All Forum Posts by: Marshall Leipprandt

@Joe Hammel I get it, you're a Realtor and trying to buy/sell properties. So am I. Buyers are hesitant and are looking for experienced professionals to tell them why it's still a great time to buy. I make that case to prospective buy and hold buyers all the time but I still tell them the obvious risks and give them my honest thoughts on rates, the economy, real estate trends, etc. At the end of the day, it is their choice to make but we as Realtors should still present to them the facts, both good and bad.

You can summarize and be concise yet still give a more accurate representation. Let's be honest, using phrases like "many are struggling to find cash flow. We are not.", "this portfolio makes me a lot of money each month", "they really just aren't that hard to find" and "market rents are only going to go up in the future" make things sound so much simpler than they are and make these deals sound like there is a 0% chance of losing money. That's my point. If you're trying to pitch the easy breezy investment, then I think it is contextually relevant for you to include some elaborative detail. Cash flow in quality markets is difficult to find ANYWHERE right now even for the most experienced investors. Your post makes that not seem the case, and that's my concern. 

I'm not undermining your processes or success, but this is arguably the most difficult time in our careers to make $ in real estate as investors nationwide. So I think it is fair for those new members perusing BiggerPockets who have never been to Detroit to understand the reality of the situation. 

I wish you well and best of luck in your future efforts. I really do hope that Detroit can continue its turnaround!

@Yogev Finegouz There will be a lot of "it depends" here. The first one is what are your financial goals? If you want to free up that equity to purchase other properties in other markets, you could try a HELOC to use as a down payment elsewhere. If it's kicking out good cash flow and your goal is cash flow, then I'd keep it and let it continue to perform as a cash cow to supplement your income.

If you are investing in areas out of state where you are happy to be investing and your returns are strong, it could also make sense to buy again in that area and consolidate your portfolio. The problem is that if you try to sell now, you'd have to wait until closing to get your equity out and by that time, the market outlook in your out of state market may have deteriorated to the point where you no longer want to purchase and then you're left with your money sitting in a bank account losing to inflation.

I own and invest in SoCal and in Florida and with the little information you've given, I would probably keep your LA property. It is not hurting you at all except for a smaller ROI. I'd take the bird in the hand in this case which is strong cash flow in a property that you own outright.

@Mica Moore I would set aside 7.5% for repairs, 10% for capital expenditures, and 7.5% for vacancy.

Gross Rent = $1,600

Less-->Expenses: PM $160, Taxes $333, Insurance $167, Repairs $120, Cap-Ex $160, and $120 Vacancy = $1,060

Gross Rent - Expenses = Cash Flow of $540/mo, $6,480/yr. 

However, you did not mention utilities. Is the tenant paying for all of them or will you be covering any? Add that into the calculation above if you're covering any utilities or deduct other unique expense you might have.

Assuming no huge issues, you should be able to get to that $10K in a little over a year and a half. Can't 100% give a diagnosis to whether it's a good deal or not. The Cash on Cash ROI is low, but you paid all cash so that kind of makes sense. Is it in a safe neighborhood in a growing area where there will be good demand from a strong tenant pool? Are there a lot of jobs in the area and is the economy healthy? Those are some other things to keep in mind that don't show up on the spreadsheet.

@Anshul Jain Unless the lack of rental income from the tenants while you rehab would really be hurting you financially, I would plan to deliver all 3 units empty. This gives you the ability to renovate or at least touch the other units up if needed before the sale and gives future buyers more flexibility.

I have had clients looking for places to be delivered vacant because they want the control to find and screen their own tenants. Buyers buying multifamily properties to owner-occupy are savvy and want the ability to decide which unit makes most sense for them to live in to maximize their overall rental income on the property while living there.

I'll be in the market in the next year or so for a multifamily and I will be looking for a 1-4 unit property that has a mix of 2/2s and 1/1s. I would live in the 1/1 and rent out the larger units. I would also prefer something delivered vacant because then I can begin advertising the units right after closing and find tenants to fill the other units.

The issue with many of the multifamily properties on the market that come with existing tenants is that you never truly know whether an existing tenant is "problematic" or not. Is the seller really going to disclose the fact that a tenant has caused them non-stop headaches if they're trying to offload the property? If able, it's best to avoid that drama when possible and sell the property completely vacant.

@Joe Hammel What has your cap-ex and maintenance been on these properties? Do your tenants pay for ALL utilities? What about landscaping and snow removal? What are your vacancy rates? Do you self-manage or do you have a property manager? How old are these homes? Do you do all of the rehab, subcontract, or do you hire a GC? 

You should be providing more info here. Detroit (even the areas you mention) is not all sunshine and rainbows as an investor/landlord. I'm saying this not to be a cynic, but because I'm from MI, am very familiar with Detroit, and have looked extensively into similar types of properties in Mid-Michigan where I'm from and no matter how hard I tried convincing myself to pull the trigger, the deals never seemed to pencil out. A whole year of cash flow and cap-ex reserve account can be wiped out with one repair that is $1,500-$1,800. 

Don't get me wrong, I wish everyone investing in Detroit well as it is a city I really hope can continue its come-back, but making it seem like there are no struggles to finding cash flow on quality investment properties is misleading, particularly for new investors who don't have much experience.

@Nickolas Burns I have a couple connections with investor friendly Realtors in San Antonio. Let me know if you'd like me to pass along their info to you.

@Bret Halsey Picking the market is the most important thing. In my experience, purchasing in an area that you have some type of connection to (family, friends, etc.) can be a huge advantage. Although it isn't absolutely necessary, having someone who has local knowledge and who could drive by your property occasionally that you can trust is crucial. When I was in CA full-time, it was great having people down in FL who could check out my properties on occasion, grab the mail if it was getting too full, pick up trash/debris in the yard, etc. You can always hire people to do these things, but it's not always the same as people who care about you and who you can trust.

Next, you really want to find an area with a strong and steady economy, local attractions, and quality amenities. If you're looking at an STR strategy, consider areas in beach towns, near large universities, near several corporate headquarters, or in an area with multiple professional sports teams. Areas like these are constantly bringing new or recurring visitors into town.

Lastly, I would look in areas that generally have favorable policies and regulations around rental property. Some quick research can tell you which states lean in favor of landlords and which are more pro-tenant, but the last thing you want is to have issues with a tenant refusing to leave while you're 1,000 miles away. 

I own in CA and FL but I employ different strategies in each market. In CA, I own exclusively LTRs in quality neighborhoods and in FL, I own exclusively STRs in a highly-popular beach destination. If I were to flip my strategies between states, neither would work great. 

With that said, I would recommend that you

1) Pick 3-5 Markets

2) Research Industries, Regulations, Growth Rates to Refine Markets Down to 1-2

3) Determine Your Strategies in Those 1-2 Markets

4) Figure Out Which Strategy Works Best in Which Market for Your Goals

3) Start Getting Serious Building a Team & Making Offers in Selected Market

@Brandon Roundtree When I listed one of my rentals, I advertised it as having an ADT system along with a front door exterior Ring camera. I had lived in the property prior to renting it out, so these were things that I already had in place. When we screened tenants and eventually found the right fit and signed a lease, we included some custom instructions saying that we would provide them the login info for the Ring app and that we would create a guest account via ADT so that they could access certain features as needed.

Now that we've had a tenant in that property for 12+ months, we haven't had any issues. I haven't personally opened the Ring app at all (it would only be able to see the front yard and driveway) and our tenant has been happy that these security features were included with their rent. However, I understand that in some areas you may not feel as comfortable providing this info to your tenants, but in our specific situation it worked out and we have good lines of communication with out tenant overall.

I don't know where the line would be drawn for what could be considered an invasion of privacy and it may be state dependent, but I would just make sure that everything is clear with any prospective tenant so that there is never any confusion.

Amy, if it says it on their website, I don't see why it wouldn't apply to you if this is your situation. You'll need to talk to someone at DRE for this. YES, they can be hard to contact, but you really need to speak with one of their local reps on the phone or via email to ask what is required. 

Maybe you just need to include your transcript with your application to take the test and it would exempt you from the pre-licensing courses which would otherwise be needed? That's just a guess but it seems that this would make the most sense. Please post an update because I am curious to what answer they might give you!

David Greene's book "Sold" is really good. I would recommend picking that one up for sure.