All Forum Posts by: Nikhil Agarwal

@Drew Sygit - The numbers on paper look too good to be true when looking at the FMRs for properties in Detroit that you can seemingly pick up for like $55K and rent for like $900. My guess is that these properties are in areas with too high a crime rate etc. to make it worth the hassle but maybe some gems to be found if there is someone with experience managing those properties and being able to do well by rigorously screening tenants / knowing the area street by street. 

Hello! We are looking to buy a portfolio of single family homes in Detroit that will be rented to section 8 tenants.

Does anyone have experience with a property manager that can help with both screening the tenants well and working with the housing authority as needed?

To present an alternate view:

You can get a 10/1 ARM where the rate is fixed for the first 10 years and floats after that. These tend to have lower starting rates than say a 30-year fixed mortgage. At the 10-year mark, you likely have a decent bit of equity built up (some from the appreciation of the property and the rest from principal paydown) that you'll want to refinance. Hence, not sure totally staying away from ARMs is a great idea.

Certainly if the rates go up a lot and stay up, this wouldn't be a great strategy but it's highly unlikely anyone can predict what the rates will be 10 years from now. Your best bet would be to look at the forward curves for the 10 year treasury bonds and make an educated guess based on the same.

While I didn't go through with the transaction, I did enquire with a local credit union about this. Based on that discussion, I learned that:

Typically, the bank will want to ensure that you have skin in the game. So an LTV limit may apply to the combined seller financing + bank loan regardless of the position. For example, the bank might say 75% LTV for the bank loan, but they may also limit the seller financing to say 15% LTV, that way, you have to come up with 10% (i.e., your skin in the game).

In terms of the amount and the position, those are two completely separate things. Regardless of who is providing most of the funds, it's typical for the lender to be in the first position and the seller's note to be in the second position.

I hope this is helpful!

Thank you @Drew Sygit and @Nathan Gesner for the detailed explanation and scenarios. 

I think we both are in very similar situations. I currently self-manage 10 properties while having a 9-5 (well, more like a 7am to midnight) kind of job. A very close friend has 20 properties between himself and his various partners that he self-manages. Together, we've realized it might be a good idea to start a property management firm given our own properties are becoming challenging to self-manage and we've been thinking of giving them to a property manager anyways.

However, we decided to take a different approach. We are hiring someone to be the property manager of our properties and starting our property management business that way. The idea is that they can focus on the property management/day-to-day and we can focus on growing the business and finding more investors who'd like us to manage their properties.

Just wanted to share this as an idea for you to consider as well!

 Thank you!

I've utilized avail. I'd say it's "okay". 

The first issue we had was the listing syndication system is complicated. The most valuable place to have your listing is Zillow and sites affiliated with Zillow. However, you can't just sign up and have the listing that you build on Avail get shown on Zillow. Instead, you need to complete some kind of process after which your account will be connected with your account on Zillow so that they can bill you appropriately. Even after completing this step, it was hit or miss. Eventually, we decided to move away from this and started listing on:

1. Facebook Marketplace
2. Zillow Rental Manager (directly, not using avail)

This is usually more than enough for us to get a strong pipeline of events.

I've started using a mix of platforms. It's annoying because you have to move tenant information between the many platforms, but each system does it's job very well. I think it's also because we were very cheap when we started. As a result, we tried to avoid paying any fees / subscriptions etc.

Step 1: Listing via Facebook and Zillow
Step 2: Google Forms to collect lead information 
Step 3: Application through Tenant Verification Services and/or TransUnion (tenant pays the fee)
Step 4: Electronic Signatures on Lease and other forms through DocuSign
Step 5: Online rent collection through Azibo (it's free, avail costs something per payment if I remember right)

We also use a company called ZDeposit to manage the security deposits given the laws around here are pretty strict around managing the security deposit / last month's rent.

That said, this setup only takes you to like 20-50 units. We are now looking for a software stack that will take us beyond the 50 unit mark. It's likely we will be switching to something like buildium (but it's expensive before you get to the 50 unit mark IMO).

I hope this is helpful! 

It sounds like your property might have appreciated a decent bit. If you were to cash-out refinance your property, would it be sufficient for a down payment on property 2? Also, you don't need to rely on your own income to get a loan. There are lenders who will underwrite the loan based on the income potential of the property itself. You can look for lenders providing such loans instead of looking at traditional mortgages.

QQ on how property management companies work! 

Typically, do the tenants make payments to the property management company (and then the property management company forwards the funds to us (owner of the unit)? Or does the check from the tenant directly go to the owner and the property management company is just responsible for collecting the check and depositing it into the owner's bank account.