All Forum Posts by: Kenneth Dai

@Shawn Ackerman With respect to Chicago, I visited twice and was keeping tabs on the area for half a year before deciding to purchase a property.  In this case, that didn't really seem to help.  I think I should have spent more time interviewing and talking to other investors who were already in southside of Chicago, to know what to look for and watch out for.

Longer term, I still plan to build out a team locally in Massachusetts.  The turnkey route (was supposed to) worked for me based on my current knowledge/time available.  It has worked out for other properties I own in Memphis, at least.

Welcome to the forums, Nick Nobrega ! I'm also in the Southcoast area of Massachusetts, so perhaps we'll bump into one another at a REIA meeting sometime. There was a Fall River meet up for a while, but not sure if is still active... it occurred on second Thursday each month.

So inspiring. Thanks for sharing the story!

Diane G. I think you have to call them, yes. The properties I got to pick from were always sent directly to me by my portfolio manager, based on my preferences (location, price range, age, etc.)

Originally posted by @TJ P.:

Thanks for the details @Kenneth Dai

Going to play quasi-Devil's Advocate here as your deal is similar to what I'm seeing (and having issues with). 

Issue #1- Applying additional DP because purchase price was higher than assessed price. There are many MANY on here that will howl about this and state it should never be done. I've also seen where a TK provider will adjust price to the assessed price. Does this concern you? Also affects...

Issue #2- Not even meeting the 1% rule. This price point is what I'm looking at (B area I presume?). Where your CF/ appreciation is balanced and tenant quality is minimal headache. And with that...

Issue #3- Cash Flow. You don't list it but when I enter your #'s in the provided calculators and my own home-brewed spreadsheets, it results in paper- thin CF. This, I think, is offset by 1) Your awesome rate (seriously, PM me those details), 2) the 25% DP, 3) 2 year lease (fights the vacancy #'s)

I receive "deals" often and my first screening criterion is the 1% rule which, using the rates and #'s I qualify for, usually "guarantees" a $200/month CF. 

Wondering what yours are/is...?

Yes, I did see the multiple posts on BP about not going with property when purchase price is higher than assessed price.  I was willing to take on that risk in order to start investing with Memphis Invest.  I have heard from several others who were not willing to do that, or who will not buy further properties like that in the future.

Regarding your other issues... I double-checked what I entered in the BiggerPockets rental calculator:

Vacancy 4% (1 month out of 24); CapEx (3%, no basis); Repairs 2% (assuming just some carpet refresh during turnover and maybe paint refresh), plus insurance $30 per month, 10% PM fee, property taxes $70 per month. That comes out to $248 monthly cashflow.

You are also correct that, when I first used the calculator with more conservative numbers, I got around $50 monthly cashflow.  I think time will tell what the appropriate numbers are to estimate expenses on Memphis Invest property.  And yes, pretty much all the properties I saw offered to me had more of a 0.8% rent to value ratio.

If I were buying and rehabbing myself, I think I would definitely look for higher rent to value ratio, to account for any mistakes I might make in the process.  With Memphis Invest, I am relying on their expertise to reduce that risk, and accept the lower RTV based on what I've heard from other folks' experience with them.

Thanks for that alternate method of pulling up name... for some reason, I can't pull in your name with a direct @ reference.

@Edwin Williams @Account Closed @Brent Coombs  Thanks for the feedback.  I'll keep adding information about how I proceed with this property.  I cetainly do hope this is a situation that others will not replicate.  But, based on what I've heard from other investors, this is not an unheard of situation, especially when dealing with PFR, Letts, and southside of Chicago in particular.

I was quoted $1000 for forming holding company, $800 for each other LLC. Included the LLC filing paperwork, plus operating agreement, setting up first shareholder minutes, paperwork stuff. I agree that setting up an LLC is pretty easy through state websites. The part I want legal help with is all the other pieces to make the LLC 'stick'. To me, there is some value in paying an expert to get all the pieces done right and go thorough the ropes on what to do to maintain the protections offered by an LLC. Not sure it's worth $5500 up front, though.

Edwin Williams yes, I could discontinue contract with Letts, but I'd like to see how this plays out a little longer. Trying to avoid sunk-cost syndrome, but also give the PM a fair chance to make things right. Dumitru Anton yes, both in speaking with Justin and reading his posts, I don't get the sense that he is out to bamboozle anyone. Thus, I try to stick to the facts of what is occurring without making judgement on intent. And, yes, you may be right about rehabs... that would be nice, if the mice are scurrying because the overall neighborhood is improving. I know the place next door is in the works for full renovation, based on Chicago permits website. I still would prefer the nice don't visit my particular property.

Brief updates on status: one unit failed its last inspection for three more unresolved items (I was wrong about it passing in earlier post).  They were issues that were observed as part of the initial inspection, so I'm disappointed that they were missed or not resolved before the follow-up inspection.

Other unit has not had its re-inspection yet, as Letts PM is making doubly-sure everything on the list is resolved before scheduling next inspection.

One nagging issue seems to be mice/vermin and pest management.  I have asked to have the pest management company come for monthly visits and put traps/bait out around the outside of the property.  The cost is better than the cost of failing inspection after inspection for 'mice infestations'.

On an improvement note - I do have more contact with the property manager now, and can get a response via text message pretty quickly.  In addition, I've gotten a follow-up call from PFR to help resolve these issues.  Thinking positively, I look forward to reporting in next few weeks that the whole team pulled together and got this property up to snuff to pass inspections.

@Dumitru Anton I agree - long term, I still anticipate this property will address any newbie mistakes I am making.  It does rely on a few assumptions, such as continued occupancy, good property management to keep that occupancy up and maintenance costs reasonable, and that the initial rehab (other than the issues I am experiencing) was of good/durable quality.  Oh, and some appreciation wouldn't hurt wipe out any errors, as well.