All Forum Posts by: Mike Mefferd

We just switched to Appfolio and are trying to implement Corporate Accounting into our process. Unfortunately, Appfolio's customer support and training has been less than Satisfactory. Does anyone have experience with Corporate Accounting that would be willing to train us to ensure our system is set up properly? We would gladly pay a consulting fee for any help. 

Thanks,

Mike

We are managing a property that was just purchased and the prior owner was using Guardian to bill back water and gas. Guardian is asking to sign a new contract with much higher service charges to the tenants. Rather than signing a new contract with Guardian, we are considering handling the calculations internally and adding the charge to the tenants account. If we do this, are there any requirements of information that we need to provide the tenant? Curious how others have handled this if you don't use a 3rd party.

Thanks,

Mike

You can use a product called a delayed refinance and you don't have to season a property. For instance, as long as you put your renovation costs on the closing statement, you can pay all cash for the property and then refinance the property as soon as you finish the renovations. Its a really awesome strategy and product when you are starting out. I would encourage you to ask your lenders if they offer that product, because not all will. 

The goal is to free up your cash as quickly as possible. If you use bank financing to buy a deal, because it takes longer, you are probably paying more for a property than you would if you paid cash. 

We use Rent Manager for all of of our accounting, communication with tenants and managing our everyday business. We love all the built in functionality! 

We also use Tenant Turner which posts our properties all over the internet and then prescreens applicants before we show them a unit to ensure they qualify. It saves us a ton of time for minimal cost. 

thanks! @Marlin Weber

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $550,000
Cash invested: $150,000
Sale price: $750,000

This was an 18 unit single story apartment complex. It was the worst property on the street, but located in an A area of Vandalia right across the street from an Elementary school and Park. Property consisted of 12 one bedroom units and 6 two bedroom units.

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

I was having a hard time finding single family homes that would generate at least a 12% Cash on Cash return. With apartments, I was able to generate a 15% Cash on Cash return, not including the principal paydown and property appreciation.

I also learned you have so much more control of the value with apartments. As you learn the industry, you get better and better at reducing expenses, driving the revenue, and maximizing the value.

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

The deal was listed on the MLS. I just put in an offer and it was accepted. This was a deal I was fortunate enough to find where the seller just wanted out.

Don't ever assume you think you know what a seller wants. Submit your offer because you never know what someone will take for their property.

How did you finance this deal?

Combination of a Sofi Loan (50k), 401k loan (30k), Bank Loan, and Credit Card Balance Transfer (20k)

How did you add value to the deal?

Spent about $4,500 renovating the units to increase the rents roughly $150. We also cut the insurance bill in half without losing any coverage and lowered the water bill by $10 a unit installing water efficient toilets, shower heads and faucets. The local utility company actually provided and installed the faucet and shower head for free as part of an energy saving initiative.

Lessons learned? Challenges?

Be careful not to put too much leverage on a property. Also make sure you have money set aside for capital improvements. You should always create your business plan when you buy a property and know how much you will need to spend each year on cap ex.

Don't wait to get started. Surround yourself with great people, treat your investing like a business and always continue to learn. You will figure it out!

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $550,000
Cash invested: $150,000
Sale price: $750,000

This deal was purchased with almost no money down. We used a personal loan from Sofi for $50,000, a 12 month interest free credit card balance transfer for $20,000 and the remaining money from a 401k loan. We also structured the contract to have the seller credit us at closing the full collected rents, an extra year of taxes, and had the seller pay $7,500 in closing cost assistance.

Looking back, I'm won't lever up that much in the future, but there were so many great lessons I learned on this deal. The most important lesson I learned was to just get started. You learn so much as you go. I made so many mistakes along the way, yet still turned this into a great return!

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

I was having a hard time finding single family homes that would generate at least a 12% Cash on Cash return. With apartments, I was able to generate a 15% Cash on Cash return, not including the principal paydown and property appreciation.

I also learned you have so much more control of the value with apartments. As you learn the industry, you get better and better at reducing expenses, driving the revenue, and maximizing the value.

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

The deal was listed on the MLS. I just put in an offer and it was accepted. This was a deal I was fortunate enough to find where the seller just wanted out.

Don't ever assume you think you know what a seller wants. Submit your offer because you never know what someone will take for their property.

How did you finance this deal?

Combination of a Sofi Loan, 401k loan, Bank Loan, and Credit Card Balance Transfer

How did you add value to the deal?

Spent about $4,500 renovating the units to increase the rents roughly $150. We also cut the insurance bill in half without losing any coverage and lowered the water bill by $10 a unit installing water efficient toilets, shower heads and faucets. The local utility company actually provided and installed the faucet and shower head for free as part of an energy saving initiative.

Lessons learned? Challenges?

Be careful not to put too much leverage on a property. Also make sure you have money set aside for capital improvements. You should always create your business plan when you buy a property and know how much you will need to spend each year on cap ex.

Don't wait to get started. Surround yourself with great people, treat your investing like a business and always continue to learn. You will figure it out!

In continuing to think of new ways to add additional value to my apartment buildings, I wanted to get peoples thoughts on installing solar panels and finding a way to monetize this. Has anyone ever done this and had any success?

I'm not sure if tenants would pay more money for the unit if we had these, but I was thinking about paying for all the electric myself and then billing back the tenants for all their electric usage. This way, instead of them making their $75/month payment to the electric company, they make it to me. On paper, I think this added income would more than cover the cost of the system. I'm curious to see if anyone has tried this approach or if there are any issues with. Love to hear your thoughts!

Thanks,

Mike

I am looking for some advice on how to handle a difficult situation with a contractor. Unfortunately I made all the mistakes of not having a new contractor sign a detailed contract and we gave him draws before verifying work was actually completed. This contractor had both of his employees who were handling the work quit, and after 7 weeks of trying to renovate 2 units, we made the decision to part ways and refund the money he was overpaid for work not completed. 

The contractor has now gone dark while still owing roughly $10,000 per my calculations. He did provide a Scope off Work at the beginning of the project, but he never adjusted any of it for change orders such as substitution vinyl plank for carpet. We asked repeatedly for detailed invoices and still have not received them to determine how he came up with his costs above and beyond his original estimate. I have statements from his old contractors  telling how much the contractor still owes us, but didn’t know if that was enough to pursue legal action. Any advice would be greatly appreciated. 

I fully accept this if there is nothing I can do because I didn’t take the proper action to protect myself, but I hate letting a contractor get away with something like this. 

 Thank you for all the suggestions! I really appreciate it!