All Forum Posts by: Michael Lee

Hello and welcome to this site Sunny!  For a rental unit, location is very important.  Being near a popular school should help you.  Overall demand for your unit is important too.  A local diversification should help too. Being in a growth area should help you with a long term strategy.  It should be a long term investment as far as its worthiness goes.  Will it earn more than you borrow, assuming you wont pay cash.  A positive cash flow right away is essential.  It's age will matter, especially if any repairs will require a permit.  Just improve as what is average for that area.Are there any nearby amenities and what the nearby retail development attract, if any.

Are there any needed repairs, renovation, or capital expenses? Do not count on anything happening in the future.  Will any improvements pay off.  There always should be the first impression and can you add value.  Owning a total of at least 16 units will make any unoccupancy, especially unexpected, will make any less painful.  Save as much of the rent as you can.  Reserve at least twice of what you think you will need.  Is it very an accessive and what type of parking is available.  My experience would be very highly rated.  I'm sure I might have left something that is important out, but please excuse that.

Good luck to you!

Hello s=and welcome to this site Wesley!  What I would recommend is learning about how to raise money and how to learn about the best way to form a Partnership where you have control and purchase apartment complexes and start off fairly small and working your way up.  If you are into rentals I think that is the best way to go.  Do not believe all the crap you nave heard, you do not need any experience to do that.  If your preference is short term investments I recommend Fix and Flip houses in this economy.  What works with that well are quick flips that do not need any repairs or anything except for cleaning.

More units usually means you'll be better off and you'll be through investments. You usually get more bang for your buck on commercial properties than you do on residential because of the cap rate. Their valuation is based on the income instead of sales comps.  If you have enough cash for the standard down payment will usually save you money on the payments which will typically charge extra for insurance and property tax until your balance is down to 80%.  Whatever you choose to do learn as much as you can about that niche and do not be fearful of the competition.

When starting off just do what is average for that area. REI is a numbers game. Which means the more offers you make, the better. Get use to hearing "no" because you will probably hear that more then"yes/". Do not let any negative answer be taken personally. Figure out how to make more and save more. Live below your means and do not buy anything that is cosmetic. The things I mentioned are positives in this economy. There is good debt and bad debt. Good debt means you make more than you borrow. Buying your house is a liability and not an asset.

Good luck to you!

Hello and welcome to this part of the famous site Awals!  Whatever I say please do not take it personal.  This is just one of several comments on this question.  There many things you need to know ideally before you make an offer.Your first thing and not necessarily be the most important is the first impression when you drive like the building(s) and the landscaping, is it's location good for your tenants, the mix of the floor plans, can you add any value, Make sure when looking at the income and expense records that you looking at actual financial statements.

Are there any nearby schools and are there there any nearby amenities and what type of the parking is available to the tenants, how any nearby apartment locations and what, if any, are they doing to attract prospects, look at all units and do not let the current owner trying to get you  not to do that, how does the current rental rates being collected near the market average, does it need any capital repairs or rehab right away,does it have a positive cash flow now, is it being properly managed by property management, and is there any nearby retail development and do its match your target market.

Hello and welcome to you Michael!  Nothing said here should be taken personally.  I am trying to tell you the best answer from my knowledge and experience in construction management and real estate.  The first  thought was why would you want just 2 units as rentals.  Whatever you decide to do, it should not matter what the tenant says should your thought on improvements that should be made by you (the owner).  in this case it might matter if the tenant has lived there a few years and you think that they look like they might stay a few more.

if the improvements need to be made, and they think "no" is the right thing to say the improvement needs to be made and they understand why it needs to be made now instead of later.  If the units are occupied, I might go with them currently rented you might just keep that money keep coming but I recommend you acquire more units soon as possible to reduce the overall pain that goes with a vacancy.  The more units you have, the less pain you get from a vacancy or the drop in the percentage number. 

If you feel good about the current tenants and think they will stay a while I'd probably keep the rentals.  If it's location is not very good and if you can make some money, I would try to sell it.  If you are not offered what you think their offering enough, you can always fall back to the rentals.

Good luck to you!

Hello and welcome to this site for all kinds of help along the way Mark!   Please do not take any of my comments personally.The first thing that popped into my head is why renting Single Family Homes and why not Fix and Flip or Quick Flip in this economy?  I like most of what you said buy why don't you learn legal ways to raise money and forming Partnerships and buy apartment complexes?  They are very less painful when a  unit goes vacant, especially when not expected and that will happen.  I have been a member to biggerpockets for about 5 years and I have heard about 50/50 of the good and the bad of home rentals and most of the successful have 15 or 20 of them or more. 

I have about 30 years of construction management and I held a real estate broker license for about 30 years and I might sound opinionated but I'm speaking from my knowledge and my heart about this.  If you are going to stay in single family rental units you have to maintain your needed statistics of demand, location, getting good deals, growth area, schools, nearby amenities, the retail development nearby, and taking baby steps but acquire several of them quickly so one vacancy will not be so painful when it happens, and it will.

Good luck to you!

Hello again Joey! Right now I do not do work anywhere because of my medical problems. I have several friends that live in Austin but I live just outside of Dallas, Texas. I am currently working on being involved in REI. i would love to help y'all in anyway I can.

Best wishes!

Hello Joey!  My suggestion to sell in this market because you might at the peak of the cycle and it may be more profit than you thought when you purchased it.  You can forget about maintain the home if you rent including the possible capital expense items that may happen before you raise your reserve account used to save part of your rental fees plus you will eleminate travel expenses to keep up with its maintenance and possible capital expense repairs.  No matter what happens a one unit rental unit is not a good idea.  If you want to be into rentals know how to raise money legally and form Partnerships so you can invest in apartment complexes.

Once you start buying a minimum of a 32 unit apartment complexes you'll be able to hire a Property Management Company to take care of the daily operations including the maintenance and tenant screening and still make a positive cash flow.  One vacancy is not as painful either.

Hello Bakari!  Before you get to comfortable, make sure there is a good demand in that area for that development.  Feel like the existing retail there has a good feature that will keep them going for many years.  Make sure all improvements are in good shape and make sure your decision is based on actuals and if you can and not on a Pro Forma.  Think of it as a long term investment  Is it in a growth area?  If it makes a positive cash flow since day 1 price is not that a price should not be the only determining factor in a long term investment.

Are their any leases with the existing tenants or does it have any obligations that you would become obligated for.  Assuming the property next door that you referred to is a commercial retail building create much traffic that could get you more business.  Is it an add-value property by raising rents or making interior/exterior improvements?

Do all expenses look normal?  Are there any capital repairs being put-off or any capital repairs that need to be done any time soon (within 3 years).?  Will the current owner do any financing?  Would they finance in return for a higher price you determined is good 

Hello and welcome here Nicholas! Whatever I say is not meant to hurt you but give you my possible knowledge and experience. My first reaction is to not do this deal. It really does not matter on the loan requirements or who the lenders are. The most positive thing you should do is to learn how to save more, Partnership types and forming, raising funds that can help you make the down payments, and buying apartment complexes with at least 32 units so you van pay for property management to take care of the daily operations. Even though I can understand the reasoning on getting an FHA loan and the fees and other extra costs you have to pay, 4 unit houses are just too risky for what you are possibly getting from a Bank.

A Bank might offer the lowest interest rate, it's not the only lending source you can use.  The other sources may charge higher interest rates but they are more lenient and easier to work with.  My 5 years of learning full time, 7 days a week, and seeing stories from both sides I have never read or heard that a couple of points in a loan made the difference to the ultimate bottom line of a project.  A Bank is usually more interested in how much money they can make, and not you.

My solution is not easier but you must be willing to make some justifications to make it big and rule out all that is not necessary.  Do not get sucked in to this society and get everything they require.  Live below your means for a while to grasp what you need in your life and understand the importance of wealth and know that it is not easy.

Be mobile and ready to go to where things are happening.  Do not believe those that have never done this and realize that most of what you were teached and preached about came from a past that is not real anymore.  Continually learn and network with like-minded people and/or those that are successful in what you want to do and who you meet at local real estate clubs and events that are real and just not a sales gimmick.

As an investor you must do the opposite of most others do to be successful.  Learn how to do something that is more unique and has less competition that is profitable.  Whatever you choose to do be dominant and try to know more than everybody else.  That kind of domination will help you be more profitable/productive at what you do.  Do some like buying apartment complexes, option leasing, reverse wholesaling, or Fix and Flip (which is doing good right now).

Take action, never quit, be patient, and be knowledgeable.  Believe in what you do and be firm and just do the average finish out at first.  Wait until later to try something fancy or unique.  Use a person that has developed software that is a full course and gives complete information like someone like Kent Clothier, Ross Hamilton, john jackson, Josh Cantwell, etc. who seem like they know the right way.

Good luck to you!

Hello and welcome Charles! About the only way I would recommend a SFH is for a Fix and Flip or a Quick Flip that involves no work that you can make money on. I would recommend what is called "reverse wholesaling" where you work with buyers instead of sellers. I would recommend learning about raising money legally and Partnerships. Purchasing apartment complexes is the best way to go in this economy but having the money you have to start on this is difficult to have.

Another thing I would recommend is Lease Optioning which is usually a way to be involved with mostly SFH's. That is a fairly simple way to go and average a fee of $8,000 of each home assigned. One of the best ways to go as described by John Jackson in Tarrant County (Ft.Worth in Texas) who teaches this method for about 15 years and has developed a good sales contract that gets you paid before the product sales and he usually quotes the list price to the owner in a fairly nice area.

He usually calls houses For Sale By Owner in decent areas.  Telling that owner your offer that is the list price makes it easier to get the deal.  Your sign usually attracts more prospects.  It contains productive verbage and your phone number.

Who the hell is this guy and why should I listen?  This letter was written by a 61 year old that was born and raised in Dallas, Texas.  He graduated college with honors in business that emphasized real estate.  Before my bad medical problems that made me bedridden about 7 years ago, I was the proud owner of a flooring sales and installation business and was into construction management before the ownership for about 35 years.  

I also had a real estate broker license in Texas for about 30 years.  I found BP about 5 years ago and I have learned alot from it and elsewhere plus I read a book about every two weeks.  When I graduated college my father was into comm'l real estate and was a licensed broker and he taught me a little bit.

The main thing to do is to educate yourself and once you decide what you want to do, focus on that style you pick out 1 or 2 areas and make sure you know them well.  Pick an area that has the most sales and closings.  Do not worry about popularity by the competition.  Some of those people might be your friend.

I hope some of this helps you.  If you think I can help you in any eay,please contact me through this site and the reason is that I am on it just about everyday.

Good luck to you!