All Forum Posts by: Michael Masterson

Investment Info:

Single-family residence buy & hold investment in Brooklyn.

Purchase price: $65,000
Cash invested: $7,300

SFR with a tenant in place ~30% below market. Purchase price of $65k, appraisal of $96k. ~$3500 in renovations/repairs w/ a conservative 10% CAPEX budget to build reserves up going into 21'

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

This deal was priced attractively as either a flip or a buy & hold. Was not initially interested in SFR but having multiple exit strategies made it a no brainer. Planning to rent out to tenants (that are already in place with a 24 month lease) and then assess at that point.

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

Found this deal with a mailer. Rentable sq. footage was very low so it wouldn't attract a lot of buyers at sub 1000sf. After looking at it, there is opportunity to expand/add a bedroom in the basement along with creating ample parking in the rear.

How did you finance this deal?

Conventional financing.

How did you add value to the deal?

I was willing to take this deal w/ little to no negotiations because I knew the value would be there from a cashflow standpoint or if I needed to flip I could at minimum get out with my head above water.

This was simply overlooked because of the square footage on the county website.

What was the outcome?

Overall this is a cashflow positive property. PITI ~$515 w/ a $950 rent and minimal needed for CAPEX. Pre-negotiated in the lease is that the resident handles grass cutting, water/sewer, and snow removal.

Lessons learned? Challenges?

I think there will be a lesson learned as this is a new neighborhood for me to own long term. I've only ever handled flips here, so it will be interesting to see things pan out with having the residents handle things I normally sub out (ie grass, snow removal, etc)

@Breelon Bryant so if you're living there you're eliminating housing expense, and possibly plan to manage yourself which would remove the line item of mgmt fees. 

I'd take a closer look at this one. If you're just starting off and you think this could be a value add opportunity I say go for it. 

@Breelon Bryant personal opinion but anytime I see a round number on owners sheet of expenses I take that as a negative and requiring a bit more due diligence on your end. 
Albeit some may round up in some instances I Would ask if they can provide you receipts or even returns. 

To counter on some of the feedback as well. You should also take equity paydown into account here if you're treating this as a long term investment. 

My assumption is you're also house hacking here since you're taking PMI into account as an expense?

@Max T. yes I did some digging on this and thats true. Which eliminates my question above honestly. Albeit unfortunate for the non-minor child it truly is none of my concern. 

In Ohio if theres outstanding balance it can over time become the property owners responsibility but only if it in fact reverted to my name. So great news in this instance whre they were too lazy to call and cancel :) 

Hi everyone

Looking for suggestions here to avoid future issues around utilities once a tenant vacates. 

On all my properties I'm enrolled in the landlord reversion program. HOWEVER this only initiates if the previous tenant terminates services. When I called the gas company they said the bill was actually in another persons name (my tenants child) 

Question is. Do my fellow BPers confirm that utilities are truly in their tenants name upon move-in? Never in my wildest dreams would I put something in my childs name and jeopardize their credit or borrowing ability....but you learn something new everyday in owning/managing. 

FYI the balance is small, and the tenant is gone with a forefeited security deposit already because they skipped last months rent. So my question for future protection is in the event this balance is very high and I don't want to be stuck with it. 

Also-would you all reach out to the account holder themself (the child) in this instance or just let it be?

@Todd Powell diversified! I aspire to be where you are Todd kudos! Truth be told I enjoy my career so pending I achieve “enough” I may still find myself plugging along....until they catch on and let me go of course :)

Fortunately I've purchased all my existing properties on 15 year notes (financed on 30 but pay as a 15), as well as had successful BRRRs on all of them. When the time comes (12-18 months from now) I plan to dump 4 of the top performers which will have decent equity so I can 1031 into a larger value add opportunity (12-24 units). 

With my remaining properties I'll pull back the aggressive paydown strategy on those notes and put it directly into the new property for improvements, potentially with some HML depending on outlook/timing. My assumption is those units will take anywhere from an additional 24-36 months to complete so slightly over a 3 year plan but once complete I can assess cashflow on the bigger apartment and determine if it will make sense to sell off my current units and pay a hefty amount down on the note or if I will have to do another value add complex to hit my cash flow goal.

The factor thats TBD is obviously how much I can drive up rents on the future property from where they are. 

Really depends on the home itself. I will say the venting requirements vary greatly, and you may find it to be quite cumbersome to put in existing construction with multiple levels. I did put one in a 3rd floor unit which has been successful but its classified as efficiency apartment-any larger of a footprint I think the cost would've been prohibitive. They have come a long way since I did this though. 

Great question! I'm not quite to that point as I'm balancing full-time work and growing my portfolio. However I would say my "goal" will be to pull the plug within 3 years on working. I've hit a point in my career where my income is sufficient to live comfortably so I have begun focusing on growing personal revenue streams with my current salary as a benchmark +25% (I'm taking into account historical vacancy average in my market) 

So in essence if you make $10k gross per month the goal should be clearing $12,500 per month. I also feel this will help offset some of the expenses that will undoubtedly be higher being classified as a sole proprietor with healthcare, retirement options, etc.

I know your question is directed at those who ARE doing it currently. But just my 2 cents. 

@Mitchell Litam sent you a PM. I need some interior work done in December if any of you have contacts as well of local contractors

Ceiling textured in kitchen

Paint entire unit

New flooring in kitchen

Polyurethaning all hardwoods