes

Cleveland, Ohio

Quote from @Mann Phan:

Quote from @John Clark:

Quote from @Mann Phan:

Hello fellow BiggerPockets members,

I find myself in a bit of a bind with my real estate investments. Last year, I took an aggressive approach and purchased six rental properties in the Midwest, specifically in the Cleveland and Akron areas.

A year has passed, and two of these properties have significantly drained my cash flow due to extensive repairs. Recently, my property manager informed me that an HVAC unit needs to be replaced, which will cost $7,200.

At this point, I’m considering offloading some of the properties as the current situation seems untenable. I would greatly appreciate any advice on strategies to mitigate these issues and manage my investments more effectively.

Thank you in advance for your insights.

How are you selecting properties? You are buying crap property, so your selection process is wrong.

You don’t tell us how much experience you have or where you are.

For this particular property, I was working with a team from Real Wealth, this house was advertised as a "Turnkey" property, went through inspection and all the due diligence. But I've had nothing but issues with it ever since. I just had to redo the grading and dry lock all of the basement because of leaking from the rain now this HVAC issue. If I replace this HVAC I'm already 10k in repairs on this property alone. It's only been 1 year!

Did you vet the properties thoroughly yourself as well?

0 Votes

Cleveland, Ohio

All Forum Posts by: Jonathan Bui

Jonathan Bui has started 0 posts and replied 13 times.

Post: I am interested building and selling homes

Post: Glut of STRs in Every Major Market. The Elephant in the Room.

Post: Tenant eviction negotiations

Post: Rental property in Kansas City area

Post: couple of questions for those that self manage out of state investments...

Post: LLC or not? If so, which LLC option is best?

Post: couple of questions for those that self manage out of state investments...

Post: LLC or not? If so, which LLC option is best?

Post: Drowning in repairs, any advice would help

Post: Drowning in repairs, any advice would help