All Forum Posts by: Mack McPhatter

Originally posted by @Drew Mim Mack:

Do you really want to invest where there are Hurricanes?  That's kind of a red flag for me.  The numbers looked decent but I didn't analyze them.  Max capacity income is between 10k-15k a month but why is capacity so low?  That's kind of a red flag too.  I would want to know WHY I wanted to be in a that market.  What in the area is attracting tenants to move there?  College?  Industry?  There is soooo much I could say about this but I'd like to read from some of the more experienced BP members.

This is a quote from a quick Google search,

"Over 45% of total U.S. petroleum refining capacity is located along the Gulf coast, as well as 51% of total U.S. natural gas processing plant capacity."

In other words the job market here is very good.  The housing bust never happened in this area because the job market is so stable with all of the refineries being the major employers including the largest refinery in the country.  That Keystone Pipeline that our president keeps vetoing ends in my backyard. 

As for hurricanes, that's part of life in this area but it isn't any different that other natural disasters that occur across the county.  Earthquakes, tornados, mudslides, flooding, blizzards etc all cause property damage, but at least I know a hurricane is coming and can get the heck out of town.  We do have to carry Windstorm insurance which does cost more than most parts of the country.  

I have been in discussions about purchasing a 20 unit apartment complex and have some questions. 

Property details

Price- $350k

20 units- all 2/1.5 townhome style apartments

Rents- $500 per unit 

Taxes- $9k per yr (per financials provided)

Insurance- $11k (per financials provided)

Utilities(water & sewer)- $12k

Market rates are $625-$675. HUD fair market rent is $757 for 2 bedrooms in my county.

16 units do need some updating which I would do a few units per month until complete. 4 have been recently updated. 

Not a terrible area, there are definitely worse in town.  2 complexes next door have hurricane damage and are condemned.  I talked to the city and the local housing authority is taking them over and updating both complexes which should help my property value.

Problem 

Only 9 of the 20 units are currently rented.  The owner doesn't accept Section 8 because "it's a hassle."  This area would be mostly Section 8 tenants so they are eliminating their biggest costumer. 

Background of property

The complex is owned /managed by a local family that owns a 15+ complexes but the owners are older and don't seem to be taking care of business like they did at one time.  A few of their properties are for sale so it seems they are downsizing.

No advertising is done at all.  The only place to find info on the property is on their family website(which looks like it was designed by a 8th grader) or driving by the property and calling the number on the sign. 

At current occupancy I could pay my note with not much room for error.  I do think with marketing, accepting section 8, updating, and raising rents that I could make this a workable deal.

Questions

This would be my first property marketed towards Section 8, so I am kind of leery of the deal to start with.  I went to the housing authority today and they were no help.  They told me to go to their website and wait for people to apply then come back once I had an interested renter.

How do I find out if there is a need for Section 8 in that area? 

Is there a surplus/shortage of places that accept Section 8 in the city?

I was originally excited about the city taking over the eyesore next door, but now I'm worried that I would be competing directly with them for renters.  Can the housing authority push renters towards certain properties?

I would be buying the property based on the assumption I could increase occupancy and rent rates, which is risky.  Any thoughts on this kind of speculative purchase? 

Any other thoughts on this property fill free to share...

Some loan types require appliances so if you are financing the property, you may want to check with your lender before you get too far along with the deal. 

If you do want new appliances then shop around.  Some places offer 2 years no interest so you might as well finance them and make payments.  I've bought appliances on houses I've flipped with no payments for 6 months and never made a payment until I sold the house and paid them off. 

What were you doing before, and what do you do now (professionally)?

I've been working in real estate full time for about 12 years now as a builder, flipper, landlord, and Realtor.  I was fresh out of college with a good job doing industrial sales, but I hated waking up every day.  I quit my job after I had flipped my 4th house which I was probably about to get fired  anyways for neglecting my real job.  My family all has a background in real estate so it was something I have been around all of my life.  My grandpa financed my first 2 flips to help get me started., which I wouldn't have been able to do it without his help.  I had him a chair at every house I've ever done and he would pop in from time to time to "help"  me work on these properties.  He passed away in December and I recently just finished my first flip without him.  His chair still comes with me to all of my jobs. 

Is your passive or business income from real estate the same, greater, or lesser than when you were working a job?

Definitely greater.  I got my real estate license because I got tired of paying Realtors when I was doing all of the research finding the properties and doing all of the work on the homes.  I get paid commission every time I buy a house and my broker lets me list 3 of my personal houses a year for free which saves me a lot of money. 

Do you "live the dream" and travel/vacation year round, do you focus on building your empire to ever greater heights, or do you pursue some other passion?

I usually go on vacation after I finish a job, so more than a few times a year.  We just spent Spring Break in the Bahamas with the kids which was nice.  I was trying to find a house there so I can write off my trips!

How long did it take you to build up a real estate portfolio sizable enough for you to "retire" on?

Still working on that part, but I doubt I will ever really retire.  I love my job, so I don't really consider it work plus I'm only 35 and get bored easily. 

How much time does your real estate business consume per month?

It really depends on how many jobs I have going at a time. Smart phones have definitely made my life easier.  I can do pretty much anything from my phone.  I couldn't imagine working without it and having to chase people down to sign contracts. 

Getting started was tough but I had a great support system and I was young which helped.  I moved 16 times in my first 5 years of flipping houses.  I would flip a few houses and put them all for sale, which of course I would sale the one I lived in 1st every time.  Staging really does work I guess or maybe buyers just liked my furniture.   

I know your deal may just be an example, but I would stay away from most deals that want $10k Ernest money. If something does happen after your option then you are out that money. The least amount of money you can put out before closing the less risk for you as the buyer.

I lost out on a bid Monday on Auction.com. I got in a bidding war and it seemed kind of fishy to me. From the beginning it didn't seem like the bank wanted to sell the house and it seemed like I was bidding against them. Here are a few things that make me think that. 1. The offer had to be all cash even though the property was in very good condition and would qualify for financing 2. The auction ran from Friday afternoon until Monday morning when people didn't have access to banks. 3. No tours of the house were allowed(they shouldn't have left that window unlocked) 4. If someone bids in the last minute then 3 minutes are added to the auction. The other bidder ran down the clock and turned in their bid with exactly 15 seconds left every time. This went on for over an hour and a half. Maybe they just liked the number 15 or something but it seemed pretty coincidental. I quit bidding at $177k and it went for $177,500. I would have cleaned up, landscaped, painted, and changed out a little carpet for $10k to list the house for $299,000. I should have kept bidding but I just had a bad feeling about the deal. Also be careful of the deeds they give when you purchase these properties. Some quitclaim and other deeds are uninsurable later and will cause problems when you try to sell it. Pay for your own title insurance if needed. Most title companies can turn these around in 1-2 days so it shouldn't hold up closing.

If the property was sold in the last few years through the mls, then an agent is the way to go to find out info. If not then the county appraisal district's website will provide you with the current owners name, sq footage, and current taxable value. Once you know the owners name you can then go to the County Clerk's site and find out info on any properties they have owned as well as any judgements or liens they may have. The deeds will tell you the amount that was financed. There is really no way to know how much money they put down, but it does give you a general idea of what they paid and the date. If they paid cash there is really no way to know if it was done outside of the mls. Some counties have great websites where you can find out almost anything about people and their properties. Others you will have to go to the courthouse and dig. Hope that helps.