All Forum Posts by: Rio Tomlin

My number 1 criteria for buying any property is "Would I want to live there?".  May seem like a silly bit of criteria, but makes sense to me.  Using that logic, when we expanded outside of Brooklyn, NY, we chose Austin.  Now I happily live in Austin and love watching others who choose to move her increase the appreciation.

Ask yourself, "If the market turned sour, would people still want to live here?".  Also when you go to visit your buildings, would be nice to go somewhere you enjoy visiting.  If I hate going to City X I'm not investing there and forcing myself to spend time and energy there in upcoming years.  Inversely, if I love City Y, you bet I want to invest there, and spend time checking in on my property and enjoying and learning about the city I have money in.  

That's why you should pick Austin.  ;)

Henry,

Coming from a similar area as yourself and @Kelby K. I moved into the Austin market from Brooklyn, NY 3 years ago and agree with Kelby.

The closest thing I have seen to a positive cash flow within the desirable metro areas are duplexes.  You could probably get better cash flow in Buda, Cedar Park, Round Rock, other areas that have no geographical highlights or significance, but if you're looking for something within comfortable distance to Austin proper, positive cash flow is very difficult to find.

A value-add duplex can be had within striking distance of positive cash flow, and still put you in neighborhoods that everyone would consider "quintessential Austin".

Send me a private message if you're interested and I can send you breakdowns of my last 2 duplex purchases and you can see some hard numbers and what to expect.

Have been using vinyl planks/tiles in apartments in both the Northeast and Austin, TX.  All happy guests, easy to clean, install, replace, etc.  Also very durable.  

First thing I did upon buying houses in Austin was remove carpet and replace with vinyl.

Thanks both of you.  I suppose those were thoughts I had and knew, but hearing them from others is what I needed to really cement it.

I'm still extremely bullish on the building itself and its' potential.  Likely going to proceed with purchasing the building, and will do some repairs/updates myself, and then put it on the market for lease.

Hello BP community!  I'm posing this unique question because it can be cut and dissected so many ways, I'm looking for feedback across the board.  Any thoughts or opinions or comments are more than appreciated!

Friend of mine is looking to open his own business (fitness gym).  I helped him narrow the area which he should be searching.  While driving the neighborhood, I found a For Sale By Owner within the same area, for a corner commercial space.  Free-standing building.  Ideal for his business.  

I love the area for investment and want to buy the space irregardless. However, I'm struggling to decide how to frame the deal. Would like to buy it outright on my own, but want the guarantee that my friend will be leasing the space, a 5/5 year lease. Would be NNN and he would do the renovations to suit his needs. Knowing I have a tenant immediately to do repairs and upgrades is a great insurance policy and won't require me to put out capital to renovate, or a long time vacant, or broker fees to lease.

I don't want any stake in his business, as it would compromise my interests.  I want to rent the space for top dollar, and if I owned part of the business, I could be doing harm to myself in structuring deals.  Would rather just own the property, rent to fitness center from day 1, and go from there.  

Any tips for how to structure the deal up front to get the best of all worlds here?  Anything I should look out for in particular (besides the obvious potential strain on the relationship).  Looking forward to your ideas and creativity in structuring all this!

Perhaps I should have explained the relationship a bit better.  We have known each other for over 20 years, and have a network of family and mutual friends as well.  Lots of trust here.  

We are both thinking the initial small net cash flow is the cost (or lack of income one might say) you pay to own exceptional properties in exceptional locations.  I haven't found many investments in such wonderful locations that offer immediate substantial positive cash flow.  

This is my first time posting a deal analysis to the BP community, so here it goes!

A broker friend who lives in New England has brought a deal to me that he wants to go in on 50/50.  The idea is we both put up equal downpayment, and he manages the property we buy together.  He owns property in the area and lives nearby, so I'm not worried about his abilities in doing that.  Building details:

4-Unit Mixed Use, asking price $1.75M: 

1st Floor commercial (currently rented to restaurant for $4,900/mo)

2 Bedroom - 1400

2 Bedroom - 1350

3 Bedroom - 1600

Since this is a waterfront property, it also has 12 boat slips on a dock!  The boat slips are rented seasonally, paid up front, and currently generates $2,000/month (when averaged over the year).

Total monthly income: $11,250 ($135,000/year)

Expenses run very low, from what we can tell, listed annual expense:

RE Taxes :12,000

Insurance: $6,500

Water + Common Electric: $3,000 (heat and hot water is paid by tenant)

Maintenance + Repairs: $2,000

Management: $10,000

If we do 40% down ($700,000) and finance $1,050,000 @ 4% over 15 years: $93,300.

Add for vacancy, misc, etc...  Total annual expenses plus mortgage are about $130,000.

Mortgage numbers are a variable, as we are unsure what we will put down and finance so far.  Also negotiating with friend how much we will establish as his management fee.  I made the mistake of using 8% in my calculations (to be conservative) but now he seems to be thinking that is the benchmark he 'should' be getting.  More realistic, fair, and practical, would be 5%, which will lower the expenses by about $4,000 annually.

If you're still with me at this point, here are some other details:  

New exterior and roof on building.  Heat and hot water may have to be changed at a rate of maybe 1 every 2 years for the next 10 years.  Building has 30 parking spots for the restaurant and tenants.  Restaurant also uses the yard overlooking the water.  Boat slips, however, is an area where a LOT of additional income can be generated.  Current owner only caters to Summer slip space, and has them empty over the winter, as he won't work with boat owners and lower his price in the Winter.  Big missed opportunity, but don't want to base all my numbers on "what could be".  Also worth mentioning that the location is 100% primo.  Lots of car, bike, and foot traffic past the building for the restaurant and exposure, beautiful views of river, harbour, bay for all units.  

My goal here is to break even on cash flow the first 3-5 years, with gradual income increases, and enjoy owning a beautiful property in an amazing location, holding it while it increases in value, and any increase in income serves us well over the duration of our ownership.

Your thoughts?

Good idea Jeremy. At this point when I try to upgrade my service from website (still have 13 days of trial left) it gives me a form to contact sales. Can't sign up online. They may have realized using sales reps can increase sales of training and implementation managers. I will see for sure once the trial runs out, and if I can buy the subscription from the website directly.

Thank you everyone, this does give me some confidence that both of these features are not mandatory, but optional.

Joe,

You may be very right. I should take a step back and refrain from using the term 'bogus'. I let my emotions get the best of me.

Let's say, optional. I believe these up-front costs should be optional, and I'm inquiring as to why a 4 hour training video is worth $199, and if it is in fact mandatory. It seems to me that the 50 hours of free content should suffice, and after reading other posts, PW is notorious for adding fees and packages. Others on BP have used the term "nickel-and-diming" and I didn't want to fall victim.

But thank you again Joe for the insight. Do you have any experience with PW in the past? Are you familiar with the program and training to recommend it to a first-time user?

@Brian W.

Yep, free trial grants access. They have no credit card/payment info from me right now.

Great collection of free videos makes the "training videos" redundant for $199. They have over 5 hours of just IMPLEMENTATION VIDEOS for free! In addition, they have so many other videos covering big and small topics going into detail. I'll use those, and not pay the $199, thanks... They also include a user guide for free in the same place.

Will keep you posted. If I hear from another BP user or two saying the training fee isn't mandatory, I will call PW back and start my paid subscription sans $398 bogus set-up fees.