All Forum Posts by: Scott Ellis

I would highly recommend 4 Degrees Management.  They offer both property management and services for RE investors.  Two brother run it and I've been super impressed with both of them.

Joel Tampien oversees the property management side.

Congrats Aaron!  That's exciting.  I look forward to following your progress on this.

It'll be fun seeing the learning curve during your first flip.  We're just starting our first triplex rehab as well.

@Matthew Kreitzer, Not being argumentative but genuinely curious.  In cases against a young person with 30% equity in a $150K duplex and $10K car, how often do you see judgements exceed what a good umbrella policy would cover? 

Similarly, how often have you been able to pierce the corporate veil? Garrett Sutton often reminds people that 50% of corporate lawsuits successfully pierce the corporate veil. So even if you do decide to transfer into an LLC, That doesn't guarantee protection. You'll also have to be very careful about every aspect of your corporate dealings. How your reimburse yourself, which credit card you use, etc. It's not a "one and done" thing.

Similar to @Steve Vaughan, we have our real estate in our personal names, but all rent and property mgmt dealings are done from an S-Corp. 

Not a deal breaker, but I'd definitely scope the sewer if you end up making an offer.  Around that age, things start collapsing or shifting and that could be a 20-30K repair which, in my opinion, doesn't add much value.

Otherwise, it seems like a good deal.  I'm closing on a 1905 triplex right now.  I was nervous, but then spent a weekend in Concord, Mass, staying in homes from the 17-1800s.  That changed my perspective a little.  And it sounds like similar to your town, that building's age is the norm and the young professionals aren't racing to live in the cookie cutter homes 20 minutes of town.  These older homes can still be great investments.

The GRM was one of three ways our appraiser valued our property. The other two included looking at recent comparable sales and taking a "cost" approach of what it would cost to build the same house today on bare land. What seemed crazy to me is that all three approaches came in within $5K of each other.

I agree with what @Sam B. said about local vs. remote, but will also stress that there are sooo many ways to get creative with real estate investing and that each situation is different. My wife and I are doing an FHA 203k loan on our triplex. This means we have to live in it for a year, but we only have to put 3.5% down. The triplex actually doesn't cash flow well (about $140 a month after a 10% mgmt fee or under $50 per door) but because we have so little out of pocket, our cash on cash return is still very high. For us there is another benefit. We intentionally did a high rehab loan which hurt our monthly cash flow because it brought up the monthly payment. However the loan has about $30k set aside as a contingency reserve. If that doesn't get used during our rehab, we get in the form of a check which we can use to pay back our down payment and fund our next deal.

I bring this up for two reasons. 1) If 10% CCR is your criteria, let's keep analyzing deals and thinking creatively until we find one that works; and 2) Every deal is different. We're in a sweet deal right now which you'd never qualify for without living here, but your reserve of cash can open up deals for you that many of us could never get our hands on.  

I'd recommend hopping on Zillow and trying to analyze a couple of houses every day.  I sent you my sheet which makes it pretty quick and before long you'll notice certain houses that are better deals than others.  Then, it's just a matter of being ready to strike when you see that deal come up where the numbers make sense.

I'm just getting started as well, but here's a little beta from my neck of the woods. We just had our triplex appraised. It is located on Spokane's lower South Hill, around 12th and Cedar and is projected to bring in rents of $2400. This is a little high for the neighborhood, but we're renting by the room to graduate students. Our appraiser remarked that our comps had Gross Rent Multipliers of 93-119; and that 90 was typical for the market. She gave us a 115; meaning our after repair value could be as high as $276,000 (2400 monthly rent x 115 GRM)

This triplex is going to have about 20% cash on cash return. However our other single family rental is sitting around 7% cash on cash return (both of which are affected by our amount down and our debt service)

I estimate a 5% vacancy, though our reality is that it's been lower.

I would also reach out to some private money lenders (since you're not currently employed) just to run a couple of different scenarios and see how they'd play out financing the purchase with private money vs. all cash.

http://www.privatemoney.today/ is one local to Spokane.  I haven't completed a deal with them, but @Kalin Stocker is on the forums.

Good luck and enjoy your traveling!  I'll send you the link to my triplex analysis sheet.

@Patrick Liska, I think we're on the same page here.  I should have emphasized enlarging the doorway as well.  Like, by four feet or so.  The original post states it's a studio.  I understand studios to mean the bedroom, kitchen and living room are all contained in one room. If there's a door to outside and the unit is a studio, that should meet safety requirements.  

Our own house has a long narrow living room with a door to the outside in the basement.  When we were considering turning it into a studio, our inspector stated that we could build a partial wall to give some privacy and create a sleeping area in the back and the door would still act as the official fire escape. 

Eventually, we decided to build out a separate bedroom and we did cut out an egress.

In this case, we don't have a lot of details from Noel to totally know what we're dealing with down there.  

Noel, Is there a door directly to the outside from the basement?  If so, you could remove the bedroom door and finish it into a walkthrough opening.  As a true "studio" unit, I believe the exterior door would act as your fire escape exit.

However, it's not super expensive to add the egress window.  On the last one we did, I think it was about $250 for the concrete cutting and $500 for the window and installation. 

Regardless of whether it may be grandfathered in on an old permit, I'd look at it from a safety perspective.  If you slept in that room and there was a fire, would you want a window to get out? 

We use Cozy which allows for free ACH deposits.  We started using it for 2 tenants and are now up to 6.  We love it.  Yes, ACH takes a few days to process, but our tenants can select what day of the month to initiate the payment on, so we often ask them to initiate it on the 27th or so, to ensure the payment actually occurs close to the 1st.

If you or tenants don't want to do ACH, Cash.Me/ by Square is AWESOME for one time payments. It's free and doesn't require linking bank accounts—it uses debit card numbers to both make payments and to have money deposited into your bank account. When someone makes a payment to me, the funds are in my bank account within a minute of the transaction taking place. I would say it's roughly 30 times easier to use than Chase QuickPay.  And, you can have a simple landing page for your property that tenants go to each month to make their payment.  Here's mine if you'd like to try sending me some money. :)  cash.me/$thescottellis

I'm all for paying for tools that provide you value; but I also think it's so cool that both of these powerful tools (and many others) are free.

@Mike Lalor, We had an "in".  We started renting because my wife was in the PT program.  However, as soon as we got our first tenants, we started doing two things:

1. Going to the departments, like @Account Closed said, and telling them we had a house that was set up to be ideal for grad students. (We partially furnish the place and provide high speed internet.) Most were more than happy to post on their online bulletin board or Facebook page. 
2. Asked our existing student tenants to give us the email list if incoming students or post to the private Facebook page for us.  (This probably isn't available for larger programs, but these programs only have 30-50 students per class) We then emailed the incoming students.  I acknowledge that this is a little spammy, but our goal is genuinely to be helpful for students moving to town and to provide a great place to live.  As a result, we had a 50% response rate to our last email.

Getting the first round will probably be the hardest for you.  After that, current tenants should be able to help you find incoming or 1st year students.  Specialty programs have smaller classes and tighter bonds. We haven't needed to, but we've even discussed offering a small referral bonus if tenants find a successful replacement for themselves.