All Forum Posts by: Milton Rivera

@Jonathan Roberts

The pros of working with the PM:

• You already have a working relationship.  You both may know what each other's strengths and weakness are and if he has a good network and can bring qualified leads, why not use it.  
• He may already know what you are looking for and keep an eye out.  You can encourage him to look for off-market deals and tell him that he will still be compensated. 
• One way to look at it, I want my acquisition funnel to be as large as possible to bring in as many qualified leads as possible.  

You can engage another PM company to manage the new properties and this will give you a backup/bench player and keep your checks and balances.  

Having said all that, in my experience, the PMs I have worked with have not been able to find or bring me to good deals. It was just not in their wheelhouse and you can tell fairly quickly if they are showing you MLS listings at retail pricing.

Good luck. 

@Kim Hopkins

It depends on their scope of work.  What exactly are they doing for this construction management fee, for example:

• Are they drafting the scope of work?
• Are they qualifying subcontractors?
• Are they going to pull permits?  Are they licensed to do so?
• Are they inspecting the work and they approving draws?
• Entering into an agreement with the subcontractor and a separate agreement with you?

In general, when someone is acting as a "construction manager" they are in principal acting as a general contractor (the only difference is they do not perform any of the work - no one really does that nowdays) but in essense they handle everything including guaranting the work and handle any post work claims.   Without knowing what their service includes is hard to tell if the fee is reasonable or not.  Fees range from 4% up to about 12% depending on the work being done.  Remember all this needs to be in a contract that includes, scope, cost and duration.  

Good luck

@Curt McClements

One way to remove would be via an amendment to the original contract.  There are a few issues to be mindful of here: 

• If the husband will remain on the property you may need to "re-qualify" him ensure his new debt to income ratio can still cover the rent. 
• The deposits should remain since they are part of the property lease and not assigned to anyone specific. 
• If the wife is to be removed from the lease, a date should be set off when she would vacate since all parties living on the premises should be on the lease.   

Good luck

@William Huston

The short answer on the LLC:

The bank has the right to call the loan if you were to transfer it to an LLC. The reality is that I have not yet heard of any bank that has actually done that if you have continued to make your payments.

The primary reason to transfer the asset to an LLC is for liability protection. There are a couple of ways you can hedge this, the first one is via an umbrella policy by your insurance company (you can get one that covers all of the assets), two the fact there is a mortgage means that you do not own the asset free and clear and have only limited equity so if some tries to sue you it may not be worth it. The LLC is a good idea but is only one of the tools for liability protection.

Another thing to consider is getting a portfolio loan, basically, you would transfer all of your remaining properties to a single note (looks like five units) and then have that loan under an LLC (portfolio lenders tend to accommodate that). Obviously, the numbers have to work. Another issue is that the liability experts like to see an LLC for each property and in this case, you may be combining all of those five assets into a single entity, the idea being that the liability can be contained to that one asset. I would talk to a lawyer and explore the options.

Good luck. 

@Tom McQuinn

I suggest enlisting an architect and the city/county on this.  There is a list of items needed to make the home truly accessible including:

• Bathroom renovation
  • The should be able to turn a wheelchair around 
  • Add grab bars for the toilet and tub/shower
• Change all of the door hardware to handles
• Lower home controls including thermostat and possibly switches 

Good luck

@Shaun Mc

In principle, the infrastructure should still be fine.  A couple things to consider:

• The infrastructure was designed to support a specific development (number of parcels, certain square footage and/or water consumption).  So if your plans differ significantly from what it was originally planned the infrastructure will need to be modified.
• You should asses the current condition, you can hire a civil engineer to go out and take a look at the pipes, stub out locations, grading, etc. Things could have happened (say a hurricane or flooding) could have caused damage.  Also, you would not know the quality of work the contractor performed ten (10) years ago.  

@Nahal Beckam

I concur with @Alan Grobmeier that a high credit score means they have been responsible and as @Ned J. states you always have the option to amend the contract.  It as a living document after all meant to be revised/updated as needed. 

@Rufus White

My apologies I put the wrong name on the equation, I am trying to keep it as simple as possible. 

Your total cashflow = total revenue (rent) - all expenses (mortgage, insurance, property management, etc.)

Cashflow = 850 - 540 (mortgage) - 84*4 (336) = 850 - 876 = (26)  so there is still a monthly loss.   I am not sure about the tax implications of leaving that mortgage only in your wife's name.  I believe it has to do with what is considered the primary residence.  I highly recommend talking with an accountant about that issue. 

I recommend two books:

The book on rental property investing (published by BP) and The ABCs of real estate investing.

Good luck to you!

@Rufus White

Looking at some of the key numbers:

Mortgage = $540/month (I am not sure if this includes taxes and property insurance).  I will assume they are included. 

Potential Rent = $840

Estimated expenses = Property management 10%, Vacancy 10%, Repairs/Maintenance 10%, Cap X 10%

$840-(property management)-(vacancy)-(repairs)-(capx)

$840-$84*4=$504 (total revenue)

Cash flow = total revenue - rent = $504-$540 = ($36), looks like you would be loosing money every month. 

In South Carolina, you also have to be mindful of taxes.  Investment properties pay about 3x the taxes which kills most of the deals.   

You can choose to do the property management and hope the repairs are not needed but it does NOT look like a prudent deal. 

@Jesse Shapiro

In general, it should take them about one week to ten days for them to complete the inspection AND provide a list of recommended repairs.  I would speak to the manager/owner and have a discussion on your experience thus far, try to set and confirm each other's expectations, if you are not on the same page, you may be better off finding someone else.