All Forum Posts by: Steve Shaffer

@Ryan Hazelwood HUD can be tricky as far as answering your question about why it hasn't sold. I was 5th place on a HUD property once and it ended up falling to me because you had to physically deliver a money order to an agent they designated an hour away within a certain time of them saying "go". Bizarre and atypical, but HUD can be weird. There's some good advice above. The only things that I'd add is if it's been HUD over 100 days, I'm sure your in the period where investors can buy it and use it as an investment property. If you buy HUD in the exclusivity period for owner-occupants or if you use owner-occupant financing and you do the live in it for one night and move out thing you are breaking the rules. You will almost always get away with it, but the penalties are harsh and not remotely worth it. Just play it straight with the owner-occupant stuff. My other comment would be to look at the price history (Zillow, realtor.com, wherever) and see when they've been dropping it. Usually HUD drops the price every 30 days and it's usually the same day. If you submit your offer the day or two before, it may hit the algorithm just right and you will have the jump on everyone else. Also, the amount of the reduction is often consistent and you can usually shave 10% or so off with your offer. These are all general guidance from someone who's bought a few HUD properties along the way, but your specific market may be different and I do not have personal experience with mobile homes. Happy hunting!

One vote here for Speed Queen.  Personally they've held up better with less maintenance than the slightly cheaper alternatives.  Does your building have secured entry?  You may want to ask a few owners in the area if they've had trouble with anyone breaking into their machines/coin box.  It is a problem in my area we've been pretty fortunate to avoid but the above post noting card instead of coin payments is worth looking into if it's an issue in your area.  Good luck!

Net Operating Income/Cap Rate = Value

Using your current numbers, you're looking at a 43% expense ratio.  I would humbly submit that for class-C that may be a little low.  Often when commercial appraisers come in, they're just going to assign you a 50% expense ratio unless you can show them cause for it to be much lower or higher.  The value of the property then comes down to the capitalization rate from the area which you should be able to get from a reputable broker or by doing your homework on similar properties that have sold.  

$7835 x 12 = $94,020 (Make sure the only income is rent.  Laundry, vending machines, etc need to be in the top line)

$94,020 x .5 (50% expense ratio) = $47,010 NOI

$47,010/0.08 (8% Cap Rate) = $587,625

$47,010/0.07 (7% Cap Rate) = $671,571

The real opportunities with these properties is in increasing the NOI and keeping good records to pass to the appraiser and future potential buyers that you did so. Make the units nicer than they need to be. Charge fair rents. Reduce turnover. Cut expenses relentlessly and increase income in a fair way as you're able. Good luck!

I purchased a side-by-side duplex for 122K.  I was able to split the parcels with my city and sell the property as twin homes after 53K in rehab.  We just closed both sides in July.  One for 145K and the other for 153K!

43 Words!  Pick Me!

@David Acosta Thanks!  Brick by brick!  I agree with you and have certainly considered your approach.  I'm trying to weight throwing the throwing a single plow on my truck approach versus buying this business for what is awfully close to book value that has some income associated with it.  

@Greg Dickerson I really appreciate you weighing in and for that excellent feedback.  I definitely see this business as more of a vertical integration with the portfolio idea than something I was looking to scale and spin-off, but the EBITDA cautions still apply and if there's one thing I've learned from doing real estate for a bit here it is to keep as many exit strategies available as possible.  Thanks again!

Hello all.  I am located in Fargo, ND and currently have 62 units across 16 properties. I am using third party property management at 6%.  The items I find myself needing consistently are cleaning, maintenance, lawn service, and snow removal.  Snow removal is obviously unpredictable but has been significant the last two years. There is a snow removal business for sale in my market with three plow trucks, a blower, and a dozen commercial contracts included for $35K. Owner discretionary earnings are 30-40K the last several seasons so the price is fantastic.  However, the owner hasn’t raised prices in many years and the current commercial clients aren’t obligated to stay/contracts haven’t gone out this year.  I’d be looking to establish a new S-Corp which would handle my snow removal, lawn care, maintenance, and cleaning as well as servicing other multifamily owner friends in my area.  I can stay as busy as I want/generate considerable revenue in those categories if I choose. I have good personnel for those seats on the bus.  My primary goal though is lowering my expenses for my portfolio while providing bettor service  (more responsive/dedicated maintenance and snow removal done well and in a timely manner).  I understand there is going to be a considerable time commitment on my end to start this up, get the systems figured out etc.   Has anyone done this for their portfolio?  What are your thoughts?  Good idea or shiny object?

Hello all! I am a multifamily investor in Fargo, ND and was looking at some of the CARES act provisions regarding the 401k withdrawal (not loan). I was reviewing the docs from my custodian and that led me to the actual IRS docs. I was planning to withdrawal $100,000 and elect to not have federal taxes withheld as my intent was to pay it back within the three years allowed. Digging deeper, this would require paying the taxes over the first two years and filing an amended return in year three. I would prefer to avoid the amended return step if possible and that is where this new wrinkle comes in. The payback can be into ANY qualified account and is classified as a trustee to trustee transfer. My question is, this seems to mean that I can take a 100K withdrawal from my 401K at work and roll it into a self directed IRA penalty free. Is this true? Any downsides? Thanks so much for your expertise!

Real estate investing isn't get rich quick.  It's get rich for sure.  Marathon, not sprint and all those other cliche's.  You have to conduct your business like a business and so I understand those who take a hard line against any rent abatement, but I know that my biggest expenses are turnover and vacancy.  If I can make some concessions and keep an otherwise great resident, I will.

Personally, I had the management company reach out to all of our residents in an effort to get them to put their hand up if they anticipated any difficulties making rent.  I have several renovations at the current time, and so we offered them temporary work while they were out of work.  Across 63 doors, we only had 3 people put their hands up for April and one came to work alongside us.  May is a different and, as yet, unknown story, but that level of compromise has worked for me.

I have practically no experience thus far with using a CRM. I have a few Excel Spreadsheets from my local assessor's office that I use to construct my own list for direct marketing. It's very manual, but I end up with an extremely high fidelity list and I'm able to exclude certain owner's/entities that I have a preexisting relationship with. What I'm wondering is how to upload an Excel/Google Sheets spreadsheet to a CRM in such a way that I keep my fields intact and that the program will potentially collate owners from different spreadsheets or who have multiple properties (each property is a separate field in the spreadsheet but it would be great to have one entry for the owner with all their properties created within the entry). I'm sure this is something I could pull off manually or hire out to a VA to input manually, but I didn't know if anyone had any input about importing directly from Excel. Thanks!

@Dave Foster Thanks for the reply!  That was the plan pretty much.  I'm closing 5/24 on this building in an entity I own 100% and then was hoping to sell 30% member interest to a friend.  If there's are not any restrictions on this following the 1031, that's great news!  Thanks! 

If I could put a follow up out there in the forum, how would you establish a value of that LLC that holds that one property? Just base it off of appraisal? (That was my plan) The building is undervalued because of management inefficiencies/the NOI isn't where it needs to be which is why I'm buying it. I anticipate a pretty substantial upside once improve the resident population/lease up.