All Forum Posts by: Silvia Baier

Quote from @Randall Alan:

Quote from @Terra Padgett:

You hear so much (I guess from the gurus and course sellers) about how “predictable” the cash flow is from rental properties. Well I adamantly disagree. You have a maintenance issue…unpredictable cash flow. Your insurance premium goes up…unpredictable cash flow. Tenant doesn’t pay their rent…unpredictable cash flow. And the list could go on. If you’re just getting started in rental properties, just beware that the cash flow is UNpredictable. 

 @Terra Padgett

So I get what you are saying, but I don’t know if I totally agree with you.  If you want to nit-pick reality, I guess I could get on-board… but the general concept is that you make allowances for the things you are talking about.  I have 37 units.  I have a maintenance reserve account I fund with over $3,000 for repairs a month.  I have an escrow account that I fund with over $5,000/month to cover tax and insurance payments due across the year.    While those escrow accounts are funded from GROSS cash flow - I don’t count those escrows as a part of my income from my business.   They are really pre-paying expenses.

Maintenance issues, taxes, and insurance expenses are all expected things - and frankly they are expected to increase every year to the point I actually over fund my T&I account by about 10% to compensate for those increases.

So if we turn to rent, yes, someone can be late on their rent.  But 9 times out of 10 that is made up for within 30 days by the tenant - so cash flow for the month USUALLY is consistent for the month - but maybe not by the 5th when it is due for us.  

On rare occasions a tenant can’t - or chooses not to recover and they get evicted.  Maybe THEN you see what you hoped wouldn’t happen - that you may be out a month’s rent or so - but that is why we mention a vacancy rate when forecasting rents, right?  To say repairs and price increases imply unpredictable cash flow I think is an over statement if you are running your business right. 

Does a credit card company say their cash flow is unpredictable because of late payments and defaults and charge-offs?  No - they expect them.  They plan for them - in essence they budget for them to the point they are listed in their annual report. 

Just a little counter argument…

Randy 

Randy, good response. I think owning in bulk makes it much more predictable. If all you have is one house, your expenses to cash flow ratio is likely going to be terrible. I only have one unit (SFH) and I don't dare to expect cash flow. I'm just happy having the mortgage paid. However, it is cash flowing for now. @Terra Padgett How many units do you have?

I wouldn't evict just because of complaining. She is paying the rent I assume.. but the other poster was correct, try to remove emotion. Tenants just want a place for "quiet enjoyment". It might not be scorching hot but she has to sit in the heat all day, not you. Sometimes there's not much you can do but apologize and absorb the complaining. I'm guessing you haven't been married? Sorry, bad joke. Just try to be a good landlord... as long as she is paying the rent and not trashing the place. Hope it works out for you.

Quote from @Joe Stout:

Actually, this is my first one that I'm hosting in Columbia! But we will be here for the forseeable future quarterly. @Silvia Baier

 Awesome, thanks!

Do you go to many REI meetups around Columbia? We will be moving there in September and looking for RE meetups.

I've been having that lately too. I'd call it Real Estate Euphoria. ;)

@Gino Barbaro

I truly appreciate you taking the time to say hello on my post and give feedback! A guru who actually has the assets to back it up! I truly believe I am in the <1% who can achieve this goal. (Partially because 99% of people don't WANT to deal with tenants and business finances!) I'm not looking to build an empire to hundreds or thousands of units, I just want one big building! I'm 45 and would love to leave the W2 behind in 5-10 years.

Extremely pleased to have a few gurus chiming in here! (look, if you have 30+ units you are a GURU compared to me and the average Joe!)

In the meantime I will check out your blog posts and podcasts Mr. Barbaro!

@Randall Alan

I do agree... I know it would come crashing down on me if I didn't keep up with the market rates. With one unit (house I've had for 19 years), and SFH market rates not changing much in my market (St. Louis City), I have been able to maintain rent level for the tenants. I increased rent between tenants, and came very close to increasing this year (year 3 for the current). But yes, with a large complex, it has to be much more business-oriented. Not that I don't treat my current unit as a business, but if I mismanaged the money on something big, my investors would be all over me. Thank you! I wouldn't want someone else to read my post and follow a failing pattern!

Quote from @Chris Seveney:

@Silvia Baier

Of course it would be a great hgtv show to have people who have never managed a MF building step in and take it over and manage it.

 I would totally love to watch myself on TV! Except I wouldn't have time if I was managing this building. LOL! Thanks for the insight :)

@Russell Brazil

Thank you!

@Randall Alan

Congratulations on being able to quit the W2!! And thank you for contributing to the forums! Considering your empire and experience, I'm thrilled to hear your perspective. Yes, the message I'm consistently getting from others, including lenders, is to start with a 4-unit. I'm certainly not "above" that, if that's what's needed to prove my competency.

How much capital is good to keep handy for repairs/emergencies? Do you have a per-unit amount? Or a percentage of the value of the assets? Or just a big number to handle multiple crises?

Example: 10% of asset value or $3000 per door or $50k?

My goal is to not burn up all my cash with a down huge payment, but find other investors to partner with and share cash flow or equity, and keep some of my own cash liquid reserved for repairs/emergencies. I do have a cash flow property I've been renting out since 2018 and I did a cash-out refi for the next investment when the rates were low. I'm confident in my ability to turn over tenants and deal with issues.

One of my most critical decisions is to get the RIGHT tenant the first time. Both my tenants (first and second/current) have been there multiple years each, young couples where one is a doctor receiving a housing stipend and the other spouse earns a healthy income as well. 

The SECOND most critical thing to me is to have a great relationship with the tenants. They just want a place to live and "quite enjoyment". So I am always proactive about seeing if there are any repairs needed (every few months). After all, they are the primary caretakers of my asset! I don't raise the rent on great tenants. Even when taxes and insurance and mowing and water/sewer prices go up. I'll have a chance to raise rent when they move. And, they are great references for new prospective tenants.

I have not met either of the tenants in person. I had a relative show the house for the first time in 2018, and have remotely managed everything from day one, from 5000 miles and 7 time zones away. First tenants showed the current tenants. I found ways to be creative because I just couldn't fly 10 hours to deal with repairs or other things that came up.

The main difference(s) I see between my small operation of one and something with 30+ units is that I would need a website, lawyer, CPA, and maybe a call center. Everything else I'm doing I can scale up easily. And the huge upshot is that I will be there in person living in one unit to ensure stabilization is smooth, and staying local (living 10-15 miles away but probably using it as an office weekly) for years to come. Thank you again for your time and thoughts!

And I leave you with a big dream of mine. Look at this:

https://www.marcusmillichap.com/properties/154758/arbor-at-t...

36 dwellings, Class A, brand new, 100% vacant, and some retail as well. I'm sure the initial period would be low cash flow when 90% occupied but wow. Managing this property would be FUN in my opinion. How hard could it be to manage one building? And eventually owning it would be a retirement by itself!

Wow. I was looking at getting into MFH in Maryland. Is it that hard to evict there?! Maybe I should just squat instead! Free rent! (joking)

Seriously I would try to figure out why they haven't been evicted yet before looking at a deal like that. What if you NEVER can evict them, and basically make no rent?? Sounds strange to me. Maybe you could apply for government funding and turn it into a homeless shelter... sounds like that's what's happening now!

D.