All Forum Posts by: Steve Miller

A few years back I was renting a townhouse and we had a series of break ins. All happened while the occupant was at work or away.  After about 2 weeks, the police tracked leads and arrested..... my neighbor.  Turns out he was caught red handed. All the stolen property was in the place he rented.  The community was fairly social and people talk.  Word spread and everyone knew.  I cant imagine what it must have been like for the wife and kids or the victims.  Within a week, they had packed and bailed out.  I do not know if that provides just cause for eviction in and of itself.   I suppose there would have to be language in the lease that stipulates felonies or illegal activities as grounds.  I'm writing since I have seen this second hand and was more about pointing out, I guess its not as rare a scenario as one might think. The more descriptive a lease, the better protected you are.

Jeff

Thanks for the idea!   That got my attention.  Would you have some resources you could share for getting in to Mortgage Notes?       Thank you

I'm interested in the pool of net revenue that comes from rental income and investing that some way.  Sitting in a bank account getting .05% is boring and essentially losing value. The rainy day fund is already a set aside amount of cash that I suppose could be invested in short terms (again boring) CDs or purely safe vehicles.  The revenue stream of net profit each month is what I'm looking to get more out of.  We go through so much to get a property, a tenant and generating money. To let that profit wither away in a plain old .05% bank account seems like leaving money on the table where it otherwise could be put to use.

Looking for thoughts on or ways that REI's use for leveraging their rental income stream. I understand rent first goes to the mortgage, then the management of the property and its bills. I also believe in having the rainy day fund accumulate for the eventual repairs and larger lifecycle replacements. With that $100 or more per door, what do you do with that money while it sits? Invest in low to moderate risk mutual funds so its readily available?

I'm interested in ways to grow that income while it sits but also have it available when the need arises. Even if I accumulate that revenue for my next purchase, I would want to get some additional return on that.  Thoughts?       Thank you!

Well as the saying goes... you can live in your car, but you can't drive your house.   :)  

If your priority is building Wealth through real estate, this is the place.  Whatever car you put in the garage at night will only get you from A to B.  Investing is what paves the road.

The 4% cap rate is what I found to be a local fair market number.   Given the cost of RE in SoCal and my research, that seems accurate.   Would I prefer higher?    yes

This is my first multi unit, so for me, there's some safety in the search being local.  I think instead of out of state, I'll search in other areas here that are not as lofty in price.  They exist, just not ones that will work for owner occupied as planned.  That's ok.  If I can find a profitable bldg. within an hour or so, I'll do that.  I want to buy something that allows me to go through the process and experience. As in experience what's involved, the good and the bad.  

OK.  I give.  I see now that I'm unrealistic with what I can buy.  I do have more capital.  I want to keep that extra $ for exactly what you mention, vacancy and repair.  First let me say that for this 4 unit I'm referring to, I Am knowledgeable about the area.   It's two 1/1s and two 2/1s.  There's no question that rents for all 4 can be raised $300/mo each and still be very competitive. I'd even say that if all four current residents walked away, the building would be fully leased within a month at the higher rents. That's $1200 a month more in revenue. It was built in the '50s and I'm guessing original ownership family. I haven't looked it up yet but given that the rents are So far below market, I'm expecting the descendants who now hold the title have enjoyed the income while being hands off the management and financials. From the pics I'd say yes, there's some work to do be done though mostly cosmetic. I'd allocate $1000 per unit, which I think is generous. There could possibly be deffered maintenance but a full inspection would find it. Plus at that point I'd have leverage to push down the price. GRM and acronyms aside, like I said, this building is in a B + area to be conservative and I would go out of my way to put it together if I had the means. Since I don't..... I'll let it go. Which leads me to my next area of consideration. I'm in SoCal where the buildings I like are $1 mil. If you're talking $200 - $300k, those are not geographies I'm interested in. I'm not opposed to out of state. Ignorance is bliss. I've been all over the U.S. and open to where I find what I takes to get the ball rolling.

Brent

The gross annual rent As Is = $49,200    The things that move the numbers out of favor based on me purchasing are Cal Prop Tax, in that the current owner has had the property many many years.  Therefore below market rents have a lower impact to him.  If I buy it, the new property taxes raise expenses such that those dollars eat away the profits.  The other factor is that with a low down, hence higher mortgage, my

higher mortgage payments take out those tasty profits. I realize I'm to some degree forcing a math on the deal from my side that isn't exactly correct. My low down aside, I believe the NOI ROI and sales price are good at the low rents.

Hi Roland,

My goal is a CAP rate of 4% minimum -> I want cash flow. This is Southern Cal. :) and expensive. As my first multi unit, I prefer it to be here where I can see it, touch it, work on it and learn where necessary. The big picture is building a portfolio of 4 - 6 unit buildings that have positive revenue streams. I expect some property value appreciation over time, though approaching this as Buy and Hold. Higher values are nice, but that's a bonus years away so I set that aside. My financial situation is that I have a little more than that $50k down for liquidity that I want to keep as much as I can as safeguard for vacancy or repair. I'm open to alternative financing and ideas that make this a reality. Thanks!

Steve

I'm new to Commercial and finding it challenging to figure out how much sales price I can afford. Having bought and sold 5 SFRs over the last 15 years I'm not new to RE. I am new to commercial. I see properties I like (4 unit bldgs.) yet when I run the numbers with what I intend to put down ($50k) the CashFlow/ROI is either negative or a few dollars at years end. There's a 4 unit I really like, it listing price is in the ballpark of fair ($1 mil) and I like everything about it. While I am firm in the reality of "its worth what it's generating Now", the upside is that rents can be raised and I'm confident even with a fair rental rate increase, the units will get rented should the cheaper tenants leave. Where I'm at a road block is

A. making it work with $50k down and B. Can I even expect to get a loan with such a small down payment for $1 million?   At the moment all 4 units are rented but quite below market rates. 

Thank you for your input!

Steve