All Forum Posts by: Stephen Glover

@Matt Carozza  It may have been mentioned above, but it is highly doubtful that taking 80% from $400K or $500K and being left with a cash flowing rental is possible in Richmond.  I've not seen much over $200K with 20% equity or less that will cashflow. (Yes, there are some, but not many)

I'm hoping that if they've been there for over 15 years then they may have great equity in the home, or maybe it's paid off by now. If you fix it up (let's say for $125K) and then the value is truly $400K, then only pull the $125K back out (because the home is paid off, or close to being paid off), and have a mortgage on that, then a BRRRR is definitely possible. You could pull ~$200K out, $125K would be recouping the money for rehab, and $75K would be money for other investments (or any variation of that concept based on the numbers).

I love BRRRRs and have 3 underway right now, have completed a handful this past year... (6-7?) but this really seems like it might be best for a flip unless you only need to pull 50% or less equity from a $400K home.  Make sense?

@Chang Pan Community banks are being cautious but still doing cash-out refis. I'm underway on a few BRRRR's in Richmond right now. It is more important than ever to buy right and be sure there's plenty of cashflow- which is what the community banks ultimately want to see in order to fund. Hoping we see some light at the end of the tunnel soon so we can get back to normal. Buyers have to be very certain of financing, and buy only the right deals.

@David Ferguson I do things under various LLCs, but agree with what @Taylor L. said. The veil can be pierced relatively easily if not set up correctly. That said, I create LLC's in a couple of minutes online for $100 (did one today, actually!), but then there's a few other items that need to be done thereafter. As others mentioned, talk to an attorney the first time around.

One important thing to note is that this will change your financing options (if under LLC vs personal). There are some benefits for financing under an LLC (super fast refis, less paperwork, lots of loans), but also benefits for personal (30 yr fixed, low rates). Be sure to study up to see what is best for you.

@Ben M. Annual walk through inspections in most cases, plus move in/move out inspections.  They will see the property more if there are repairs needed, or if you have a good PM, they should visit if the home is quieter than expected or if there's any reason to believe an inspection should be done sooner.  I've seen PM's promote quarterly inspections during the sales process but have yet to see any PM's live up to that promotion- it's just not feasible unless each individual inspection is paid for separately.

During COVID19 inspections on occupied units have mostly stopped unless an emergency, along with non-emergent maintenance.

Out of my company's management portfolio, there is one client who owns ~130 units in Richmond, VA. On April 1 at 5PM we had received 43% of his payments. We compared to previous months and they were similar.

Most of his tenants are on a 5-day grace period from previous management and pay on the 5th.  All of our leases are 0-Day grace period.  As we transition his portfolio to our leases he will get paid sooner.

We are updating our clients daily with percentages paid for their peace of mind.  I believe some other PM's are doing this too since many are concerned.  Good luck to all!

Things are changing rapidly.

There seem to be two camps for landlords/PM strategy:

Camp A: Proactively reach out to tenants with new policies and procedures to include eliminating late fees or payment plans, etc.

Camp B: Collect more information as things are changing. Make minor decisions to stay on course. Make larger decisions when things settle.

My company is in "Camp B.” I am choosing NOT to proactively reach out to tenants regarding rent and late fees as we expect them to pay. The situation is too fluid to implement new policies. I’m expecting this to be a marathon, not a sprint.

**If you send written notice implementing new policy, then something changes and you no longer need or want to have that policy, you could be heading for a lot of headache trying to change policy again.  Be patient.

We are choosing to communicate appropriately with tenants as they contact us. In short, we are letting them know that this is unprecedented and to bear with us as we learn more about the situation. We are showing empathy and that we do care for their concerns.

Our team has also sent notices to all tenants, both commercial and residential, with CDC guidelines and recommendations to reduce our clients' liability. For our multifamily assets and commercial assets, we have doubled our cleaning frequency and focus.

While we do expect rent payment, we also expect there may be some sort of leniency if payment is not made. This could be in the form of no late fees or payment plans, but we are choosing not to advertise any options to our tenants in advance. I have a feeling the government may mandate what we are allowed to do, or not do, in this scenario over the next week. Something to keep our eyes on.

Once April 1st arrives, we will see what percentage of payment isn’t made and tackle it from there.

Stay consistent across the board with policies in order to follow Fair Housing law. This is for your protection.

Other minor updates:

My PM company is not doing occupied unit showings. We are implementing code box and/or virtual showings on some vacant units.

Our maintenance team is not entering units unless there is an emergency or safety issue, or an issue that could worsen if not remedied. Occupied inspections are postponed.

In Richmond, courts are closed and evictions may come to a stop temporarily. Our evictions already planned are still scheduled, however I expect this will change.

Our office is working remotely.  All staff is still actively working and engaged.

We expect more mandates, rulings, and new policies throughout the next week as we approach the first of April.

Some courts are closing in Richmond.  Evictions may be affected but we are still able to file.  We have one eviction scheduled to happen late March and talked to the Sheriff yesterday.

Our team may be forgiving some late fees next month, but that is to be determined.  That likely will be the first step in leniency during this time.  We will be communicating with our clients on a case by case basis.

More local updates to come on this chain as needed.
 

There's a lot of uncertainty right now as to how impactful this virus will be on our health and local economy. Our team studies property management on a local and national level for trends, variances, opportunities, and potential risks. We are seeing things happen other places that could happen in Richmond, VA as well. In an effort to provide some information for long term buy and hold investors to be more prepared, please see below:

Happening Nationally:

Tenants have refused to leave at the end of their lease siting uncertainty and high risk of virus.

Tenants (apparently even with strong renter history) are stating the virus has impacted their income and are not able to pay rent, are asking for lenience.

Vendors are less responsive to non-emergent maintenance due to fear of employees becoming sick.

Property Managers have chosen to be less responsive to non-urgent maintenance requests from tenants to keep their team safe, similar to vendors.

Showings have decreased or have been cancelled due to the fear of being in public buildings or other people’s homes, which might impact vacancy if this is longer term.

Occupied unit showings have ceased for the protection of the tenant in place, the showing agent, and the prospective tenant.

Some management offices are closing and requesting rent be paid in a different manner than visiting the office.

Occupied unit inspections have been paused, unless deemed emergent.

Be Prepared:

Think through how you will handle some of these situations in advance and write our a process for it.

Handle them consistently and do not favor one tenant over another.

Be proactive and prepared so you can act unemotionally and with fairness for all.

Be a Leader:

Now is the time to show your team (vendors and tenants) that you value their health as much as you do your own. You may not know what they, or their family member, are dealing with. As the leader of your team, prove that you have their back. They will remember that when this passes and treat you accordingly. Whether you believe this is a big deal or not, others may feel differently.

This is an unprecedented situation, and it is more important than ever to create mutually beneficial arrangements between tenant and landlord. Think outside the box, and be courteous. There is a need to create a win-win for all parties involved, and the landlord or manager needs to be a leader in a situation like this.

Whether you self-manage or use a professional manager, communicate with your team and others in your community to find creative solutions to keep moving in the right direction.  This is a learning experience for many, and we can do better when working together.

Stay safe!

@Adam Sieg  What @Jeff Copeland said is correct. Quality PM's would realize it's a long term relationship.  Focusing on the immediate short term gain would set the PM's up to lose in the long run by setting the wrong expectations.  Overpromising and underdelivering.

Anyway- you have the right idea, but in short, if two different PM's are in the ballpark you can feel a little better about it.  Zestimates have no idea of the condition of the home, or the difference between one neighborhood or another.  Zillow is often misleading.  I've rented 2 homes this week for $200+ over the Zestimate, and that's just top of mind from this week. Scary that Zillow now wants to replace PM's.  Trust local professionals.

@Sarah Stamper @Justin J Morello other than REIA and RING, most I've found are on meetup.com (3-4 good ones). @Taylor L. has a good monthly meeting (Richmond Multi Family meetup on meetup.com) and @Shera Gregory hosts an upcoming meetup/seminar too.