How should i structure PM while starting to buy a SFR portfolio?

4 Replies

I've been a FT investor the last 6 years mainly flipping+wholesaling. (100+ flips & 200+ wholesale deals)

I have a wealthy friend who has 3-5 million liquid he would like to put to work. 

I'm looking to start a SFR portfolio in 2021, looking in areas like Memphis, Milwaukee or Jacksonville.

Rough numbers....

Buy 50-100k
Rehab 15-30k 
ARV 120-150k
Avg rent 1-1.5k

I plan to BRRR everything.
I would be using a local property management company.

Questions: 
1. If it was up to you, how would you structure PM deal? 
2. Best ways to refi these portfolios? Deal by deal? 

Thanks!

Hi Elliot, your rough numbers are very doable in the Milwaukee market. 50k purchase price puts you in some rough areas with high turnover. better to stay in 70k price point to improve your area and stay time. always best to buy cash then refy deal by deal. if you own less then 10 homes with mortgages, that is one type of lending. If you have more than 10 loans, that is llc lending with a commercial lender. these loans have higher rates and shorter amoritization schedules. Most property managers have volume discounts. The PM's structure the deal on the front side when you have a few properties and once you have a certain number of properties with them you can negociate the contract. Many good property managers in the Milwaukee market to choose from. Good luck! Welcome to Milwaukee

From personal experience I can tell you it will be tricky to make these numbers work. 5 years ago they would have worked. 

Your rehab numbers are light, because when you long term hold a property (vs flip) you have to spend more money to bulletproof a property not just make it pretty; i.e. fixing mechanicals to make sure the property will not require ongoing repairs. 

For example we usually replace all of the plumbing and snake the lateral as a default. You'd never get your money back on a flip of course. Same for the rest of the systems. This increases your repair budget and to keep the repairs proportionate to ARV you have to aim for a higher property price segment.

Also know that the median sales price for a single family in Milwaukee is now $192k so you'd be aiming at the bottom third of the market.

Also, doing this remotely is hard - I know people do it, but I am not sure how. I am at my jobs at least twice a week and I have a great crew, but still could not image to do that remotely.

Not sure what your question is about PM? I assume you'd hire a PM.

You will definitely want to connect with a good PM that will give you a preferred rate if you are going to be buying in volume. Most PM's are going to charge a premium for managing properties in rougher areas. If you can find an SFR portfolio that might make financing easier.