All Forum Posts by: Matthew Irvine

@John Hall I agree with @John Warren about waiting/repairing instead of replacing.  If you had a water heater that was old but wasn't leaking or showing signs of failure, my guess is, you wouldn't change it.  In this case we are speaking about a roof, roofs scare people and usually the catalyst of that fear is the "home inspector".  Home inspectors for all they help, tend to speak in language that covers them for liability purposes(in turn raising concern where it may not be immediately warranted).  Very few things on a house have complete and immediate failure, what I mean by this is a roof will have a minor leak before a major leak.

Why put off the inevitable? Because you are replacing a functioning piece of a building before it is necessary i.e wasting the resource(roof) you already have.  This is why I site the water heater, or better yet, a stove(you often don't replace these until they break).  Alternatively, if you are not good at keeping your reserves as reserves, I have dipped into my capex reserves more than I'd like to admit, then fix the roof while you have the money.  Otherwise, tuck it away and let that existing roof do its job.

I agree with everyones opinion regarding the benefits of cashflow received from 3/4 unit buildings(I prefer them for this reason).  The one thing I will add to the contrary, in my opinion, 2fams get better tenants, have less drama, and resell easier.  I have zero drama at my 2fams(I only have 3, small sample I know), I have never ending drama at my 3-5 units properties.  Something strange happens once a third party enters in, its like tribes form and people have to form alliances(sounds crazy I know).

@Bruce Woodruff - I remodel in CT were homes are 100+ years old and the floors we are dealing with are crazy.  I now only use 1/2" engineered hardwood(staple down application) in my main spaces/common areas and carpets in the bedrooms.  I will see how this works out over time, but I am optimistic that it is better then my previous template of laminate floating click floors.

Few things to consider here.  You mention price first, so I assume that is a pain point, you also mention doing it yourself.  There is a consistent theme in the responses you are getting and it is accurate in the broad sense; go with LVP.  As a contractor and owner of 60+ units I would caution you to explore further.  LVP products, along with cheaper alternatives(laminate) are very easy to install on a FLAT surface.  The cheaper the product the more FLAT the surface must be, and even with expensive products you need expertise to install on uneven floors.  Sooo, make sure you understand the quality of your surface before choosing LVP and especially before attempting yourself(I have done many floors that failed in year 4/5, seperation at joints)

Second consideration, how long do you plan on owning this property?  If its for a long time I would consider #inflationproofing your property.  What I mean by that is installing products that will outlast your ownership.  An LVP flooring that will last 7-15 years will need to be demo'd and replaced at much higher labor and disposal costs, and the replacement flooring could be 50%+ higher then it is today.  Now you could just account for this in your reserves but I doubt anyone properly budgeted for material spikes of 2020/2021(I know I didn't).  Happy to go into more detail if your into exploring other options.

I'm not sure exactly how you would calculate 2-3x return, I lean towards a cash on cash return when talking about renovations.  If I have a unit that rents for 2,600 and if I invest 12k I can rent it for 2,700, that would be a net gain of $100 a month or 1200 a year.

1,200/12,000 = 10%

I then ask if I can get more the 10% somewhere else in my portfolio.

The caveat here is that the mid term goal is to sell this property, so what do those renovations do to the value of the property upon sale.  Still I would look were you can get the most return on your money today with the assumption that you can always do those improvements down the road.  As for where to get these comps, I look online (zillow, realtor, rent-o-meter, etc.) just get comfortable searching active listings for something comparable.

I have had several situations very similar to yours, I have taken the following approach for the following reasons.  Offer tenants 2 options: 3 month lease at $50 increase OR 12 month lease at $150 increase.  I would then do the same thing in year 2.  The specific increase is up to you, these are examples to make the point.  I do this because it cuts the risk that both tenants reject your proposed increase and put you on your back foot.  450 -> to 600 is still well below your market rent, and maybe you choose more, but be careful.  I may be overly careful in my approach but I am a firm believer that when you enter these situations like "it's just business, this is market rent" you run the risk of things going left, quick.  With your break even being a factor to consider I would just make sure you have adequate reserves in case of vacancy.

As for the lawn care and snow removal, that should never be built into rent. Ex. Your rent is 600 but you do xyz(wrong imo). Instead, Your rent is 750 and you do xyz for 150 a month.  This creates clear lines and allows you to remove those tasks if you find it is in your best interest.

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $75,000
Cash invested: $15,000

Side by side duplex that needed a full remodel on one side but was essentially rent ready on the other.

What made you interested in investing in this type of deal?

Looking for 2% deals

How did you find this deal and how did you negotiate it?

I worked with an agent on an reo, he called me several months later and asked if I wanted to by his duplex. He was an older guy named Skip, real gem, always buying and selling. This property had too much work for him and it had appreciated enough for him to get out at a profit.

How did you finance this deal?

Private money, 12 month term, no fees, interest only 12% paid monthly.

How did you add value to the deal?

We cleaned up and painted the left side unit, fully built out the right side unit(over did this unit, but it looks great and will rent well for years to come.)

What was the outcome?

Rented both units and completed a cash out refinance at 205k.

Lessons learned? Challenges?

I personally placed both tenants here and had countless issues, this is when i realized i had no business wearing the realtor hat. Subbed that job out going forward.

Hey Jahmari, I have 65 units and if I had a proper direction when I started 6 years ago, I think I would have double that(starting out by finding a mentor is a great move).  I see your big picture goal, and appreciate the ambition, but being specific and intentional early on will help greatly.  Example, how are you thinking you can best add value? Are you great at sales, handy, systems oriented/great at managing. 

What I'm getting at is, you're looking for people to lead you, first step is helping us understand you and your skills.  If you're handy and want to add value through sweat equity, making that clear will help you find the best mentor for your first deal.  Just my thoughts, hope it helps.

 Good to know, Skip was certainly a vet! Had some interesting stories and some sage advice, along with being an absolute character.

 Thanks!