All Forum Posts by: Brad Larsen

@Ramon Cuevas  I would agree with you as well on the MF being possibly better than a SFH if one has the capital and experience to purchase a newer 50+ unit complex getting rents of $1,000 or more per month. However, the focus of my post was to assist the rookie investor who does not have $1M in liquid funds to put 20% down on a $5M complex.

That aside - it comes down to quality of tenant. My firm and I have leased well over 1500 SFH's in the San Antonio region (documented on the San Antonio MLS) so my experience in dealing with tenants has taught me that THEY make the difference in the performance of the project as a whole.

You are right on scaling, managing, all of the above if that is your focus for MF....which falls victim to exactly what you indicated in your reply the same as SFH's. Again, my response was for the self-proclaimed rookie's initial post.

Lastly, I could not comment on using a FHA or a VA loan to house hack. That is up to the person borrowing the money and interpreting the use of those funds. Example: You are supposed to live in a VA home as a primary resident - but after closing....plans change and you rent it out. I have seen that done but would not recommend or condone the practice on this forum.

Good luck out there!

@Kyle Kieke  Good Morning Kyle - In reading the posts, I have to wonder why you are so focused on the multi-family real estate side for properties to invest in.  Let me offer a few reasons to consider single family homes as your FIRST choice.

1) The monopoly method.  Buy, hold, sell 3-4 single family homes....years later sell....exchange in a 1031 to buy a nice multi-family or commercial building.  Nothing new with this - but it holds true.  

2) You get what you pay for.  If you buy an investment for multi-family where rents are $500, you get the absolute worst kind of tenants / applicants and you then just bought yourself a full time job.  Good property management companies can not handle MF properties like this because the tenants do not come to us ready to be screened, verified, and held to actually pay rent on time!

3) The re-sale market for a SFH is exponentially larger than a MF property. Who buys MF properties? Investors. 1 out of 100 people. Who buys SFH properties? Everyone.

4) Appreciation. In my opinion, you will see a greater appreciation in SFH versus MF. Of course there are exceptions - but I think it plays back into point 3.

5) Comparable Rents. When looking for comparable homes, you can get quite a bit of information for SFH's through the MLS or other sources. These tend to hold more water than some Pro-Formas or Loopnet listings coming from the seller.

6) The Formula. We feel that San Antonio is excellent in producing good quality investment SFH's in the $125k to $175k range that fall closely to the 1% rule in rents - get excellent tenants - are newer in age - and can sell when you need them to. Did I mention excellent tenants? Go for homes that will rent for $1,000 or more per month. The quality of tenant is much better. I can not stress this enough. If you "cash flow" well from a MF home - but it costs you 3 times the amount to turn the unit because the tenants only have $500 deposit down.

Lastly - the BRRRR method is an excellent way to begin. You could get your feet in the door with a SFH with a primary residence loan.

Always work with a Realtor, and plan on hiring a property manager to handle your home.  

Good luck out there!

I would recommend you consider management, or atleast consider factoring in management of the property for the end result some day which would be to sell the property.  There are numerous reasons to use a property manager, all of which should play into your numbers analysis.  

When you go to sell years later, or should you want to illustrate your holdings to a 3rd party to get a loan perhaps, these numbers will be evident and show on a pro-forma.  

With that aside, go with your gut on this as sometimes you just have to jump in.  Investors that get paralysis by analysis do not get too far.  

Good luck out there!

Well Done David!

I would agree with the above comments as most good investments are NOT hitting the MLS. The dynamic of San Antonio investor clubs has put a lot of bird dogs and wanna be's out there knocking on doors from foreclosure lists, sending direct mail, networking, etc.... all in the interest of catching the deal before it hits the open market.

However, there are excellent retail deals to be had for solid homes.  You can buy that distressed property for $100,000 - put your 3 months of time and $25,000 into for an end value of $125,000 with a rental rate of $1,200.  

OR - You could pounce.....I mean literally pounce.....to get on the good retail home being advertised at $130,000 - getting you the rent rate of $1,200 from day one.  

My point being, do not discount the value of the open market on the MLS. Have an area, a price range, and an AGENT ready to go when they come up.

HERE IS ANOTHER GEM:  Work with Property Management companies in the area looking for the package deal.  The homeowner who wants to sell WITH the tenant already in place.  The PM company can take a reduced commission, show you the exact lease and rent rate - and you can get into that for a good 5 to 10% decrease from full retail value.....WITH a tenant in place and documented numbers.  

Good luck out there!

Would agree a lot with the above comments, there are good and not so good parts of San Antonio to look into.  In producing some information for investors from France, we have some excellent examples of quality properties getting cap rates of 10-12% (before expenses) that draw in an excellent class of tenants. 

The thing you should understand most about San Antonio real estate is we are like the turtle - slow and steady.  If you want a rabbit, wait for the market to do something weird and go into the coastal areas like Florida and California.  History will repeat itself again there.  

For us in our market - the downturns are not really downturns.....conversely....the upturns are not get rich quick.  

Either way - We feel San Antonio has an excellent real estate market that is always in the news for bright prospects.  

Take Care!

On a month to month situation, we raise the rental rate by 25%.  Most tenants are GLAD to pay this because in our experience they only need one or two months extra to close on their home, find a new place, get through a life challenge, or finalize a new job.  This is put in writing in our lease agreements from day one that the rent goes up 25% on a month to month scenario by default.  Since this is standard across all of our lease agreements, we comply with any fair housing laws.  

Ask yourselves a few questions for your market - 

1) What is the tenants alternate cost?  (Meaning - if they are FORCED to move out - how much will it cost them for interim housing)

2) What do apartments (real apartments - not the ma/pa 8 plex) charge when a tenant wants a 1-2 month extension?

In the end of all of this the Property Manager / Landlord controls the extensions.  If they do not want to extend, put that to the tenant in writing with the required amount of time per your state.  Texas is 30 days.  With this being completed, you can do a lot of good with extensions.  Another good point is pushing a November lease end to January or February.  In our market, the low time is Thanksgiving.  The last two weeks of November are always dead.  From there - it's all uphill until late summer when it starts to slow down again.  

By allowing for extensions, you could put a landlord (or yourself) back on to "Summer Cycle" as we call it here in San Antonio.  Which, by the way, is from April to October.  I know - a LOOOOOOONNNNNGGGGG summer!  

Take care out there!

The first time use of a VA loan is around 1% origination and the fees can be higher than FHA from non-allowables being factored in. That is a long discussion in itself. The second and subsequent loans are higher each consecutive time you want to secure a VA loan. It would / could be cost prohibitive to do this. Also, you would be obligated to capital gains by NOT living in the home for several years. The after sale tax consequences would eat up any profit. Start with your exit in mind. Good luck out there!

Julie; Realizing I may be a bit late to the party - I will copy / paste some info from a post of mine.  

http://larsenpropertymanagement.com/8-things-look-san-antonio-property-manager/

Owning numerous LLC's myself, I will tell you that I always use an attorney. All of my rental homes are under an LLC. The comments above about Legal Zoom are correct and it's fairly straight forward to file for an LLC.

HOWEVER - You have to nurse the LLC yearly. There has to be a record of corporate minutes and documentation to go with the LLC on an annual basis. Without that, an attorney can attack right through it saying you have not maintained the LLC and it's no longer valid.

1)  Do an annual update.  Pay someone to do it, or set it on your calendar as big as an event as your spouse's birthday!

2) Do not forget to file a Tax Return. Goes without saying, but even a new LLC filed now (December 2016) is obligated. The fine alone could be several thousand. The IRS does not miss anything!

Good luck out there!