All Forum Posts by: Wade Sikkink

Check with your attorney on this one.  We own a 14 unit building and have a similar situation.  In Nebraska, the landlord tenant act specifically prohibits charging tenants for water service without having a separate meter.  However, there is no prohibition against raising the rent and including utilities as part of the rent.  If the bill is $600/mo, then increase each unit's rent by $40 and you're covered.

Good luck.

Here's a picture of my teenage son demo'ing a bathroom today.

Any other pictures of the next generation learning the real estate biz?

We have a 14 unit building with a laundry in the basement.  It brings in about $2500 per year and over the last 4 years we've spent probably $1000 maintaining the machines and $800 to put in a new water heater that was 15 years old.  Dryers and are gas and the laundry uses very little electricity.  Overall a money maker and also a nice draw for tenants as there is no laundromat in this town.  We charge $2 per load, which is the max the machine coin slot can accommodate.

I'm not sure it would be as profitable on a smaller building, but might be worth it if you could buy used machines.

We're thinking of adding a vending machine down in the laundry room as another revenue source.  Need to find a used one to try it out.

@Jon Holdman Interestingly, I'm wondering the same things.  I came across an 80 room hotel for sale recently.  It's not something I would have gone out looking for, but the opportunity seems interesting and I could probably raise the money necessary in a small, friends and family syndicate.  However, I don't know anything about running a hotel.  I travel for my day job and spend probably 50 nights a year in hotels, so I know the customer side pretty well, but I would guess that the operations side (ie, cleaning, laundry, maintenance, front desk, etc) is probably the most important part of running a hotel.

The one I'm looking at is not "flagged" right now. It has been in the past but the owners dropped the flag because they didn't want to spend the PIP that was required. (I had to go look up what a PIP was....). It seems to me this is a value add opportunity, just like apartments or SFR's we buy. The value add would be in sprucing up the property and getting it under a mainstream flag.

Can anyone recommend a good resource on hotel operations?

Jon, maybe we can compare notes and help analyze each others deals?

BTW, the hotel I'm looking at isn't under the Patel umbrella....

Never allow a tenant to use their security deposit as the last month's rent.  That leaves you exposed on any damages that may have occurred.  I would tell the tenant that the deposit can't be used for rent and they have to pay the last month's rent when due.  If the tenant doesn't pay the rent when due for the last month immediately issue her a pay or quit notice and proceed accordingly with your attorney.  I wouldn't be surprised that when confronted with this that she just up and disappears.  Often when new landlords confront tenants that have been getting away with this kind of junk, they bolt.

Good luck.

I don't ascribe to the theory of giving a bunch of small concessions so the other party feels "good"  This is a tactic espoused by some, but I've not found it to be useful in buying real estate.  Trust, building rapport, etc. are important, but for the most part you won't be negotiating ever again with the same party.  This isn't like business contract negotiations that recur every so often with the same players.

My perspective is that you need to ensure you're reputation in the area is maintained, but not that any particular seller feels that they are winning. We have been buying off market SFR's this year. We do talk with the sellers and get to know them a bit to build some trust, but we don't orchestrate a series of small concessions. We tell sellers that we are considering buying the property as an investment and it will either work or not work based on the numbers. Understanding your counter-party's needs is important. In the cases we've encountered this year, the most important need was to get the house sold. So what do we bring to the table? Certainty it will close. If we come to an agreement, the sellers can relax knowing that this house is now taken care of and off their list of things to worry about.

One recent seller was in the house painting and putting together a list of things that needed to be fixed so they could sell the house (estate situation, not her residence).  When we met her to look at the property we told her, if you accept this offer then you can put the paint brush down and walk away.  We'll take it as is.  You could visibly see the relief on her face.  No concessions required.  In fact, we drove a pretty hard bargain on the price.  But for her, price was less important than just being done with this house.

We will never again negotiate with this seller, and I don't know if she felt like she "won" or not.  However, we solved her primary problem (need to get rid of this house).  I'm certain that if she's asked she will say we did exactly what we said we would do and she feels satisfied with the outcome.

Remember, negotiating is about solving problems.  Figure out the problem the other party needs solved and help them solve it.

@Andrew Johnson said it right.  Generally, people that don't really need the money have the easiest time getting it.

I bought a 14 unit apartment building with no cash out of my pocket and no owner financing.  My bank loaned my 100% of the purchase price.  75% was as a first mortgage loan on the apartment building.  25% was as a second mortgage loan on my personal residence.  No cash out of my pocket, but I had to have other assets to back the loan.  3 years after buying it, we refinanced into a single loan and my personal house was no longer "at risk".  The building appraised over $120k higher than when we bought it based on our improved management and renovations.  Therefore I had enough equity to meet the 25% without a second on my house.

Last April we bought a SFR and did the same thing, except the second was against the apartment building, not my personal residence. I'm doing the same thing on another SFR right now. In the last 3 1/2 years I've bought $750k + worth of real estate and not paid any cash out of my pocket. However, I have a high salary W2 job, significant equity in my personal residence and significant investment assets.

You can buy real estate with no cash outlay, but I think you generally have to have some other assets to back up the deal.

I have posted a review of J Scott's most recent book, The Book on Negotiating Real Estate, on my member blog.  Go check it out!

https://www.biggerpockets.com/blogs/9539/64796-the-book-on-negotiating-real-estate-review

Multiple LLC's adds unnecessary complexity to most operations. Remember, for an LLC to provide protection it has to be maintained as a separate entity. That means each LLC has to have it's own bank account, own tax returns, own PO box, etc. If you co-mingle funds or resources, then you will lose the protection of the LLC.

My thought is unless you have well north of $1M of equity in real estate, a single LLC provides the protection you need for your personal assets and is manageable. Just think about it, if you have 10 houses with $20k equity in each do you really want to maintain 10 bank accounts to protect $200k in equity? Insurance can easily protect that. And if one property is doing well and another is not, they can't share funds easily. It would have to be a distribution from one property and a capital investment into the other. Too much work and chance for error.

I'm not providing legal advice. I would recommend you go talk with your attorney and ask him/her the implications of managing multiple LLC's.

I would collect the whole months rent and then give the buyer/tenant a credit back for half a months rent at closing.