All Forum Posts by: Spencer Gray

https://inbiz.in.gov/ - creating an LLC takes about 5-20 min and is pretty straight forward.

Are you just fixing deferred maintenance and trying to narrow the $100/m market gap or have you looked at upgrading the interiors to be a B+ finishes and pushing rents a little more for a heavier value add play? There are advantages to both strategies, mostly depends on the specific market/neighborhood and how the demographics are trending and what the comps are like.

You're already at $9,375/unit, a $100/m increase will give you an ROI of 12.8% off of that $150k, which isn't bad, but not incredible. If you could push rents $150/m, with a $175k rehab ($10,937/unit), a little over $1,500 more/unit for either new LVT floors/paint cabinets/new counter top/new appliance package, etc, you would be able to push the ROI to 16.45%, an additional $28,800 in revenue/yr. Can your market support those rents/ looking at the area median income and income growth will be telling. Maybe the extra 3.65% spread between the two options isn't worth the risk of not being able to hit the extra $50/m.

Just taking a quick glance at the Cleveland Heights demographic information by biggest concern is the 8.6% population decline between 2000 and 2014 and the depreciation of real estate in the area. Area median income is $53k, so with your average rent of $714/m ($8,568/yr) that's only 16% income/rent which would indicate there is some room for people to pay more - but only if the comps are either already at or very near that price point, or your units are far superior while not pricing residents out. 

I would take a hard look at the area to make sure you're not paddling upstream. If not, and there's a nice niche neighborhood, it could be a deal. 

Just curious, do you have actual T12s and rent roll or just that screen shot? My gut tells me a lot is left off of that screen shot on your blog post. 

Congrats on getting it under contract!

I have to second what @Mike Dymski said, what is the value add strategy/ROI? That will can make or break the deal. How much do you plan to put into a unit and how much do you think you can raise rents over what time? Then the next big question is how will you finance the deal, just given the NOI and revenue/expense ratio the deal should cash flow, but looking at actual debt service will make the picture a little more clear.

Other numbers I don't see that may be baked in are vacancy, reserves, management fee (even if you plan to self manage).

That all being said, it could be a great deal but need to know more. 

@Charles Richardson

Analysis aside, if this deal even exists, it is NOT a good a deal.

If it actually exists you're describing a top of the market, very high end, A+ core to the core asset. It's in a class that almost no one here on BP even deals with because the only buyers who will accept the low returns associated with such assets (and substantial higher risk IMHO) are institutional investors: large funds, insurance companies, pension funds, 1031 money etc.

If we are just talking about in "theory" how one with bad credit, spotty job history, no cash available can take down a $21M deal then that is another, albeit futile, exercise. 

All the enthusiasm in the world is for not if it is not directed towards an achievable goal. There's nothing wrong with setting a big goal, but it should be just barely out of reach, not nearly impossible. And true, like others have said, it's not impossible - I would say there's about a .1% chance of success - and dozens and dozens of hours spent. It won't be for nothing, though. I'm sure you'll learn a lot.

If you want to go down this road, instead of trying to do something that has >1% of success, why not try for something that has at least a 10%, 20%, or even a 50% success rate. Do something in reach, you'll learn more practical lessons on REI and will be taken more seriously.

I like the NBA and marathon analogy- it would be like an overweight middle aged person saying "I'm going to try out for the NBA or run a marathon tomorrow, hope I can do it!" If they make an attempt they will probably injure themselves, setting them back further and worse discouraging future attempts. Instead just start "working out" and follow the crawling steps others have mentioned. Start with a 4k. 

Not trying to rain on your parade but wishing you logical success.

@Michael G. just an FYI you can legally own bazookas and tanks - and what do you know no one ever commits crimes with them. Outside of our shared belief in property rights your attitude towards guns reminds me of why I left Brooklyn! 

Many states allow businesses to prohibit firearms on premises. The 2nd Amendment applies to the government infringing on ones Right to bear arms and does not apply to private property. Each state has different laws for tennants rights as well as property rights. It is YOUR property and you should be able to set the perimeters for the lease, as long as it complies to state and local law. My personal view is that gun owners tend to be relatively responsible people so there's no reason to alienate a large % of your potential tenant base. Also, as been mentioned LEOs and military can be great tenants. 

What size properties? Columbus is one of the best cashflow markets in the US and buying is very competitive. Unless you are able to find a pocket/off market mom and pop deal (will take lots of networking and boots on the ground and are increasingly rare) owner financing will not win you many deals. It's a great market and to win you're probably going to have to be relatively aggressive with your terms (quick close, hard earnest money, waive some contingencies) and offer price. Good luck! 

Have you considered wholesaling the deal to another investor instead of taking it down yourself? Use those funds for your own deal. 

Have you considered raising his rent to whatever it would be after renovation? Then it's up to him to leave voluntarily or pay the higher price. You win either way. 

I find it a little ironic that one of the most discussed strategies on BP to find deals is to put together (even purchase) a mailing list of owners and conduct a direct marketing campaign via mail. How is that any different from what Holton-Wise is doing via email? Just unsubscribe if you aren't interested in their deals.

 I read the emails linked and while I probably wouldn't consider buying any of them (I'm also not big on Cleveland but it's just not my market) they seemed on par with other wholesalers/brokers descriptions.

I haven't read of anyone on this thread having a BAD experience, just some non prompt responses. Know what your getting into and learn to swim with the sharks! Not doing business with someone because they sent you an email or a few negative online reviews (especially when they are a big player in a market) seems pretty short sighted. 

I also have to say that even as annoying as it is, direct email marketing is one of the best tools for any marketer and I've found the absolute best ROI that also gives you tons of data (who opened the email, how long did they look at it, did they click on links, did forward it?) to then create more targeted lists. This is practiced by companies of all shapes sizes including banks, Fortune 100 companies, etc,