All Forum Posts by: John Todderud

If it's a small property it would be a good deal if there is some reasonable cash flow but provides you a way to learn about buildings, tenants, finances, whatever you're not comfortable with yet. That would be more valuable than a few more dollars of cash flow. If it's a larger property, take into account how much work it will require to get in good condition, how much time you have to commit to that, what the area looks like, will you be able to attract tenants to the area, does local government encourage property ownership through taxes and regs, and are there good contractors in the area to respond to your work items. Lots and lots of other important items but don't wait until you know every one, that never happens. Read the books mentioned, listen to podcasts, educate yourself, and put in offers.

That's a great skill to apply to real estate. You have analytical and problem solving skills, both required. Be aware, though, of engineers' tendency to over analyze. You'll never know everything and there's a point where you decide you know enough, then take action. Also engineers tend to be introverts and you need to meet and partner with others, but everyone can learn to network.

Engineering taught you to do several things at once. When working your W2 job, find time in your day to research markets, take multifamily investing classes, call brokers, underwrite properties. Don't be in a rush to quit your job, just find 10-20 more hours in the week for real estate. Don't wait forever to buy a property as you'll learn more from that than any classes. Unless you have an experienced mentor or partner, keep your first properties small so your mistakes don't break you. 

This has been my progression, from my background in computer science. What I battle, and I think this may be common with people who have studied hard, got a good job, and make decent money, is risk aversion. I have huge respect for people who didn't have much, took risks, and found success. 

AllTrade, call Josh Lindley. They manage a number of multifamily properties in Louisville and were recommended to me by several brokers in that market. Josh is very thorough, extremely knowledgeable, manages large renovation projects, and is easy to work with.

I can relate, in a similar position, working hard at all the things we've been taught by successful investors, but nothing this year. 

One addition I would make to your list: learn from each experience. For example, I had an offer on a great property, well maintained and rents way below market, and was told I won the offer and needed to see it. I live on the opposite coast and could not get there soon enough. I lost it to another bidder who had visited it, making a similar trip from the opposite coast. Three times. These things matter to sellers. Now I will get someone from my team there much earlier in the process. 

Learn from failures.

Here's how I recommend using cap rate. Be sure you have accounted for all of the actual income and expenses for the property you want to buy, including things that are often unreported like property taxes. Calculate your NOI from that, then look for a source of market caps for that area and property type. Divide your NOI by the market cap to get a price. Then adjust up or down based on other factors like the condition of the property but that at least gives you a negotiating position when talking to the seller.

How you want to improve it, what are market rents compared to this property, and how hot is the area will help you figure out how high or low to go. You may be looking at units in terrible condition with rents half what the market will pay. Then what you're suggesting, buying out a tenant just so you can get started on renovations sooner, might make sense. If rent is $400 because the units are in bad shape and market is $800, you can let them stay another 10 months until their lease ends, which costs you $4000 in opportunity cost, or pay them something a lot less than that to leave now. If the difference isn't that big, maybe renovate when their lease ends.

Costar provides average/median cap rates for comparable sales in their underwriting reports. If you're interested in investing in an area, it is worthwhile developing broker and property manager relationships. They might have a Costar subscription (expensive) and can run a report for a property you're interested in.

There are a number of training/coaching/mentoring organizations who specialize in multifamily and share their spreadsheet templates. You might check them out to get a feel for the kinds of income and expenses to track and how to do it. A few good ones include REMentor, Brad Sumrok, Rod Khlief, Michael Blank but BiggerPockets members probably share templates too. Also buy their educational materials, well worth it, and listen to podcasts. It takes time but doing it right saves time and money.

I had a triplex in an HOA and it wasn't just the fees that were an issue. The HOA hired lawncare people who were rude to my tenants, we had to take care of another owner's property because they were in long term foreclosure, and lots of disagreements over HOA management. More of a mess than it needed to be. But now I have larger properties, professional management with professionals who fix these issues quickly. You can focus on growth, not day-to-day operations. You're heading in the right direction, just stick with it.

Also be aware that penalties for violating the eviction moratoriums can be substantial and expensive to defend. Steer clear. I have used cash for keys successfully but be sure they are committing to leaving very soon. The longer they are there after agreeing to your terms, the higher the likelihood they share the good news about management's generosity with their neighbors.

This is a late reply but I can share my recent experience. I have a 32 unit apartment in Anderson and started with a Greenville PM a year ago. They were okay but Anderson is 30-45 minutes away. It was hard for them to get there often enough. We changed property managers recently, chose one in Anderson, Foothills Property Management. They're very good, can strongly recommend them for anyone else looking for PM in Anderson. Very attentive, knowledgeable, proactive, great suggestions for the improvements we want to make exterior and interior.