All Forum Posts by: Jeff Takle

A few add considerations:

-Long term profit from buying / holding the rental. Is it profitable in the long term? Are the profits better with this rental than you'd get in a mutual fund or stock market?

-Cash flow implications in the current year (do you have enough cash in your pocket to keep it going or buy more properties, depending on your strategy?)

-I'd recommend being more structured in your approach to cash flow and profitiability analysis. PM me for spreadsheet or I'll hang it up here when I get back to the office on Monday.

-Jeff

Raider,

Great idea. We've been doing this for the past two years and met with some -- but not a lot -- of success. I think as we refine the pricing, this is a fantastic way to gain additional revenue. This strategy is also mentioned in Jeffrey Taylor's landlord toolkit book.

[size=18]On that topic, does anyone know of a real estate book on the subject: How to Get More Revenue From Rental Properties Without Raising the Rent?[/size]

We've been considering authoring a book on the subject. I haven't found any good existing book comps. Any ideas? Anyone willing to help contribute?

-Jeff

WOW, this is a crazy set of posts...really...on a forum for real estate investors nobody blinked when he said that he uses a "50% rule" for determining whether he makes cash flow?????

There's no such thing as a "50%" rule for cash flow. No creditor will give you repreive because you're "at 50%." Either you can pay your bills or you can't; it's that simple. Either generate cash, or you burn cash, that's it.

[size=18]Also, it's unacceptable for an investor to NOT KNOW the exact amount of cash flow they generate! [/size] Professionals calculate exactly what positive cash flow dollar returns from each dollar invested. Without knowing exactly what you earn on every property, you cannot possibly be making wise investment choices--on what basis are you evaluting Investment #1 versus Investment #2 if it's not on cash flows or ROI? The color of paint on the walls or the new carpet???

Please, please, get a set of financials (Profit & Loss, Balance Sheet, and Cash Flow Statement) for your investments. Spend a day or two to fill them out and learn from them. Even if you *feel* that you're generating positive cash flow, I'll bet you're leaving a LOT of value on the table by not knowing exactly what's going on with your units. I have a spreadsheet you're welcome to.

:shoot:
-Jeff

Nationally, full service management averages between 8%-12% according to the U.S. Census Bureau.

However, vacation rentals can be 25%-50% or more. A vacation rental in Hawaii or a very high end home can run close to 50% but, as you would imagine, the level of service provided to the property is much higher.

Without knowing more about your rental, location, season, and the services the PM is going to provide, I'm not sure you can out-of-hand dismiss them as nuts.

-Jeff
aka "Wet Blanket"

You should look into BizBuySell or BizQuest. They're very popular online databases of businesses for sale and many include the real estate.

Also, unless you've sold a business before, I'd highly recommend seeking out a business broker. Bad news is that they're completely unregulated and quality varies widely. Good news is that they only get paid if you sell and they'll know MUCH more about properly valuing businesses, the right process to go through, how to handle due diligence, regulatory issues, etc.

You can always sell the property separately from the business if that makes more money. Or, keep the property and rent it back to the new business owner. Many options...

I'm not totally sure I understand your question, but I can say that every state that I know of requires that you include the words "Limited Liability Company" or "LLC" or some other specified variation if you are creating an LLC, e.g. "BiggerPockets LLC".

That doesn't mean you have to use the "LLC" part of the name all the time because you can also file a Doing Business As (DBA) for "BiggerPockets" which enables you to market under the new name which does not have the LLC addition. So the short version is: When you're creating the entity you may be required to have specific words in there, but you can file a DBA and use whatever name you'd like in practice of normal trade.

Similar rules exist for corporations, professional partnerships, etc.
Hope that helps!

-Jeff

These are awesomely funny responses.

That landlord may also run into trouble using his current model if he's overcharging those utilities. For example, if the ACTUAL electric expense is $37 and he's charging tenants +$50 for electric, that's a no-no according to the utility companies unless he's a registered utility reseller. Most landlords who offer utilities with rent never disclose how much of the rent is specifically for those utilities and therefore, are basically covered. Potentially you could run into trouble if the units are individually metered but the rents aren't fluctuating with monthly utility expenses. I've never seen it happen though.

Many utility companies have a "Landlord Agreement" for properties so that once a tenant cuts off service it automatically sustains under the Landlord's name so you don't have an interruption of service. You would do this to make sure the electricity/water/etc stay on if your property stays vacant or while you're showing a vacant property. I've found that handy.

:shoot:

Do you provide the heat, I'm guessing? Are you saying there's a separate tax just for rentals...or just observing the sales tax on oil?

A few more points:

John's right -- you are always paying the agent when you are the buyer...when I work as my own agent, I'm keeping the 2%-3% in my pocket...I get paid those agent fees. You've got to split those fees with your managing broker, but If I can make $5,000 more on the same deal than you can--every single time--then I'd say you're paying for a service!

When it gets tricky (i.e. representing yourself against sellers like Countrywide), then it's handy to have a wife. She's the buyer and I'm the agent. And if Countrywide doesn't provide a commission, then you should be able to point to a 3% drop in price below market value to compensate.
[b]
Agents provide two big buckets of info: 1) "neighborhood knowledge" and 2) navigation of the legal paperwork and process. [/b] If you're local, then #1 isn't as valuable; if you've done this a few times, got licensed, and read the state laws, then you're as equipped on #2 as 99% of the agents. And, being an agent really doesn't add much time to your day. You only show properties that you really want to see! You participate in every negotiation anyhow! And, it's ultimately always your choice as buyer/seller to accept.

Finally, I have used good agents when it made sense -- I couldn't be in town, or it was in a neighborhood I didn't know. There's a time and place.