All Forum Posts by: Account Closed

I'm going to second the opinion of potential plumbing issues and the entire building being 1/1s. I recently went through the process of hiring another property manager for my building in VA, and a few of them actually turned down the business. One stated that (in my area) people in 1/1s are one step from being homeless. I feel that was a little strong wording, but vacancies have run a little high as we look for decent tenants.

Also the plumbing has been an issue, seems like every month there is a clogged toilet/sink/tub to deal with in one unit or another.  

I wouldn't turn you away from the deal, but be sure to up your capex/maintenance numbers and potentially add a little more vacancy too.  

This is an old thread, but I got alot out of reading the responses and figured I would add my own.  

When I was working with the bank on my first property I had budgeted 4% gross rents for reserves.  The banker liked  this, and it was actually more conservative than the bank normally wanted to see, I think they were looking for at least 2%.  

But the building also didn't have any major pending issues like needing a new roof, and the windows had also all recently been replaced. 

Now that it has been running for a while, I want to keep about 3 months PITI set aside to deal with anything that may come up. Once we go along a little further, I would want the property to be in a place where if I did need to make a major repair, I could go back to the bank and get a small secondary loan (maybe LOC) or refinance to get access to the needed cash.

I would imagine for a bigger property these number get big quickly.  Three to six months of funds can be 50k plus.  If I were running that I'd probably find a way to keep the money separate, but invest it.  Assuming that money ALWAYS needs to be available, there are numerous ways to squeeze a little yield out of it.  Maybe like a rolling 1-2yr CD ladder, or heaven forbid even a small amount in the stock market accompanying another sum in cash.  

@Justin Fraser I have a small commercial building in Norfolk, I'm curious to hear if you chose to buy something and where it's located.  

@Bernard H. Thanks again for responding.  After I talked with the property manager they got the issue taken care of by having the bill get auto-deducted.  Thanks for your response, I just wonder why they waited a full year to set up the auto draft.  

I can't say I'm happy with my property manager either.  But if  they were charging me $500 to put someone in the unit I'd have found another a long time ago.  Is that normal in your market?  

As has been said, if your properties are in a total warzone this may be normal for your target demographic.  If that's the case you may want to work on an exit strategy so that someone better equipped to handle this can take them off your hands.  

If the properties are in a better spot, and it's just your property manager that's the problem (which you will know after interviewing a few others), then move on quickly to another.  

@Filipe Pereira  I think this is what is meant by the "early retirement police"!  Congrats again on this purchase.  

I wish I could have been a fly on the wall when the sell realized he was obligated to sell.  Sounds like a hard won victory for you.  Congrats!  

@Johnny Quilenderino I'm on Fort Worth in Ward's Corner.  I can recommend a good pest company if you are interested.  Next time I'm in town we may have to meet up.  

Congrats on the 6 unit building!  I have one in Ward's Corner, which probably isn't too far from where you are located.  You mentioned needing to spend some money to bring the insurance down?  Might that be for aluminum wiring?  If not what for?  Just curious.  

"Mandatory" is a pretty rigid word.  The numbers will tell you what's necessary and what's not.  No matter what you do beforehand, unless you have a clear indication the current on-site person is not doing a good job, you're going to have to see how it goes.  Ideally, you can talk with a few contractors in the area who may have done work on the place.  Possibly even interview tenants too.  

Think about the number of units and the likely work involved - here are two simple examples

-  Maintenance - lets say 25% of the building has a maintenance request one month.  For the 16 unit building that's only 4 units.  A single offsite person should be able to handle that and farm it out to the right contractor to get the job done.  Not alot of follow up or management.  Now on an 80 unit building that same percentage is 20 units, all with potential multiple needs, follow up to make sure the work is done, all the while coordinating with tenants for access to the property.  WAY more work.  Not that an offsite person can't get it done, but it would require a team thus likely a larger property manager.  

Vacancy - same issue, lets say each unit has 4 prospects, and lets say that there is 5% vacancy at any given point of time.  For the 16 unit building that's less than 1 unit.  For the 80 unit building that's 4 units vacant, which adds up to 16 prospects.  Lot more work there.  

These numbers are all spitballs - not real life examples, but I think the point has been made.  There is a time when some presence on-site makes sense, and below a certain point the cost isn't worth it.