All Forum Posts by: Roman Rytov

I've been building my portfolio for a couple of years aiming at two things:

- good tenant profile (working history, credit score, security deposit)

- area reliability (easiness to rent, density of working options)

I also didn't want to leverage too much and not to bet exclusively on the appreciation factor, always planned to have enough cash flow so all the (large) expenses are covered by the portfolio itself without requiring additional inflows. 

My ideal house was a ranch 3bdr, 2bth, about 1450-1750 sq ft in areas with a modern appreciation rate and I bought a few duplexes in an area with a higher appreciation although, much better ROI (when rented) while the tenants proved to be more troublesome as well.

I talk to other landlords who invest aiming at the appreciation factor mostly with their rental ROI way worse than mine. I'm offered houses in the areas where the ROI is extremely good but the appreciation is non existent.

Given the recently growing talks proclaiming coming recession (and in the long-term real estate the question is not if but when) how do you make your portfolio ready for it? What are the risks that you're trying to mitigate? Do you focus your portfolio on high ROI, appreciation, tenant strength, etc.? Do you focus on a single factor or spread it over?

If the task is to survive the recession (assuming you don't have to sell) and keep the rental income steady what questions one need to ask for herself and what factors to take into consideration?

many thanks for your input!

Thank you both. Decided to walk away.

There is a two-story building, built in 1920 about 9000 sqft consisting of 12 one-bedroom units with only 3 parking lots. It is in a low-end area of Atlanta (West Atlanta) which is going through a lot of changes and theoretically possesses some potential for growth. The building has been abandoned for a long time and requires a major investment. Before though calculating the ROI and how much it may cost my question is does it present too many unsolvable problems and should I walk away even if the renovation/purchase numbers make sense? Roughly speaking, I envision the building can be ready for 700-800K (purchase/fixes) and a unit rented for $650-700 targeting in today's money about 9-10 cap assuming 10 out of 12 average occupancy.

However, I'm more concerned about its vacancy rate and its turnover. With only one-bedroom units and the lack of parking what tenants can I get? Possibly not the best but causing high turnaround. On the other hand, the area represents a potential of growth and the numbers allow some room for an error.

My current tenant profile, the area of investments (SFH) are very different from this type and the agents/PM company have no experience with this type of the deal and properties. Needless to say, they're talking me out of this deal.

Walk away or check something else? Thoughts?

Patrick, I hear your point and I don’t claim to be an expert in the zoning area. All I meant to say is that some new regulations are grandfathered to the new owners and others are not. 

@Patrick Liska, I'd respectfully disagree with your statement on #1. Changing ownership puts the new owner in the current compliance requirements even if no changes to the property have occurred. At least it is the true in our county and in regards to restaurants and getting the COO from the city. The new architectural/safety regulations that occurred during the previous ownership can be waived for the old owner but once the property is leased to a new establishment they have to comply to the current regulations. Your situation may vary but it's not universally true.

Thanks everybody! Very helpful. Appreciate your input.

I have three duplexes with interesting characteristics. When both units are rented the CoC (after insurance, taxes and PM fees) are about 20% CoC which is very good. On the other hand, the vacancy rate is the highest there in my portfolio - one of the 6 units is often not rented. Next aspect is that it's a "high touch" area: a couple of the tenants on the 8th program, they often delay payments, etc. The last part of the story is that these properties have appreciated substantially.

Two distinct questions come in this regard:

1. Given that high touch flavor of the properties I'm thinking to sell them but maybe I'm reacting too emotionally? Even after the vacancy rate and high turnout are factored in the CoC is still better than other properties in the portfolio.

2. The appreciation of the properties is, of course, only on paper. CoC is high but return on assets is getting lower since the assets are growing faster than the rent. How to realize the appreciation? Should I take a loan against the properties and invest is somewhere or maybe sell them all at once and reinvest?

I know that I'm mixing two questions here. Your feedback is very welcome.

Chris, can you pls elaborate on how is it possible then? The requirements stay that the owner should be the same. I can't seem to figure it out without an LLC.

Never did 1031 but based on what I read it may not be an option for my situation. I owe two duplexes in my name and my wife another one. Can we sell the three on 1031 and exchange it for a single larger property? Probably we have to create an LLC first and transfer the three there before the exchange occurs?

I have a dozen of single family homes in the ATL area and very happy with  my property management company that offers an end-to-end solution. Considering now expansion to my first multi-family property <20 units). Want to check alternatives before giving this business to my folks. Would appreciate any recommendations.