All Forum Posts by: Timothy Smith

Hi fellow landlords,

First post over on this side of the forum, so allow me to introduce myself quickly. We own 10 units in Buffalo, NY and are growing aggressively through rehabs and the occasional "opportunity flip", while working full time careers and raising a young family. Our main focus has been small multi-family, and continuing to play a small role in the resurgence of these historically down-trodden neighborhoods.  

I've been reading BT's book on landlording, and was curious as to how many of you provide your tenants with a packet or binder that includes your (or your companies) information, house rules, copy of the lease, etc etc. I can certainly see how this could be helpful, but wondering if it is worth the work as how many tenants refer to a paper copy of anything?!

If you do this, do you mind sharing what you provide, how you provide it? My thought would to also include all the manuals for appliances, thermostat, water heating re-lighting instruction, and possibly even copies of the move-in property condition photos. Too much? Thoughts?

Thanks for your constructive comments. I tend to overthink, but then again, it's served me well so far. 

@Jon Adamowich and @Adam Wigdorski, I really hope to meet up with you both eventually. I read one of Adams post a while back introducing his properties and process, and one of the takeaways is -- and Jon, this is important to acknowledge -- this is what works FOR HIM. He knows the area, he is close to his units, and he can make it work beautifully for him. This is awesome! But...just because the model works for him, doesn't mean it is what you should be compelled to do it. I personally would never spend that much on a duplex (aside from the one I did because I hit a 1031 deadline and it's zoned that I can build another multi-family on the same lot) but it works. $1500/mo rents in North Buffalo originally shocked me, but it is a family friendly neighborhood that benefits from the explosion of Hertel Ave. However, I also think that rent range is volatile in Buffalo should/when the next market downturn take place, as the folks paying $1500-1800 may be looking for $1000-1200, but that is really tough to predict. All the new development along Niagara Street, for example, with rents $1800+ is a tough pill to swallow, but I'm watching it closely to see how it pans out. I hope for our sake (and Buffalo) that it is successful.

By comparison to those $200-300K duplexes, my best performer is a South Buffalo duplex that I was all in at $105,000 purchase + rehab. Its NET cash flow is $900/mo. I nearly had a perfect BRRRR before I even knew that BRRRR was a thing. It is a true unicorn and I wish I could copy it 50 times. Looking at re-appraising it soon for some truth, but I don't expect it to top $120K.

I feel it apropos to acknowledge your comfort level and lifestyle goals. Some folks talk about house-hacking (which, again, I fell into by accident myself) and lay out these crazy inconvenient things like turning a living room sofa into their bedroom and renting out the rest of the house. Maybe that would have worked for me a decade ago, but not now. I'd rather my family enjoy our own four walls and space, and have a slightly slower growing process with my properties than be a "prisoner in my own home". However, if you can make it work for you and pursue it like an adventure (cue the BP podcast with Jocko Willink) then more power to you!

The beauty of it all is that you do what works for you. The most important thing is that you do something! Oh yeah, last thing before I turn in -- Adam makes a great point about the ~$50k houses. They are not in areas you may want to live in, and/or require a LOT of work. If you don't feel comfortable in the area and don't have the rehab knowledge yet, saving up for something a bit better is a good idea. One of my last projects was a $64K duplex purchase that needed nearly $80K in rehab to stabilize. It still performs well, but not as well as I originally projected. However, the saving grace there is the rise of the neighborhood values. 

There is definitely something to be said for quality, as it will probably yield less headaches down the road. 

@Adam Wigdorski provided a much more thorough answer for you, which is all great. I personally write snow removal into my leases, so it's on the tenants. That is certainly a factor here in Buffalo! You may also want to look into the water metering, as some properties don't have meters and are billed at a flat quarterly rate. I found this out the hard way with a triplex I bought (1/3 occupied at the time) and the quarterly bills were $400!! That was not a fun surprise, but not necessarily a big-ticket expense, either. But, those small oversights can add up. The water/sewer line insurance is a brilliant purchase, as well. Sometimes it comes with the property insurance so ask your agent the right questions. My primary residence is covered under our homeowners policy but we opted for the extra coverage through Dominion (or whatever they are now) for the upgraded sidewalk and landscaping replacement coverage should we ever have to dig. 

As long as we're being thorough, add the city rental registration in there, too, at $50/yr. 

@Jon Adamowich sounds like you need some networking with agents to find some off-market deals, or find an MLS listing that has been sitting for a long time because no one wants to touch it -- then again, don't we all!! I would start talking to some contractors and even throw a few bucks at one to come look at potential properties with you. It takes a while to get comfortable with eyeballing rehab numbers, but you'll get more confident each time. The rehab is the only way you'll get your money back out quickly, and also leaves you padding in the LTV.

Speaking of padding, yes I factor in property management, 5% vacancy, and high common utilities (water/sewer/trash) to give myself a rather conservative view of the metrics. This way, if values level off or even dive, I've built in some padding even if I'm still self-managing. Use the online calculators so you can quickly change the figures and see your range of returns in both best-case and worst-case scenarios.

Looking forward to meeting you all at the meet-up -- it will only be my second but have already significantly networked with people from the first one. @Jon Adamowich, to answer your question, I think everyone looks for different numbers and prioritizes different aspects of their investment. For me, cash on cash return was originally the most important, as I could get my money back and into the next project faster. But, I also look at the area and how much appreciation there will be. While I do not use property management, I factor it into my metrics as a worse case scenario, or for when I no longer want to self-manage. My last couple buys were through 1031 Exchanges (look it up in the glossary if that's new to you -- pretty cool concept though not necessarily the simplest!) so I was also dealing with deadlines and some of my priorities had to shift with regard to numbers. If I had to average my handful of properties, I would say my cash on cash returns average 40-50% and  cap rates range 12-22%. 

My advice to you is to find some lenders that offer rehab loan products (I have an excellent one) that will finance 80% of your purchase and the entire rehab, as long as they are not in for more than 80% LTV. There are a few smaller banks around here that do this, each with slightly different terms and "red tape".

Hi Matt,

Nice to 'meet' you. I'm still relatively new to BP myself, but have been doing the investing thing for just over 3 years. It certainly can be fun, though not without its trials. Are you coming to the BP Meetup this Wednesday? That would be a good place to start networking and introduce yourself. It is at Thin Man/Tappo on Chandler Street starting 6pm -- you can RSVP if you go to the Network tab above, then Events, then find Buffalo on the map. Best wishes!

Looking for an agent well-versed in vacation and rental properties in the Finger Lakes region, within 3hrs drive of Buffalo. Considering personal vacation property that would also serve as a rental. Trying to find an agent that is also knowledgable in local rules (HOA, rental restrictions, etc) and familiar with local property managers. Please send me a message if you are one, or know of one. Thanks!

@Sophia Smith

Are you looking for turn-key, or willing to do some rehab? Any turn-key 4 units around here are going to be a premium, and won't offer the maximum equity build that a rehab will. But, there are plenty of opportunities if you are up for a significant rehab. There are also several lenders that offer rehab loan products. You may not get as good of a deal as you would with BRRRR, but you get your foot in the door and can start building equity, along with house hacking.

Not financial advice (good stuff covered above), but if you DO get into the position where your current LL wants to know if you are renewing your lease, ask if you can add a "home buying" clause. I did this myself as a tenant, and provide the option to my tenants who express interest in buying a home. Basically, it is verbiage stating that I will release them from the lease early once they provide a commitment letter from the bank. I do this because I'm passing on the goodwill that was extended me, making the tenant more at ease about signing a long-term lease, and I firmly believe that more owner-occupied properties in our up-and-coming Buffalo neighborhoods is a good thing. 

I'm here in Buffalo, living and investing. Curious as to which differences you are referring. I know NYS has a reputation for "everyone getting a piece of the pie" during closings, but I've only ever bought/sold in NYS so curious what you noticed.