All Forum Posts by: Ronald Perich

Lawn care... a simple act that causing nothing but problems. Have it done for them, work it into your numbers, and advertise that the resident never has to lift a finger to mow the grass. 

It's a good marketing point and you avoid the municipal fines. You also avoid the headaches caused when the resident "forgets" to mow, when you have to fight the fines in court, when you try to collect the fine from the resident, etc.

I really won't add to the conversation much, but I can tell you that managing multifamily properties is more challenging than a similar portfolio of SFH. Why? Turnover, plain and simple.

A vacancy in a SFH will be easier to re-rent (in most situations) at the same price-point. Most people would prefer having "their own home" as opposed to sharing walls with others. The problem with SFH is you have to pay a lot more for the same income stream.

But going back to 2008, you'll see where SFH investors got spanked, especially in high-growth areas. Builders couldn't sell their new homes so they started renting them, and they severely pressured the rental prices. Older SFH couldn't compete with the brand new inventory at that price point and went for months with vacancies. There were a lot of SFH investors who lost most, if not all, of their inventory because they simply couldn't withstand the pressure.

I own a complex of eight two-bedroom apartments and one 1-bed with a gross rent schedule of +$70K/yr. Purchased for around $200K and rehabbed at about $100K (using the cash flow to pay for it). All in for $300K.

Around the same area, I can purchase/rehab a SFH for about $50K. That would mean I get 6 of these banks running for me. But the rents are almost the same between a SFH and an apartment. Maybe $50 more per month for a SFH. So I'd have a gross scheduled rent of $54K versus $70K.

I pay more for maintenance on the apartments because we supply trash, sewer, and water plus snow removal and lawn care. But that's around $3K a year. 

I pay less for capital expenses, though. A roof on one of the four-unit buildings is around $15K. To replace four roofs would be around $22K. Replacing the driveway is 1/2 the cost on the four-unit than replacing four different driveways.

If we have another downturn and the pressure is on, I know I can break-even on the apartments at a 50% vacancy. It will be tough, but I can survive it. Not the same with 3 of 6 SFH vacant. I wouldn't be able to cover the nut.

That's why we focus mainly on small multifamily. It feels more like a SFH but brings the benefits of multifamily with it.

To your investing success!

Ron

 Are you still using them? They seem pretty good and will get Workman's comp integrated with it. Price seemed to be a little high.

Let me give you yet another example why the 401(k) is not going to help the "average" guy get where they need to go. The 401(k) plan I have at work will stop offering the Science and Technology fund effective June 9. This fund is the 2nd highest performing fund option we have for the YTD, 12 month, 3 year, and 10 year periods and 2nd highest for the five year period. It is an expensive fund ($6/1000), but the returns more than make up for the added cost. The reason?

"The other funds (like the S&P 500 index) already contain between 25 and 36% of technology funds. We don't want you to have too much in one asset class"

Now I personally kept my investment in this fund to 20%. I diversified across different index and managed funds. But it's because I had this fund that I was able to still beat those indexes.

If I take no action, they will move the money into a "Lifecycle" fund. One of those funds designed to reduce risk as you get closer to retirement. What it does is invest in other funds (no individual stocks or bonds, just funds). All of the lifecycle funds use the same funds, just different percentages. Not a one of them comes close to being a high performer. But we get charged $4/1000 for this fund.

I say all of this to remind folks that a 401(k) is there to benefit the company, not you. You have to wait to get your money or you're penalized. The company no longers needs to give a defined benefit, they can do a defined contribution and still look like they're concerned for your retirement. 

How can I help?

 What company do you have for the home warranty?

Before you do a refinance on a seller-financed property, you should always offer up to the seller a discount bulk payment to clear off the loan immediately. Let's say you have $500K of loan remaining with 10 years to go at a good rate. Not sure I would refinance if at a good rate. If I wanted to get money out, I'd consider taking out a line of credit.

But maybe the note holder would consider a discount to get their money right away. Especially good if the note has passed on to the heirs.

Or, if the seller has other money, perhaps they would actually consider refinancing you themselves?

Understanding how relationships work is key to what many of us do as real estate investors. I've always said that the "deal" has to work for both parties or it's not a deal. That's true here as well.

For these smaller banks, they have to have deposits on hand in order for them to make money on the lending side. Understand how banks make money and you'll completely understand why this is a reasonable request from their perspective. 

One thing I would do prior to placing your baking with them is check the strength of the bank itself over at the FDIC. Just make sure they are not in a weakened position. If they are healthy, consider it.

But remember, if both parties don't receive something of value, it's not a "deal". So you are always free to walk away.

I use RentecDirect as my PM software and used Cozy for rent collection. It was nice and free, but such a hassle to update RD at the right time. So I now pay Forte which is integrated with the software. All records are immediately updated. I believe I could also use it to pay owners. It was well worth the extra money ($15/mo)

@Chris Harsy

Welcome to the party!