All Forum Posts by: Satyam Mistry

@Spencer Gray Hello Spencer, I had a follow up to your message. In your opinion what is driving the higher CoC returns on compressed cap rate acquisition? In the example class A asset you had purchased at a 4.75% cap rate and are yielding a 13% CoC is this factoring in P&I payments or interest only? Of course cash flow is real either way, but was curious on the debt structure.

For say sub 5 cap multi family acquisitions what have you generally being seeing as the lead driver to achieving 10%+ CoC returns on compressed cap rates? Would you say these are generally more common for A class assets that are able to achieve these returns based on the higher rents and lower OPEX ratios due to age of the building?

@Account Closed Thanks for your input. When you remove the dishwasher what do you put in its place? At what rental price point are you removing them and are other rentals in the same area usually not having them either?

🔨 Below are some methods I have used to help tenant proof rental properties I have in Omaha, Nebraska. Of course the number 1 way to tenant proof your property is to screen applicants thoroughly. However what are some other tips & tricks you have tried that help with durability, reduced maintenance, & appearance of your units?

• Use of LVP flooring
• Use LED lighting without bulbs
• Use satin or semi gloss paint for easier cleaning of walls
• Black appliances instead of stainless show less scratching over time & still look updated
• Line kitchen cabinets and drawers with vinyl sheet for protection
• Put bath fan on same switch as light in bathroom to ensure air circulation
• Remove garbage disposal if not newer due to continuous maintenance 
• Remove exterior door knobs that have locks to avoid tenant lock outs, use deadbolt instead
• Remove closet doors if they become an issue especially large bifold ones, install a curtain rod or leave exposed
• Re caulk areas as needed during turnover
• Install door stoppers
• Use curtain rods on larger windows, let tenants get drapes
• Thermostats that cannot be reduced or increased above certain thresholds
• Schedule HVAC maintenance twice a year
• Schedule gutter cleaning once a year
• Physically mailing 2 tenant tip letters a year with reminders incorporating visual images  

Interested in hearing more suggestions from others!

@Ryan Miller Hello Ryan, I have them mostly of west of 72nd St in Omaha, but also have some others in areas such as Benson, Bellevue, etc. I look at the quality of the neighborhood and if it is a SFH if I can consistently get a quality $1500/month tenant in the property.

@Bud Gaffney Hello Bud, I am expanding into more multi family assets as well as development. Currently in the pre construction process to build a duplex and plan on being the GC for the project to gain experience.

@Ryan Burris By ROI are you referring to your cash on cash return which does not include other benefits such as appreciation, depreciation, and equity pay down? If so then this is common in the marketplace today in the 1-50 unit type properties that I am currently focusing on. This is also common for properties that are on market. Just because you are seeing these lower returns does not mean they are necessarily bad investments however as there are other considerations to be made as well as your personal investment strategy and where you are currently at in your journey.

🏠 Sharing some lessons I have learned from owning & managing a portfolio of single family properties over the last 5 years in the Omaha, Nebraska market:

If just starting out don’t undervalue the power of locking in historic interest rates for 30 years on conventional loans. You get 10 of these conventional loans if you qualify!

If owning a couple of single family rentals do not rely on the cash flow to be steady or consistent. Large expenses wipe away this amount for long periods of time, but this does not mean they are bad investments.

When you hit say 10+ single family rentals the cash flow becomes much more consistent. Maintenance budgets also become more realistic month to month. You can absorb large expenses within your monthly budgets. 

The vacancy factor becomes more powerful as you scale. If you have 10 rentals that have all successfully collected for 1 year that is 120 months of straight occupancy! If you have 1 single family rental it would take 10 years to achieve the same record.

Scheduling leases to end during spring and summer months can help fill vacancies faster. Would not have all leases ending in the exact same month, but rather try spreading them out over say March to August time. 

When you have scale, buying something at or near market value can make more sense than if you have 1 or 2 as it can plug into your existing systems seamlessly.

The key systems I have benefitted from are proper tenant screening through credit/background checks & references, online rent collection, regular maintenance visits, strong leases that will hold up for collections, reliable contractors, & regular punch lists.

Reliable contractors are hard to come by and when you find ones that stick, treat you fairly, and respond promptly don't forget to value them. We are in a mindset to constantly reduce expenses which is an important aspect to monitor, but do not compromise the service providers who perform well for you even if they are a little higher in price than a general handyman. A large part of your success in this business comes from quality service providers. 

You should have confidence in the quality of residents in your properties. You cannot catch everything and there are certainly uncontrollable events that happen, but being able to have this confidence will go a long way in your peace of mind as well as your operational success.

Provide excellent tenant service that is fair and friendly. Stuff comes up in the first 30 days of a tenant move in, but usually settles down after that. This gives the tenant confidence in your management.

Patience helps when replying to non emergency tenant requests, especially ones that come up over the phone or in person. We are in a hurry to make real time decisions to requests, but saying you will double check and revert back can avoid uncertain decisions.

Hold tenant deposits in a separate account even if you just have 1 property. Mixing tenant deposits is illegal in many states and will also give you a false sense of security of how much operating capital you have.

Create sheets that track your equity & cash flow. Adjust them a few times throughout the year with updated loan balances, rent rolls, insurance premiums, & property taxes.

Create a sheet with your insurance premiums for each policy that include the premium, deductible, expiration date, and who all are included under the policy such as which bank is financing that property. I found using one or two insurance providers for a portfolio of properties is much easier than communicating with separate contacts for each in order to save a little. I used to prepay the policy in full for the year to save 5%, but switched to escrow them monthly as many conventional mortgage providers require you to escrow insurance & taxes together so in effect you are holding up extra money you do not need to.

It is difficult to scale with single family homes unless you are getting consistent opportunities to purchase properties at below market value.

Refinancing at market value will usually not make sense due to the rent to value becoming too far spread and causing negative or minimal cash flow. Nothing wrong with keeping that equity in the property while maintaining healthy cash flow levels.

I have used 15, 20, and 30 year amortization periods. They all have their benefits and it depends what your own investment goals and comfort levels are.

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Would love to hear lessons and tips others have learned!

Hello, I currently use a combination of Cozy and bank statements for accounting for 13 units (mostly SFR) I currently have, but am looking for suggestions on what may be best moving forward with a growing portfolio.

I like how easy Cozy is to use and you can use someone without accounting experience to add in appropriate expenses for each property each month. I also like how specific it can be for each property to see how it is performing. However I feel this may not be the most time efficient way as you must manually enter everything in and I am left with some expenses that are general expenses for my LLC and not tied to a particular property.

I know Quick Books is widely used, but feel this requires more of an accounting background to be able to successfully operate and is not something I am interested in doing myself. 

What do you recommend?

- Outsourcing to an accountant to do everything through Quickbooks?

- Continue using Cozy along with Google Sheets for the remaining expenses that are not tied directly to a property?

- Any other software or accounting process suggestions?

Hello, I have recently created a website for my real estate holding company, operating out of Omaha, Nebraska, and would love to get feedback on the content and design from members of this community! 

Please see link here, http://silkproperties.co.

Thoughts/comments/suggestions?

Hello Rafael, I am also an active investor in the Omaha market. Have you already found the deal you are interested in funding? If so what are your plans for the property, is it a flip or a rental you would like to keep? Knowing what your plans are with the property as well as having another exit strategy are important things to consider when deciding what funding option to go with. The Omaha market has been on fire, especially for properties $200k and under. If anything decent has come up it is usually under contract within 48 hours.

@Irving Casas Hello Irving, thank you for your kind words. The 50% rule is something that I have checked in the past on other properties, but not one that I regularly use. I have found that the 1% rule in this Omaha market is working well for me numbers wise so most of the other rules will also be close. There are of course other factors to consider such as what value you are able to capture at and what value you can add to the property as well as the type of neighborhood you are investing in. There are many rules and ratios that you can use to calculate the return on a property so it is important to find out what works in your market and what your goals are on the property. Try not to get overwhelmed in trying to make the numbers work on every formula out there, but focus on the ones that are most relevant to you. Best wishes.