All Forum Posts by: Justin K.

Hey guys!  One of the best intro threads I have seen.  @Mat Deveaney I love your ambition!  I would agree with these guys above me.  Focus on something.  Your goal of buy and hold and flipping so soon seems very difficult, especially with a young child (our first is due in January).  I currently have a 5 unit 3 of the 5 units recently completely renovated and demo is almost complete on the other 2), a duplex, and a single family home (our house, future investment home though).  We will be closing in mid-october on a 4 unit building.  My experience has been the more units that you can tie into a property the better the cash flow is, although I will say that once the 5 unit is completed (renovating it myself) we will cash out refi it and I will make about $30-40k for my hard work.  It will still cash flow at about $200/door/month if anywhere near full occupancy.  The 4 unit I am buying the seller wants to move to Florida SUPER bad and is carrying back a 2nd mortgage for me.  It will only cash flow about $150/door/month, but I tell you this to point out that cash-on-cash returns are nice to analyze, but I am getting to the point that something that cant be an infinite cash-on-cash return at some point in the near future just doesnt sound that appealing.  

I have gotten pretty good with multi-families in low to low-middle class neighborhoods.  It has taken me about 4 years to feel this way.  Now I am interested in growing a little into the single family realm in a neighborhood closer to my home.  Playing for cash flow still, but also a little for appreciation and the single families typically dont require as much hands on work on a weekly basis (mowing grass, shoveling snow, etc.)

Everybodys niche will be a little different.  Find what will work for you and for your family and study it.  The best way to study it is to do it!

@James Triano 

@Matt F.

I have been to a few sheriff sales in my county.  Never bought anything there yet, but I am looking at buying some properties at tax sale soon.  

My experience has been that the bank hires a local attorney who shows up with a list of properties that he has been hired to buy.  When the sheriff offers them for sale he bids 'costs' on them.  Cost is just the fees that the sheriff charges to serve the papers.  If anyone tries to bid above 'costs' he then immediately bids what the banks max bid is.  I always assumed this is the current mortgage amount owed, but it may not be. If someone bids more than that he shuts up and they typically win the bid.  

I am curious as well how the sheriff can offer the property for sale (tax or sheriff sale) without serving proper notice.  That is the first time I have came across that concern.  I am even more curious as to how you know if they did of not?

I would also encourage others to make sure that they are developing their team!  My mentor gave me a name of a closing agency that he had done 30+ deals with (we are both buy and hold investors).  I have done a deal with them and they are FABULOUS!!! I still work a W2 job and I signed the closing papers on the street corner of my office building on my lunch break one time.  With the upcoming tax sale I called this closing agency to see what it would cost to run a title search on a few properties (I am looking at a property and my parents are looking at buying the neighbors).   Because of my relationship with him and my mentors past relationship with the closing agency, they offered to do the search and just tell us the results verbally without charging us a fee.  No insurance or anything, but the title work will have been done and done right.  

Hope this helps!  Would love to hear how others are fairing with these. My personal thoughts are that the risk is slightly higher (buying sight unseen, if you have to evict the current occupant they may trash the place, etc.), but if you do your homework (title search, etc.) you can get GREAT deals here.

The 5 unit was completely vacant for the 2.5 years while I renovated the first 3 units. I am not pulling any profits out of my rentals at all. The 5 unit building is cash flowing but it currently is owned free and clear. I am using all the profits from the 3 units to finish the last 2 units. Based on a 10% cap rate (pretty standard) I should have a final ARV of approximately $225,000 with only $85,000 of my own into it. I will likely refi it to get back what I have in it and maybe $30,000 to $40,000 for my time and hard work. I still want it to cashflow $200/door/month after the refi though. I will likely use the $30,000+ to buy more properties or increase my liquidity ratio (cash reserves).

My wife and I are self managing everything.  She does the accounting and bill payment and I serve notices and handle the tenants day to day.  30 by 30 might be a little ambitious, but IMHO falling a little short of a big goal is better than achieving something safe and easy.

Correction.  I had just turned 24 when I bought the 5 Unit.

@Nicholas Armstrong 

I just turned 27. 

At age 23 I bought a five unit commercial building that needed completely gutted and remodeled.  With a minor background in remodeling and a degree in a construction related field I thought I could do it myself.  (We can call it young and naive). Well I have 3 of the units done and am working on the last two now.  

At 25 I bought a duplex in a much nicer part of town and house hacked it.  

Just last month I bought a single family house.  Currently my home, but will be a future investment.

This month I am in the final stage of my due diligence on a 4 unit building that is already up and running.  The final (seller verbally accepted) negotiations brought me to NO MONEY DOWN with the seller carrying back a mortgage.  After repositioning the property a LITTLE it will cash flow $600/Month. 

Buying this property will bring my total units up to 11 and I am doing this all while holding a full time job, marrying the love of my life, and we are pregnant with our 1st child (due in January), and being very active in our church and with our local youth group.  You can accomplish ANYTHING with the right mindset, the right process, and by putting yourself in position for success!  It is really simple, but it is NOT easy.  

My personal goal is 30 units by 30 yrs old while working a full time job. Then focus on building large reserves and capital over the next 5 years to achieve financial freedom and have the option to go full time in RE by age 35.  If I ever quit my job and go full time in RE then I will have the capital to grow (to 50 or 60 units) quickly out of the gate.  60 units times my average cash flow per month per unit ($175) = $10,500 per month.  $126,000 a year for someone in their mid 30's who would then have freedom to do as they pleased, spend time with their family, volunteer at the church, and mentor young men to help them achieve their lifelong goals.  Not a bad gig if I do say so myself.  

Its simple, NOT EASY!!

I dont think I have anywhere near the empire that @Jered Sturm has built quite yet, but if you are in need of a podcast guest let me know.  I love your passion and heart for the cause and I love encouraging and mentoring others our age to reach for their goals, regardless of what their goal is!

@Dallas Martin 

My 'mentor' uses a PM for his 30+ houses in Pittsburgh.  He is a hard nosed Italian guy that isnt going to let anyone push him around.  I think he negotiated fees of 8% of gross income/month and first months rent at lease up.  That seems pretty good from what I have seen.  Depending on the size of your portfolio drives the percentage that you get.  I believe most people with 1 or 2 properties are going to get a 10%-12% +/- quote.  My mentor did say that the company he has running his properties took is occupancy rate from 94% (where he ran it himself for 3 years) to around 70-75%.  Its certainly more work to do it yourself, but for me its totally worth it.

@Nicholas Gallinot, 

Saving early is good! When you call around looking for a PM I would see if that agent also will represent you as a buyer. Assuming you will be buying things off the MLS. They might like that more and you can build your team. I let me team grow organically. I only tried to forecast what help I needed and then found someone to help me in advance of actually needing them. You dont want to hire a CPA (or other team member) out of desperation and without time to examine several options. This is what my organic team looks like today.

RE Agent: Bought several properties together.

RE Attorney: Have never done business with anyone, but have interviewed a few places and found a guy I kind of like.  Still planning on interviewing others in the next 12 months.

Estate Planning Attorney: My biggest gap right now.  I intend to interview some of these guys in the next 12 to 24 months.

RE Tax Attorney: Referenced through my RE Agent.  Will be reducing the taxes (by half) on a property that I am in the process of buying.

Residential Mortgage Lender: Closed 2 30 yr fixed mortgages with them.

Commercial Mortgage Lender: Have 2 contacts that I got through my mentor and my Residential Mortgage Lender.  Have yet to close a commercial deal, although I own one commercial building that I will be refinancing soon and the property I am working on now will be on a commercial policy.  

CPA: A friend of the family (has always done my parents taxes).  I do all the work.  Fill out all the forms; organize, document and file all the receipts, etc.; and he just reviews them for me and points out deductions that I may be missing.  Then he files them online using TurboTax, all for the cost of making him a homemade dinner.  He has told me that as long as I do all the organizing and I dont get into anything too tricky (1031 exchanges, etc) he will continue to help me at no cost. 

Contractor(s): Word of mouth through friends.  I might not need a roofer right now, but I have a list of them available as soon as I need one I can start calling reputable contractors for quotes.  

I say all this to illustrate that its nice to be proactive in adding to your team, but dont let not having a fully fleshed out team prohibit you from taking action!

In PA you have to hold a real estate brokers license to offer PM services for hire.  To get a brokers license (in PA) you have to become a real estate agent (60 hours of course work plus test), then attain the necessary experience as an agent (both time in the market and deals done) AND complete another 240 hours of course work.  Then pass the brokers test.  At that point you can offer property management services.  All that to say not a lot of people seem to jump through these hoops.  Century 21 and Coldwell Banker may allow their agents to offer these services under their brokers license, but some may not.  My real estate agent works for Northwood and has offered these services for other investors, but he has told me that his phone rings like crazy when he is trying to lease something and its a lot of work for a small fee (in comparison to buying and selling house commissions).  All of that to explain why you are struggling to find a property management company.  They just dont exist, especially in rural PA.  

My properties are 45 minutes to an hour from Pittsburgh and although I have not tried to sign up with a PM in Pittsburgh (my closest option), I dont think they would be willing to make the drive and/or be as accommodating to my potential customers as I am. I work full time (in Pittsburgh) and am currently managing a portfolio of 7 apartments. I am also negotiating for 4 more right now. That would be 3 total properties (plus my personal residence) where I cut the grass, shovel the snow, conduct maintenance, and collect the rent. If you are only investing in SFH I would suggest that you put in your lease that your tenant shovels the snow and mows the grass. This is a big time saver for a landlord! Since you said you wanted to learn I would pick up the BP "The Book on Managing Rental Properties" by @Brandon Turner.  I have read several books on the subject and his is the most direct and to the point and will tell you all that you need to know to manage the property.  As well as being the best 'bang for your buck'.  

Interested to see how your journey goes!  Feel free to message me in the future and let me know how the journey is going!  God Bless!

My day job is an engineer.  Building codes are 'universalish'.  Almost every jurisdiction in PA has adopted the International Building Code, which references and prescribes all the other codes (International Residential Construction Code, Mechanical Code, Structural Design Codes such as ASCE 7, ACI 318, AISC 360, etc.).  The universalish part comes into play with the local municipalities.  Each municipality (State or Local) can ammend the codes as they desire.  For example in Pittsburgh the code required is the "International Building Code (IBC) as amended by the City of Pittsburgh" and in the state of Ohio they use the Ohio Building Code (pretty much the same as the IBC, with minor changes).  But it is different in each state or local municipality.  Furthermore, some situations and sections of the code can be interpreted as contradicting each other.  Ultimately what is most important comes down to the local building code enforcer.  They have the ultimate say as to what is and isnt against the code and in settling minor discrepancies.

So to answer your question about the railing requirement for PA, I would suggest that you reach out to your local code enforcer.  In the IBC railings are required based on the 30" or 4 step rule (assuming your local municipality hasn't amended that).  

With regard to what you should do I would wonder what your end goal is?  You said the money was starting to get tight.  So, if you are flipping the house the aesthetics are huge, especially from the front porch perspective.  If you are holding it as a rental I would consider back filling 6" of soil around the beautiful foundation walls you built to make the porch under 30" (code compliant) and then add the railings at a later date if you want to sell or improve the look further, or when the finances permit it.

Best of luck!

At one point I wanted to open a Nevada corporation to own some of my PA LLCs for the very same anonymity that you mentioned and that I read others claim to be using. I have talked to several lawyers in my area (north of pittsburgh) and every one of them said that creating a Nevada corporation that never has any intention of doing business in Nevada will make it appear to a judge that you are trying to hide something or are at the very least doing something a little shady. Every one of them said to start a PA LLC and operate with respect to the laws and be courteous to your tenants and all will be ok.

As I continue to grow I will pick up a personal liability insurance plan and just own nothing except be the controlling power in the LLCs that own everything.  May even start a PA corporation to own my personal home so that it gets protected if something happens on the investment side of things.  

Great question though.  I am sure it will spur a great debate.  Interested in what others have thought/heard/done!!

Hi Stormy!

I have seen several foreclosures in my area that I have been mildly interested in watching.  Never to the point of wanting to actively pursue the lender (although I have thought about how I would do it).  

Here is my thought.  In our area when a property is foreclosed on it is published in the local paper as a Sheriff Sale.  That add in the paper lists the foreclosure attorney and the bank that is ordering the foreclosure.  I was thinking that you may be able to call the foreclosure attorney and by paying a small fee for his/her time they may give you their contact in the bank that is handling that direct case.  Thus avoiding all the run around of trying to contact the bank and hope that they direct you to the right person.  

I dont know that this would work because of client confidentiality and other reasons, but to me it seemed like my best shot at getting to the decision maker at that bank.  If you do try this I would LOVE to know how it works!

Best of luck!

Justin