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All Forum Posts by: Nick Zupec

Nick Zupec has started 1 posts and replied 31 times.

Post: Interested in purchasing apartment complex and don't know where to start

Nick Zupec
Pro Member
Posted
  • Investor
  • Saint Joseph, MI
  • Posts 31
  • Votes 40

Hi Adelaide! My wife and I live and invest in SW Michigan so we are across the state from you. We have a few single family rentals and we closed on an 8-unit apartment building about 6 months ago. I completely agree with Amir that anything 5 units and above moves you from residential to commercial and has a lot of differences. Here are a few thoughts:

1. I highly recommend the Bigger Pockets Multifamily bootcamp. I just completed the winter session but they are doing another one that starts in June. There were a lot of things that I learned that I wish I would've known before we did our first multifamily deal.

2. How you determine the value of the building is very different from residential real estate which uses comparable sales. You need to know the net operating income (NOI) and divide that by the cap rate. Because of that, it is critical to get accurate financial statements from the seller. You also have to make sure the NOI covers your mortgage payments by a set amount that the bank determines (e.g. NOI is at least 125% of mortgage which would be a DSCR of 1.25)

3. Lending is through a commercial lender. This is a lot more relationship based so it is good to start reaching out to commercial lenders before you have a deal. We found a great deal and almost lost it because we struggled to lock down a commercial lender in time. Small local banks and credit unions are commonly used for commercial lending.

4. Due diligence is a lot more intensive and consists of a document review period, an environmental study, etc. 

There are many more  differences, but this should get you started. I also recommend Brandon Turner and Brian Murray's 2 part book series "The Multifamily Millionaire" as this goes through a lot of that. Good luck and I hope it works out for you! Multifamily is a great way to scale more quickly and efficiently and despite our learning curve and many mistakes, our first multifamily property has still been a huge success!

Post: MTR Summit Recap

Nick Zupec
Pro Member
Posted
  • Investor
  • Saint Joseph, MI
  • Posts 31
  • Votes 40

Robin, welcome to BP :) I think of getting contracts directly with the agencies as kind of like direct to seller marketing. You will probably get a lot of no's before you get a yes. It may also be dependent on when you catch them so it is helpful to follow up every so often. But when you do get a yes, it is worth it! I also think it is really important to have a value proposition. If you were in their shoes, why would they want to work with you? For example, in our market all of the MTRs turn to STRs over the summer because we have a lot of seasonal vacationers so traveling professionals really have a hard time finding anything from May-September. I tell them that we will commit to them for the full 12-months or longer, which many others don't. Whenever we get an application from someone that we get on Furnished Finder (and full disclaimer... we are new at this so haven't done a lot of them yet) I ask for their recruiter and staffing agency on the application and add it to a spreadsheet. Then I call the recruiter to do the employment verification. At the end of that call, I ask them if they frequently place travelers in our area. If they say yes, I give them my 20 second pitch. A recruiter yesterday took my name and number and said she would pass it on to her travelers in my area the future. That was a small win. At the end of this contract, I will probably reach out to her on LinkedIn and tell her that we had a great experience with our guest/tenant and send her our website for future reference. If she engages back, I will remind her that we would always be interested in working with them directly if there is anyway that we can help to fill a need for them. I always try to phrase it in a way that we are being a solution for them.

Allen, I haven't gotten an agency contract yet, but I talked to some others that have. I agree that you would have a hard time asking them for a higher amount if they can see your properties online listed for less. Our contract that we are negotiating now is with a large local company. We were networking with another investor that provides MTRs to this company in the offseason, but they are making all of the tenants leave in the next few weeks to switch the units to STRs for the summer. We just asked that investor how much the company pays them monthly so we had a benchmark (and it was quite a bit higher than we are getting direct). The other investor's properties are a little bigger, but ours are more updated and in a better location so I think we should be able to get a similar amount. When we were emailing with the company, they asked us to provide information on properties that we could provide them and include photos and the pricing structure. Knowing what they pay to others was huge for us in feeling confident throwing out a higher number than we would on Furnished Finder or Airbnb. If you can find anyone that has agency contracts in your area, that would be ideal so you could have a similar benchmark of what the agency is willing to pay.

Post: MTR Summit Recap

Nick Zupec
Pro Member
Posted
  • Investor
  • Saint Joseph, MI
  • Posts 31
  • Votes 40

Allen, keep in mind that placement agencies often provide a stipend to the traveler. They may give $6,000 and then the guest gives you $4,000 and pockets the other $2,000. If you contract with them directly, they may pay the same amount but you get all of it.

Bonnie, it sounds like Jesse will be doing another MTR Summit, probably in October. There were over 1,000 people on the wait list. Furnished Finder is making some changes. It sounds like there will be an overhaul to the data side of things coming in the next 6 months or so. They are planning some market insight reports and more supply and demand data on a market level.

Thanks for sharing Jamie. It was a great conference! Sorry that we didn't meet.

Post: Luxury MTR Rentals

Nick Zupec
Pro Member
Posted
  • Investor
  • Saint Joseph, MI
  • Posts 31
  • Votes 40

We (my wife and I) are currently doing some higher end MTRs, but we are in a smaller town in the Midwest so we won't be getting north of $5K. What we are seeing is that even when traveling professionals are getting big stipends from their company or staffing agency, they often want to find lower cost places and pocket the difference. We are currently negotiating our first contract directly with the company and we are expecting a pretty decent price bump because we will getting the whole stipend that the company is willing to provide. It will also be less work for us as we won't need to find each individual guest and we won't have rental loss from vacancies.

We also attended the MTR Summit and I recommend consuming any content that Jesse Vazquez is putting out there on the B2B strategies. I also second that Rachel Gainsbrugh is a great example of success in the luxury MTR space.

Post: First time renting my home

Nick Zupec
Pro Member
Posted
  • Investor
  • Saint Joseph, MI
  • Posts 31
  • Votes 40

Good luck with your first rental Shannon! I highly recommend reading Brandon and Heather Turner's book "The Book on Managing Rental Properties" which you can get directly from Bigger Pockets. That gave me so much knowledge and confidence when I went to rent out my first property. If you plan to manage the property yourself, it will teach you things that you probably don't even know that you should be thinking about. If you end up hiring a property manager, it will help you to know what your property manager should and shouldn't be doing. If your question is "where do I start" this is what I would recommend. If you decide to manage yourself, you will also get access to a lot of forms (many of them state specific) with the book that are helpful.

Post: Cash vs loan, what is most efficient for faster growth

Nick Zupec
Pro Member
Posted
  • Investor
  • Saint Joseph, MI
  • Posts 31
  • Votes 40

Some of these are valid counterpoints to the majority opinion, but I disagree that the only reason to take a loan is if you don't have enough money for your next deal. It depends on interest rates. My first investment property had a 3.25% interest rate. I wouldn't have paid cash even if I had the entire amount available. The other 80% of my money could make more than 3.25% pretty much anywhere else that I put it. Sure the bank is making some money on me in interest, but I am making much more than I'm losing by investing my money elsewhere at a higher than 3.25% return. It's an opportunity cost exercise. Having a loan costs more than paying cash in the long run, but the real question is if your money can make you more than you are paying in interest if you deploy it elsewhere. At a lower interest rate, the answer is usually yes. After all, you probably wouldn't give someone $100,000 if they promised to pay you back at 4% interest over 30 years. With rates in the 6s and an uncertain stock market, I might lean towards paying more in cash.

Post: Separate phone number for business?

Nick Zupec
Pro Member
Posted
  • Investor
  • Saint Joseph, MI
  • Posts 31
  • Votes 40

Congrats Kayla. I started using Google Voice about 10 months ago when listing my first rental property because I didn't want to give tenants (and prospective tenants) my personal cell phone. It was nice that I got to select a local number because my personal cell has a different area code. Originally, I planned to make an old cell phone my "business phone" and use it on wifi only. After a couple weeks, I changed my mind and forwarded the number to my personal cell so that I would get calls away from home too. It is nice to have the option though and you can choose to not allow calls outside of certain hours. It is also nice to setup a separate voicemail and to also get transcription of your messages. Overall, I have been happy with it. I hope that helps and good luck!

Post: Cash Out Refi? Cash flowing rental with a conventional mortgage

Nick Zupec
Pro Member
Posted
  • Investor
  • Saint Joseph, MI
  • Posts 31
  • Votes 40

First of all, congrats! That sounds like a great first property. I agree that there is not one right answer here but what works best for you. That said, this reminds me a lot of my first deal so I will share my experience to give you another data point.

I put ~40% down on my first rental property before I found Bigger Pockets and learned about the power of leverage. I did a $24K reno and the house appraised at $56K over purchase price. I had a cashflow of over $500/month and a similar strategy to scale slowly. The notable difference is that interest rates were only about 1% higher at that time. I ended up doing the cash out refi, pulling out my down payment amount, and reducing my cashflow to ~$250. A week later my agent called because another investor was selling his portfolio of 3 rental houses, all meeting my criteria. I got creative to make it work and now have a monthly cashflow of ~$1100/month and am getting appreciation across 4 properties. I wasn't planning to move that quickly, but an opportunity arose and I was ready to jump on it. Now I have #5 under contract partially because of the cashflow from the first 4.

If you are looking to scale, capital will help you to get there and a cashout refi can get you that capital. If you have other sources of capital, I would use that instead given the interest rates. A HELOC would work well if you can find a BRRRR to payoff the HELOC. That said, a couple hundred of cashflow after a refi is still solid and given the current market, I would be very surprised if you bought another property or two and regretted it in 5-10 years. As long as you are cash flowing on those too, you can always refi those when the rates go back down and still benefit from the appreciation. Good luck!

Post: Cash vs loan, what is most efficient for faster growth

Nick Zupec
Pro Member
Posted
  • Investor
  • Saint Joseph, MI
  • Posts 31
  • Votes 40

I agree with most of the comments above about the math favoring getting mortgages and increasing your leverage. This will allow you to buy more properties faster which will speed up the scaling process. This is especially important if you are buying in markets with a lot of appreciation as you will benefit from that appreciation across multiple properties. The obvious counterpoint is not to get overleveraged. Since you have a large sum of cash up front, I would set some of it aside as reserves. That way if you have a non-paying tenant that causes damage and needs an eviction, you don't have any concerns handling that and paying the mortgage. Also, you can still buy properties with "cash offers" and get a mortgage as long as you have the funds and waive your financing contingency. Good luck!

Post: What Is Being A Landlord Like?

Nick Zupec
Pro Member
Posted
  • Investor
  • Saint Joseph, MI
  • Posts 31
  • Votes 40

If you are going to do it, I highly recommend reading "The book on managing rental properties" by Brandon and Heather Turner. I read it right before I posted my first rental and it saved me from making so many mistakes!

I spend a lot of time and effort up front renovating my properties, screening tenants, and setting expectations. If you have good tenants with appropriate expectations in well maintained properties, it isn't as much work as you would think. If you don't spend the time upfront, you will spend the time later dealing with all of the problems.

No matter how prepared you are, things will always pop up. I got a call about a leak at 9PM on my birthday. I highly recommend having a business line (or at least Google Voice with a different number). If you don't want to deal with those issues, hiring a PM is always an option so don't let that stop you from investing in rental properties. Just be sure to spend the time vetting the PMs and incorporate that into the numbers when evaluating a potential deal.