All Forum Posts by: Michael Whitman

Congrats Brendon, what was the draw for you with the property?

When we opened our tent and event rental business (with a small out of pocket cash investment in equipment), my wife asked for a business plan.  I hadn't written one since college! But, I was happy to go through the numbers with her.

Fast forward two years, the business is doing well and now we're looking to expand into real estate. She's again looking for a business plan :)

As my goals for real estate progress and our event rental company grows, I'm looking forward to the day where it can be income replacement and I can quit my day job!

 Thanks Jonathan, all good points. The property is a small three unit multifamily. The units are currently rented, which is great. My son was able to walk through the units the other day.  Sounds like there is some updates that can be made, but nothing immediately needed.  

We're in the process of evaluating a multifamily near where one of my sons attend college.  On paper, the numbers work, it currently has renters in place, although month to month and one unit is actively trying to move somewhere else because they need more space. 

As I start to gather my thoughts on next steps, one that came to mind is my due diligence questions.  I'll be honest, this is the point I would normally get cold feet and pass on an opportunity. But, this community has been great in sharing advice, so we're going to dive a little deeper into this.

What are some of the due diligence questions you like to ask?  I think I have the basics down:
* rent roll or proof of rental payments over x period of time
* copies of owner paid expenses
* copies of owner repairs over the last couple of years
* clean title search
* home inspection

What are some of your favorite questions? I'm sure I'm missing some and I'm sure there are others who could close a deal and not worry about it.  For our first property, I'd like to make sure I'm thinking this through the right way.

Thanks all!

 Good advice! The only thing I would add to this is if you leave the company, check with benefits as the loan from your 401k may be due in full. @Josh St Laurent would you know for sure?

@Ross Kane Like you, I am also starting out. I'm in CT, which is also a difficult place to be a landlord (although I talked to an investor here and he likes CT, so it's all perspective really).  It's also super expensive if you aren't in the fold for deal flow and simply going out with an agent to look at properties.  We have started looking out of state in landlord friendly states.  I've connected with a few investor knowledgeable realtors through BP in different markets to start researching areas and building a team of mentors and advisors.  

If you're concerned about piercing the corporate veil with an LLC, reach out to an attorney and talk it through. Different states, different laws. CT actually has some of the strongest protections for LLC's in the country...but it took some research (and money) to talk through that. Not that everything is right on google, but you can start by searching for landlord friendly states, then dig into legal protections, etc. Or search the forums and blogs here, I'm sure you'll find some good info.

It's also helpful to know local ordinance. For instance, I was looking at a property for STR in a town in VT and the realtor explained the town passed an ordinance preventing repetitive short term rentals of properties because of partying and noise violations. The next town over didn't have the same ordinance.

I've been considering a property near one of my kid's colleges that is  currently a multifamily. 3 units: 2/1, 1/1, 1/1. Rents are currently $800, $600, $600. 

Looking at other properties in the area, many are multi-family.  I've considering whether it makes sense to look at potentially converting it to a single family and enrolling the property in the college's off-campus housing program. A 4/3 could potentially rent for $3,500 - 4,000/room/semester.

Clearly some other factors to consider, but it would be great to hear any insight from folks who may have done this in the past.

Drago raises a good point about exit strategy.  What if the partnership sours? Having a well documented partnership agreement is helpful. If you're providing all the hands on work and your partner is the money, there's pro's and con's to each. So while there should be a percentage of equitable contribution, sweat equity also plays a factor.  

Carson, first congrats on the upcoming degree, I'm sure you'll have a solid baseline for property management based on your degree in facilities management.  

What does your dad invest in?  Real estate? Other assets or businesses? 

What's your plan for when you graduate? Will you live at home to save money? Do you have a job lined up? Have you talked to property management companies about opportunities? 

How you're thinking about things is on the right track - developing a network of mentors you can talk to is a good thing.  Having a little money in the bank from a day job is a good thing.  Building a credit history...all on point.

Things that I would also start looking at: where do you want to invest - locally, nationally, internationally? Can you evaluate whether something is a good investment - use the BP calculators, build your own spreadsheet, identify what seems like a good deal to you (everyone has different criteria). This analysis will actually help you determine how much cash you need for your first deal which will guide your decision for a well paying facilities job.  

You're on the right track, just remember patience and diligence are a good thing.

Some great replies in here and I'll add my thoughts:

Everyone has a different opinion on what good financials look like. I talked to someone the other day that was happy making $200 a month after expenses and they were scaling that way with multiple purchases.  Personally, I would prefer a higher net income at the end of the month. If the numbers don't match what you think you would like to make on a property, then either you need to discount the asking price to get there or pass on the property.

My second thought is what you're feeling and others have highlighted - no everyone is in the business to make it fair for both sides. Being taken advantage of would be a tough pill to swallow for me so I've been (overly) cautious when looking to put my money into an investment.  

My last food for thought is if you decide the risk is worth taking, always get the inspection done. Some may disagree that investors should be contingency free, but having a thorough inspection will at least give you peace of mind that the property is in good working order.

Good luck!