All Forum Posts by: Matt Ward

@Ryan Montes

As this crisis showed, being local is not a good requirement. There're 20+ real estate accountants on this board, and we all work nationwide. 

At least 3 of us are in CA, although not in LA area: @Brian Schmelzlen, @Jana Cain @Matt Ward

Originally posted by @Matt Ward:

Originally posted by @Ben Leybovich:

Originally posted by @Matt Ward:

Originally posted by @Ben Leybovich:

Originally posted by @Michael Ealy:

Originally posted by @Sam Grooms:

we just got the reporting for December. Income is up $15K over November. November was up $15K over October.  

As for the renovation, we added a new ramada/bbq area, added a dogpark, the playground is going in now, they just finished painting the property last week, and plans for the new office/gym have been submitted to the city and we expect to start that project the first week of March. 

About two months ago, we took over the interior renovations from a third-party and hired our own crew. Our renovations are averaging 30 days, while the third-party was double that, with some units getting up to 90 days. Cutting down on that vacancy is a big reason for the increases in November and December. 

We also cleaned house when we took over and evicted quite a few people. Sure it hurts for a month or two when you see income going down, but you have to believe in the plan and process.  Having better tenants in there has also contributed to the increases in November and December.

We haven't even sent this to our partners/investors yet, but here's a graph of the income since we took over. 

 This is awesome Sam and Ben and congrats!

Some people here on BP might say "That's too good to be true" but I can see why your numbers have increased like that.

Vertical integration works. It's only through vertical integration that we are able to have renovation costs 50% (or more) cheaper than our competition and yes, we get it done faster as well.

 Michael, it's not even the upfront cost so much. It's the economic loss that we used to have that we don't have any more.

Third party would take 60 days if not more to renovate each unit. At $1,000 of rent, that is a lot of economic vacancy.

If we push it, if absolutely necessary we're able to turn a complete unit renovation over to the manager in 3 weeks. Typically we do one month turn around.

It is a lot easier to stack GSI when we're able to have this good efficiency!

I suppose that is a factor of how bad your original third party was to begin with.  I have vendors that turn 800sft unit in 10-14 days - full scope.  I agree, though, vertical integration is the way to go if you have the scale.  Nice work.

WOW! That's impressive. Maybe I can get to know your vendors!

What's your average cost on an 800 sq.ft. unit? We gut and then install new cabinets, granite, etc. They must be able to do 30-40 per month.

What cost do you typically see, Matt?

Thanks, ya we've been lucky.  Definitely needed to weed out some "sub-par" contractors before we established good processes, but now it seems to be a pretty well oiled setup.  We are roughly in $10k-$15k per unit.  We almost always do a top to bottom, so the range is a result of a few things: keeping cabinets or getting new ones, new or old appliances, refinish or new counters, 1 or 2 bedroom.  The gut, clean, paint, and new floors (click in) are all pretty much the same.  We do approach 21 days if we aren't able to time the cabinet and counter guys accordingly, but we've got a proactive PM who generally has a good pulse on upcoming vacancy.  The palet stays the same and we rarely ever do anything structural.

Congrats on your successes so far, will enjoy following your progress.

Yeah, that's about right. Our range is a little lower as a function of vertical integration and perhaps volume, but the timing is about right. We run $9,000 - $12,000, but we install cabinets, do the demo, and the trim kits in-house. This is where we probably shave $2,000 - $3,000 on your pricing. 

Good luck!

Originally posted by @Matt Ward:

Originally posted by @Ben Leybovich:

Originally posted by @Michael Ealy:

Originally posted by @Sam Grooms:

we just got the reporting for December. Income is up $15K over November. November was up $15K over October.  

As for the renovation, we added a new ramada/bbq area, added a dogpark, the playground is going in now, they just finished painting the property last week, and plans for the new office/gym have been submitted to the city and we expect to start that project the first week of March. 

About two months ago, we took over the interior renovations from a third-party and hired our own crew. Our renovations are averaging 30 days, while the third-party was double that, with some units getting up to 90 days. Cutting down on that vacancy is a big reason for the increases in November and December. 

We also cleaned house when we took over and evicted quite a few people. Sure it hurts for a month or two when you see income going down, but you have to believe in the plan and process.  Having better tenants in there has also contributed to the increases in November and December.

We haven't even sent this to our partners/investors yet, but here's a graph of the income since we took over. 

 This is awesome Sam and Ben and congrats!

Some people here on BP might say "That's too good to be true" but I can see why your numbers have increased like that.

Vertical integration works. It's only through vertical integration that we are able to have renovation costs 50% (or more) cheaper than our competition and yes, we get it done faster as well.

 Michael, it's not even the upfront cost so much. It's the economic loss that we used to have that we don't have any more.

Third party would take 60 days if not more to renovate each unit. At $1,000 of rent, that is a lot of economic vacancy.

If we push it, if absolutely necessary we're able to turn a complete unit renovation over to the manager in 3 weeks. Typically we do one month turn around.

It is a lot easier to stack GSI when we're able to have this good efficiency!

I suppose that is a factor of how bad your original third party was to begin with.  I have vendors that turn 800sft unit in 10-14 days - full scope.  I agree, though, vertical integration is the way to go if you have the scale.  Nice work.

WOW! That's impressive. Maybe I can get to know your vendors!

What's your average cost on an 800 sq.ft. unit? We gut and then install new cabinets, granite, etc. They must be able to do 30-40 per month.

What cost do you typically see, Matt?

Originally posted by @Michael Ealy:

Originally posted by @Sam Grooms:

we just got the reporting for December. Income is up $15K over November. November was up $15K over October.  

As for the renovation, we added a new ramada/bbq area, added a dogpark, the playground is going in now, they just finished painting the property last week, and plans for the new office/gym have been submitted to the city and we expect to start that project the first week of March. 

About two months ago, we took over the interior renovations from a third-party and hired our own crew. Our renovations are averaging 30 days, while the third-party was double that, with some units getting up to 90 days. Cutting down on that vacancy is a big reason for the increases in November and December. 

We also cleaned house when we took over and evicted quite a few people. Sure it hurts for a month or two when you see income going down, but you have to believe in the plan and process.  Having better tenants in there has also contributed to the increases in November and December.

We haven't even sent this to our partners/investors yet, but here's a graph of the income since we took over. 

 This is awesome Sam and Ben and congrats!

Some people here on BP might say "That's too good to be true" but I can see why your numbers have increased like that.

Vertical integration works. It's only through vertical integration that we are able to have renovation costs 50% (or more) cheaper than our competition and yes, we get it done faster as well.

 Michael, it's not even the upfront cost so much. It's the economic loss that we used to have that we don't have any more.

Third party would take 60 days if not more to renovate each unit. At $1,000 of rent, that is a lot of economic vacancy.

If we push it, if absolutely necessary we're able to turn a complete unit renovation over to the manager in 3 weeks. Typically we do one month turn around.

It is a lot easier to stack GSI when we're able to have this good efficiency!

So you're going to sell all of your possessions and lock up the capital in an opportunity fund for the next 10 years?

@Matt Ward

It's not odd, it's that 2-4 units can be bought as owner occupants with VA, fha etc low down loans and that's just what the majority of humanity has to start with. Consider them the gateway drug to real estate investing.

The investing discussed on BP is only a tiny fraction of the real estate investing marketplace.  All of the investors and business owners I know outside of BP invest in larger commercial properties.

Great guesses here, folks. Stay tuned in a week or two - we'll release some research showing you where we think the cash flow is. To some points on this thread: 

@Matt Ward Not sure why that's so surprising that 90% are interested in 1-4 unit properties - most investors can easily qualify for a Fannie Mae loan on those, they can't on bigger property. It takes more capital, and most of our investors (85%) earn less than $200,000 per year. I'll see if we can spin something up to make those results clear. The financing is thee huge advantage that our investors have over institutions. Wall Street can't competitively finance a duplex, triplex, quadplex, or SFR.

@Steve Vaughan I think there's some truth to investing locally and the savings and opportunity that you get! If it's close, I'd go with the local market. However, for some, the cash flow just isn't there locally!

@Storm S. of course! I'm analyzing this based on unleveraged CoC ROI.

I think that many of you will be surprised when I wrap this up and release it! Cleveland ain't even in the top 50%. Neither is Detroit. 

What the 1% rule and cursory reviews of rent to price ratios BUTCHER is the fact that many markets with 1% rule properties also have very high property taxes and insurance. For example, property taxes in Detroit and Cleveland are higher, on average, than property taxes in Washington, DC. Literally, the total dollars spent on property tax for owners of property in DC are lower than they are in Detroit and Cleveland, in spite of property values 2-3X higher. Insurance rates follow a similar pattern. 

I think investors have been making assumptions that are wildly wrong about where the unleveraged CoC ROI is for years, and I will prove it to you in a week or so!