All Forum Posts by: Michael Hooper

Just wanted to get some opinions. I've got a 14 unit apartment complex in Cincinnati. I bought it for $420K ($30K/unit) a little over 2 years ago. I've done about $30K in renovations and raise rent from an average of $550 to $600 since I bought it. By the time I pay everything I make about $15K/year cash flow ($22K if I include mortgage principal). I've got about $110K in the property. Not sure if I should count the $30K in renovations (parking lot and unit turns) as those were paid with cash flow. So I figure I make somewhere around 20% ROI. Well I contacted a realtor and they said my apartment could go for around $700K-$750K given the prices in the area. That would be almost a 300% ROI in 2.5 years. It would take me 10-15 years to make that money with the cash flow from the apartment. I was thinking of 1031 exchanging it for something in my area that was a little bigger. Is this a good idea? I don't know if the Cincinnati market is going to keep going up. This was the second deal I've bought, I've only done 3... so this kind of return is a little overwhelming for me.

@Cin Khai Sure. I don't claim to be an expert by any means. I've analyzed a lot of deal, but only pulled the trigger on 3. But I love to help any way I can.

@Mike Solak The roof is new and the parking lot was recently patched to fill all the pot holes, so its got a little more life in it. The windows are old, but still functional, not exactly sure when they'll need to be replaced though. The boiler might have to be replaced in the next few years, but its still hard to say, it could last longer. I don't know much about accounting, but we Opex as much as we can cause I'd like to get that tax break. Real estate is a side job right now for me, and this is held in a pass through entity, so the profit is taxed at my tax rate, which is around 29%.

@Mike Solak

Yes. The management company I use does have low fees. One of the reasons I kept them after taking on the property, though there were a couple in the area that were around that. Where I'm from management fees are around 10%, so I was happy to see 7%.

In answer to your questions:

1) I used a local realtor to Cincinnati. I probably went through 50 deals before I found this one, but I just kept looking at the packets she sent to me and finally she had one I liked. It was off market when I got it, but 30k/unit was about right for the area when I bought.

2) I am setting aside some in my business bank account. But that's not reflected here as this was just about Income and Expenses. I've got a reserve of about 30k, which might be a little too much.

3) When I bought I did keep the same tenants, but there were many under market rent units, so we told everyone at their renewal they were going up to $550 if their rent was under $550, and anyone under $600 was going up $25/month. We had one tenant not renew because of it, but everyone else did. It's also worth noting, the property manager, managed the unit before I bought it, so they informed me of the problem tenants. There was one that was pretty aggressive, and we basically just played hardball with her until she left. There were also 2 that struggled making rent. We implemented a 2 strike rule (they can be late once, but after that, they're out). And they haven't had trouble since.

4) I do want to continue finding bigger properties. I also had a quadplex, and it was kind of a nightmare. This 14 unit has been a dream. But I also want to start a property management company, and I'm told it only starts to make sense once you have close to 100 units.

5) Covid didn't really affect my cashflow. We had two tenants that paid 2 weeks late because of it, but that was it. Most of my tenants are older people on social security, so they already had a steady stream of income. I inherited most of those tenants, but if it wasn't discrimination, I'd love for them all to be senior citizens.

Thanks for the interests. Reach out if there's anything else you'd like know. 

Hey guys. Thought some of you might be interested in seeing some actual numbers from a deal. So I'm posting my owners statement from my property management company from 2019 and some relevant numbers associated with the deal. A few notes:

1. The property is 14 units (3 - 3x1, 11- 2x1) in Cincinnati OH. 
2. I pay all water and sewer (labeled in owner statement as "Water and Sewer"
3. I pay for heat (labeled as "Electric" even though it is gas)
4. Tenants pay for eletric in their own unit
5. Avg Rent is around 600/month/unit (newly turned units go for $650)
6. 54k in Net Income (Revenue minus expenses in Owner Statement)
7. 14k per year for taxes (Not reflected in owner statement)
8. 3k per year for insurance. (Not reflected in owner statement)
9. I paid 420k for the property putting about 100k down and 10k in closing costs (Total invested of 110k). 
10. The mortgage is 1800/month. About 15.5k of the mortgage this year went interest. About 7k went to principal.

So on an investment of 110k I have a total net worth gain (Income plus paying down mortgage) of 29k. About a 26% ROI (please check my math). I hope this can be helpful to someone taking the plunge. Though I realize I bought this property in 2018. The property is probably worth closer to 650k now. I haven't ran the numbers on if it would still work if I paid 650k. This is the biggest property I have ever owned, and it was scary, but I'm glad I took the plunge. Feel free to chat me if you have any questions about the deal or if you spot any inaccuracies.

So I'm in the process of flipping my first home. I've learned a lot, one thing is to always be overly specific with contractors. I walked through the house with my contractor and explained everything I wanted done. They sent me a list of line items with a total at the bottom. Nothing was individually priced, just a total at the bottom. We went back and forth a few times and finally arrived at a price. The trouble I'm having is, the "contact" just had bulleted items like "New Kitchen Cabinets", "Modernize Fireplace", "Drywall Back Room", "New Flooring".

Now that we're almost done and I'm doing the walk through, I'm seeing a ton of things that just look bad. They're functional... they just aren't what I envisioned. For instance, there used to be a porch that we closed in. It used to have a door and I told him to just close it in and drywall over it to make that a closet (It came off a bedroom). So, he drywalled the room like we talk about, but on the outside of the house, where we removed the old exterior door, he just put a faux door over the hole instead of putting siding on it. No where in the contract does it say that he needed to also cover the exterior with vinyl, I just thought that was how you close in a room.

We also talk about modernizing the fireplace, which I mentioned painting the brick, and adding some shelves. Well, he ripped out the hearth exposing some ugly delapated brick and crumbling mortar, which he just painted over. Now he said he had to rip out the hearth because it was causing the floor to sag (fixing the flooring was also something I need him to do). I told him that it look terrible and we needed to re-cover up that old brick, so I asked him to build a light weight wooden hearth, and he wanted to charge me for it.

There are lot of other places, where he remodeled, and it is technically functional, it just looks like really shoddy work. Some of it I'm not even sure is up to code. What are my options here?

Does anyone have any idea what it should cost to repair a parking lot in Cincinnati OH? I've gotten 3 quotes so far. One at $2500, one at $4500, and one at $18,000. I think the $18,000 was to just rip up and redo the whole thing, which I don't think I need. I really just need to:

Repair the one drain

Repair Cracks

Sealcoat

Paint Lines for 14 spots

Does anyone have a recommendation for a company and any thoughts on about what it should cost.

Wow this thread really got away from me. No need to worry, I was open and honest with everyone, I told them I was an out of state investor purchasing a property in my name because I didn't have an LLC at the time. I later formed an LLC and am just looking to move the property into that LLC. It was not a loan for a personal residence, I just used the wrong term, I was just trying to say it wasn't a commercial loan, which is for properties 5 units or more. This was just a quadplex.

I own a quadplex in Cincinnati. I just changed property managers because I had a number of issues with the previous manager including letting 3 of the 4 units go vacant in 3 months. There is currently 1 tenant still in the unit, and one just moved out on Monday. The one that just moved out put all their trash by the road, not in a bin. My property manager went over today to inspect the unit after move out and found a citation on the door for $750! They told me they'll pay it and charge the tenant, but don't expect anything.

The first question is, is there even a way to prove it was the tenants trash? I feel like they could say it was the other tenant or even just that it wasn't theirs. 

The second question is can I charge it to them and at least take it out of the deposit, which was only $600, but at least I only eat $150 at that point.

The last question is, the citation said I could appeal. Do I have a chance at winning in a game of he said she said? I live in Tennessee, so I'd have to send my property manager, which will cost me more money. I'd hate to send them if I'm just going to have to pay it anyway.

Has anyone dealt with this before? Thanks.

@Account Closed Thanks for the advice. FYI, It was a traditional residential investment loan. I was very clear I wasn't going to live in the property. I was mainly trying to say it wasn't a commercial loan.  I'm aware I violated the Due on Sale clause. From everyone I've talked to, they very rarely get called in these circumstances, but I decided I was willing to take that risk. Thanks for the help.