All Forum Posts by: Paul Shannon

I found a product made by H20 Degree.  SN# WM1200. Hooks right into the line and reports individual unit usage to a gateway.  The water company would bill me and then I would bill the tenants back, or hire another company to read the data and do the billing.  No external wifi needed.  

Seems pretty simple.  Waiting on pricing.  

I'm purchasing a 40 unit apartment building (2 buildings of 20 units each).  Each building has only one water meter.  The current owner pays all water, which runs at $1500-2000/mo.  RUBS for gas, all separately metered for electric.  I'm considering two options to handle the water, which I've been told we can't do RUBS with:

1.  Charge the tenants a flat rate for sewer/water/trash that would mostly cover my costs.  This is simple to implement on units that are vacant or turning over, as we intend to update them, add-value, and will have a blank slate.  More difficult with existing leases, which we will likely leave alone at the onset.  

2.  Sub-metering....If anyone has experience with a product that's worked for them, I'd love to hear about it.  I've heard there are sub-meter devices you can hook on to the cold water line coming into the apartment that can monitor that individual units usage.  I like this idea b/c I could cover all my water charges.  Second, if there is a toilet running, leak etc., we could deduct pretty easily where its coming from.  

Would be curious on product recommendations, as well as general recommendations as to how others have handled this situation. 

You mentioned RE professional status.  This would only be relevant if you are using the paper loss to write-off "active" income, as opposed to passive.  Its my understanding the you need 750 hours to qualify as a real estate professional.  That just gets you in the game.  To use the paper losses to deduct active income, you then need to prove that you are "materially involved" in the day to day operation of the property.  Keeping "contemporaneous" logs will help with proving this should you get audited.  I've been told that if you show property management fees being paid out, that can be a red flag for the IRS to take a closer look as to whether you are materially involved.  

Is this your understanding?  Its a bit of a gray area in my opinion.  I'm dealing with a similar situation and want to stay above the fray. 

NO!  21 is the right time.  Work hard, save every dollar you can, and invest it in assets....stocks, real estate, etc.  Learn as much as you can and network like crazy.  I wish I had started in real estate sooner but had self-limiting doubt holding me back.  Fail fast and often, get up, and keep going.  In 20 years you'll thank yourself for getting started so young. 

 I just PM'd you.  Would like to get involved.  Thanks for setting this up. 

Every asset is in a bubble.  Interest rates are artificially low.  Margin debt is at a peak.  Money is being printed and flooding the markets.  Banks are eager to lend that money and have a risk-on appetite.  When the FED pumps the breaks and/or treasury yields rise in a meaningful way, the party will stop.  

Real estate is a safer place to be than some assets, though.  Inflation protection and income are attributes of rentals that can help you weather the storm, as long..... as you aren't over leveraged.  

What are your other options?  Cash?    

 David,

What additional endorsements would you be entitled to on an owners policy by getting a survey?

Check out www.leftfieldinvestors.com.  Their goal is exactly that.  Sharing experiences between passive investors and providing insight into different operators. 

As Nick mentioned, NOI is how the value of the property will be determined. You can check with a broker on price/unit for an idea of market comps, but it doesn't tell you what the NOI of those comps is, which is most important. Berkadia and CBRE have some data you may be able to find online too.

Back of the napkin, if you are all in at $265K, and your gross income is $48K, figure a 55% expense ratio (conservative after a rehab), you get ($48,000 x .45)/$265K = .082.  You'd have an 8 cap.  If comps are selling at or below an 8 cap in your area, you've got a deal.   

If you believe that a foreclosure crisis is looming, your best bet is not to find an agent. It's to ready capital/investors and get versed on the foreclosure process....short sales, sheriff sales.  

In the meantime, as others have said, the best time to get started is now.  If all the pundits are saying a foreclosure crisis is coming in 2021, the exact opposite surely will happen.  Nobody has a crystal ball.