All Forum Posts by: Joshua Beall

How did you calculate your $120 cash flow? Are you setting aside money for repairs and vacancies? You really need to include those numbers to figure your "true" cash flow. Brandon Turner recommends that you assume 50% of your gross rent will be spent on repairs and vacancies. I am comfortable with 45%, but maybe I'm too risky :)

Could you clarify what is actually being required by the underwriters? You said "underwriter for our homeowner's insurance is requiring renters to have a renters insurance policy for no less than $300k in liabilities"

Are they truly requiring the renters to have $300k in liability protection for themselves on their renter policy? Or are they requiring you to have a rental owner's policy (landlord policy) that has $300k in liability protection for you?

  -Josh

Hi All,

I'm looking at expanding my rental portfolio, and found a local turnkey company. I'm trying to do my "due diligence" and asked for some references. I've never worked with a turnkey company (or a property management company) and am trying to come up with a list of questions to ask references. Here's what I've come up with so far--am I missing any questions I should be asking them?

1. How long have you worked with this management company?
2. How many units did you have when you started out with them? How many units do you have now?
3. Have you ever had to go through an eviction with a tenant they placed? If so, how many times, and how difficult/costly was the process?
4. How many times have you had to become involved on an issue with one of the rental units they manage? How much time do you have to involve yourself in the day-to-day management of the properties?
5. Do you plan on holding the properties they brought you and are currently managing for you? Why or why not?
6. Do you plan on purchasing more properties through this company? Why or why not?

What else should I ask?

Also, any other general advice on things to watch out for with a turnkey company, and/or a property management company? This will be both my first turnkey purchase, and my first property that I am not managing myself. My plan is to stop, eventually, managing any rental properties myself, and I want to make sure I start this process off on the right foot.

Thanks for any suggestions!

  -Josh

They do lend to LLCs (and other corporate entities). These are commercial loans and often have the following characteristics when compared with personal loans:

• Higher interest rates
• Shorter amortization periods
• Balloon payments

But, you should consult a loan officer at the bank of your choice to find out the precise terms.

If you'd like to move them into an LLC without worrying about the "due on sale" clause, you can "sell" your property to your LLC, and get a commercial loan for the purchase.

The other option, which some people do, is simply ignore the "due on sale" clause, and transfer it into their personal name, and hope that the bank doesn't call the loan. From what I read, it's uncommon that the bank will call the note if you are continuing to make the payments... but who knows what will happen in any particular case! It's entirely at the bank's discretion.

  -Josh

Hi Phil,

I'm sure this isn't the answer that you want to hear, but--"it depends." What is your local market like? Take a look at what comps are selling for, and compare the amenities in each to get an idea for what you can expect to get if you put in hardwood as opposed to carpet. 

It also depends a lot on what kind of house you're rehabbing (and what kind of buyer will be looking at it). If this is an expensive property in an upscale neighborhood, you better have a kitchen that is in-line with neighborhood expectations. Conversely, if this is a modest neighborhood, you can go all-out on that kitchen with beautiful, expensive appliances, quartz countertops, etc., but the type of buyer that is looking for that house won't pay much extra for all those things.

Having given that very important disclaimer, I'll give you my personal opinion on each of the specific items. Just please remember that this is my opinion, and it's your job to figure out if these opinions apply to this particular property.

1. Hardwood vs new carpet: hardwood all the way! when you walk into the property and it's got hardwood throughout, it's got immediate appeal.
2. I think popcorn ceiling is ugly, but I'd be more inclined to look down the floor and be excited by the beautiful hardwood than look up at the ceiling and discouraged by the ugly ceiling. You could paint it white to make it look a little nicer.
3. Stainless vs white appliances: I would go stainless if I could find a good deal, otherwise go with nice white appliances. And I would look for quality used appliances--you can find great deals on used stuff that is great shape! Check craigslists and local appliance stores.
4. Does the house need painting? If it doesn't need painting, I wouldn't paint it just to get it to match the color of the door. Change the door color instead!

Hope that's helpful info. If you buy the house, make sure to keep us informed about how it goes!

  -Josh

Hi Melissa,

What does your attorney recommend?

  -Josh

Wow, too bad you didn't have $10k proof of funds in your back pocket. Somebody got a deal!

At least you were there at the auction. Next time you'll be ready to snatch it up, I'm sure! Definitely a motivational experience. Thanks for sharing!

Hi Brandon,

If the quote you are getting is "really expensive," then I would suggest you shop around. I don't know your local area, but there are plenty of national insurance brands, like Allstate, Geico, State Farm, etc., and you can just call them up and get quotes.

It's quite common to own investment properties, so I wouldn't expect you to need a special "investor friendly" insurance agent to work with. I called up my agent before buying my first flip and went over my business plan and asked him for some quotes on a hypothetical house. It was about what I expected, and was only going to cost me a few hundred bucks out of pocket when all was said and done. My agent also acted like this was no big deal, they insure this kind of risk all the time.

Before you ask, my agent works with Erie, it's a smaller insurance company that doesn't operate in Minnesota. Sorry! But you might want to look around and see if there's a smaller regional company that can offer you better rates than the national companies.

  -Josh

Hi Miles,

I can think of two primary ways you can find out information on a property that is not in the MLS or otherwise listed online:

1) Walk the neighborhood, and make conversation with anybody you see. I've been able to find out plenty of valuable information on various properties just by making friendly conversation with neighbors.

2) Public records. Many counties have their tax and courthouse documents online, and you can find out things like the square footage, beds, baths, age, construction info, etc. (from the tax assessor's database) and ownership history (who owned it, how mortgages and any other liens on the property, if the owner is deceased, etc.).

  -Josh

Welcome, Trevor!

Have you been to any local Real Estate Investor Association meetings? I'd encourage you to start looking for mentors locally. In addition to the BP REIA directory, you can do web searches for "REIA" and you'll find various other online directories. Also try searching for "{region your interested in} reia".

Bigger Pockets has a wealth of information as well, so make sure you go through the BP start here page, and absorb as much information as you can.

  -Josh