All Forum Posts by: P.J. Bremner

@Lee Bell

You're absolutely right, poor choice of words on my part.  He was thrown in jail for domestic violence for several years, it was an actual conviction.

@Scott Morongell

I totally agree with you on that, too many people are "one and done".  I've made my living for the past 6 years as a full time real estate investor.  It pays my bills, vacations, house, etc. and I would NEVER go back to the corporate world unless I had no other choice.  While $8k seems like a lot of money, in the grand scheme of things it's really a drop in the bucket (it's all relative).  However, I can think back not too long ago where a long stretch of bad luck like that would have really caused some pain.  

Another good thing to keep in mind, this was damage done by a duplex.  Imagine if you had a couple tenants in a 20 unit building that decided to do the same thing?  It could have easily ran into the tens of thousands.  Sometimes you get those scumbags that know the system and know how to inflict maximum pain for no other reason than they know they can get away with it.  Karma will prevail in the end : )

@Milin Butler

Hm... good question.  I had done a good amount of DD on the PM company before hiring them, had some good references and they had good reviews online.  Personally, I would never trust a PM company again to go full hands-off.  If they say they are posting an ad, ask to see it immediately when it's posted.  I have a Shaker property that they mistyped the address and it ended up in Cleveland, so it sat vacant for 2 months until I caught the typo!  So definitely inspect everything they say they are doing.

If this was a beginner investor dealing with this mess and they didn't have good cash reserves, they would probably have to sell the property at a tremendous loss.  I don't know too many people that can float a mortgage, plus nearly $10k in bills unless they have good reserves.  I have always maintained about $10k for the 3 duplexes, so I never had to dip into my personal money for it.  Actually, for all 3 duplexes I am saving all profits until I have $25k.  Once I hit that level of reserves I will funnel the profits into other properties.

@Matt Motil

I tried so hard to find another property management company that I could trust.  I networked with tons of people and literally NONE of them had good things to say about who they were using.  So I decided to partner with someone who lived locally and do my own PMing for now.  I handle the advertising, pricing, contracts, setting up online rent collections and quickbooks accounting stuff.  I also handle all incoming leads and schedule the showings with him, he shows the units and signs the leases.  I've been able to fill most units in 2 weeks or less, often times getting 20 - 50 leads per ad in those 2 weeks.

This whole experience has proven to me that most people just don't care or are incompetent.  I manage student houses locally, so I know how to manage college kids and I know how to setup a process to handle things, but I didn't have any experience leasing to "adults".  I've been able to learn everything on the fly and put great tenants in my units, it's not that hard...  Pretty disappointing on the PM company side of things though.  They had really good reviews online!  Just goes to show, you really don't know until you're in the thick of things.

I won't go into all of the details because I would have to write a book to explain everything, but a quick background: I bought 3 duplexes in Cleveland last year, hired a PM company (Northpoint Asset Management - avoid like the plague), found tenants and all was well... until it wasn't lol.

One of my duplexes is in a good part of Cleveland, right on the border of Lakewood (affluent city).  It's not B class, but solid C working class area.  My PM company filled the down unit within a month and a half - definitely slow for the area.  The up unit sat vacant for many months until my PM lady was fired for being bad at her job.  The new guy filled the unit within weeks - great work I thought!  Unfortunately he didn't do much due diligence on the tenant.  He was in his late 40's, horrible credit (not unusual for the area), no bank account (also not too unusual for the area), no rental references because he lived with family his whole time (BIG red flag), and not enough income to qualify for 2.5x rent.  Any one of these things by themselves may not be a big deal, but all together is a no-no for me.

Sure enough, 4 or 5 months into the lease he starts to slow pay.  A month later, both front and back door are kicked in by someone, the down unit lady is complaining about cars being parked on the lawn, loud noises, violent stuff going on, etc.  We fixed the issues and sent him the bill, which he happily did not pay.  The next month, I have to ask my PM company why the rent isn't turned in yet.  His reply, "Oh, I'm not sure, I'll have to look into that".  It was the 15th of the month - just an idea of how BAD these people are at their job.  I had to request that they initiate the eviction process.

A week later I got a call from the PM that the tenant was arrested, which is a breach of the lease (we don't allow convicted felons).  We communicated with the tenant in jail, arranged for his things to be removed from the building by his friends.  I thought the worst was behind me lol it gets MUCH better!  So we schedule to have his people come remove his belongings from the building.  My PM, in his infinite wisdom, thought it was a good idea to allow everyone to have access to the building and left it unlocked and had no supervision of the process.  I'm pretty sure most of you know what happens next!

So 4 days go by and I hear nothing from my PM.  I reach out asking for an update on the unit, asking if we have the ad up and looking for tenants.  "I'm not sure, I'll go by today and have a look."  Then I get a call later that night, "It looks like someone else moved in, I guess the ex-gf decided to move in and won't let me in."  Classic!

Needless to say, that PM got fired shortly after.  The next person they hired to replace him was a very nice girl, seemed like she was going to save the day.  It was too much for her, she quit a week later because of all the issues.  Then my PM company FIRED ME! haha I can't make this stuff up!  They said they had nobody else to handle my properties and it was best to part ways.  So I started to self manage.  I reached out to the tenant, who stated she had been paying the other PM in CASH (which is not allowed on the lease, or by the PM company).  Typical hood rat trying to get away without paying.

I started the eviction process immediately.  She never showed up to the hearing and we won the case by default.  We took back possession of the unit, not too bad of shape.  But wait, THERE'S MORE!  During her short, free stay, she decided to run ALL of the water nonstop for 21 days straight.  I received a bill from the water company for $970 (typically it is $50 - $70) and a sewer bill for $1,900 (typically $70 - $90).

Let's recap the damages here so you can see what type of risks there can be in real estate:

- Lost rent due to vacant/non-payment $3,750

- Replacement of doors kicked in $650

- Cost of eviction $450

- Cost of PM company (they had the balls to charge me still LOL) $750

- Cost of water/sewer bill $2,870

Total costs - $8,470

This property fully occupied throws off about $400 per month in cash flow, so this fiasco represents about 22 months worth of profit.  That's almost 2 years down the drain because of how bad the PM company managed the property.

All of this being said, I love real estate and take the lumps, learn the lessons and move forward.  I've finally passed 100 units this year and look forward to reaching 200 in the next year or so.  Don't let the dips deter you from experiencing the peaks!

@Korie Apgar

There must be some care taken when asking "What rate should I get?" because it's a lot more complicated than the scenario you're laying out.  I have some experience, I was licensed to lend in 4 states and originated loans for about a year.  Here are a couple things that significantly affect the rate you're getting:

- Credit

- Points paid upfront

- Type of property you're buying (Single family, multifamily, primary residence, non-owner occupancy, etc.)

- Type of transaction (purchase, refinance existing loan, cash out, reverse mortgage, etc.)

- Length of term (15, 20, 30 year etc.)

- Loan to value ratio (70%, 75%, 80%, 85% are the big tiers typically)

- Amount of loan taken out (this makes a bit of a difference as well)

Most of what you said it spot on, but I think you can get a better idea of what's out there if you cover all of the bases. The only thing that I can see here that MIGHT affect the rate of loan you're getting is the size of the loan. For example, let's say everything about your lending profile is the exact same - 80% LTV, investment loan, no points, same lender, 30 year fixed, etc. but you were looking at a $400k property compared to a $50k property, you will get a lower rate on the $400k property 99.999% of the time. The company originating the loan has a lot more wiggle room and freedom when the loan size is much bigger.

That being said, I just closed 2 loans last month that were non-owner occupant, 30 year fixed rate, no points, 800+ credit score, both duplexes, cash out refinance, 70% LTV and both loans were $100k - $120k at a 5.5% rate. I had locked the rate the month before, so this is a rate from middle of May. Rates change daily (and sometimes even during the day if there is enough movement in the market) and it's tricky to compare today's rate with those that were locked last month or closed months ago etc.

If you have a Costco membership, you can go through them to find a few lenders in their network that will do the loan for cheap.  I shopped 15+ lenders before I found a good one, but then I checked with Costco while I was in the process and found their lenders to be even cheaper.  I closed my loans with Bank of Internet and they did a heIl of a job.  I hope some of this info helps!

@Fahad Masud

When you say commercial real estate, do you mean 5+ residential, warehouse, office space, etc?  I'm at 43 units in the Cleveland market, multifamily commercial real estate but my business partner and I are getting into the non-residential side of commercial as well towards the end of this year.  I'm not sure if a partnership would be appropriate, but we can explore the possibility.  At the very least, we will be more than happy to share our experiences and maybe get you pointed in the right direction.  PM me if you're interested in chatting sometime.  I'm on the west coast as well, my business partner is in Cleveland.

@Robert Campbell

I can't really recommend hiring the same company to manage your property as well as the rehab.  That's not to say it doesn't exist as a good setup, but in my experience it's probably not the best fit.  The problem that I generally see is that they will both be on the same page, so if you're out of state and they aren't doing a good job, they will cover for each other.  If you have independent companies for each, they can keep each other in check.  Just something to think about.

PM me, I can give a couple recommendations for contractors that I've used for about $350k worth of work in the last 12 months.  I have a PM that I've used for about a year that is decent, definitely not perfect but they get the job done well enough and they are the cheapest that I've dealt with so far.

Best of luck with your new investment, would love to keep in touch and hear how your property is doing!

@Oren K.

I will definitely reach out to Marc.  The last time you referred me to someone, it worked out very well so I'm looking forward to it!  Thanks again.

@Brett Schickler

Great info, nice deal, well done!  Nothing like making a profit with $0 of your own money at risk :)

I would love to see the itemized numbers for the monthly cash flow, I think it would help quite a bit. How much are you saving each month for CapEx, vacancy and repairs? Are you paying for anything for the tenant (water, trash, lawn care, etc.)?

I'm also curious to hear how you found the local private lender that you used?  Did you have previous deals to show you could handle their money properly?  What kind of terms did you negotiate with them?

Thank you so much for sharing everything, this is good stuff!