All Forum Posts by: Allan C.

If you’re new to landlording, what makes you believe you will be better at tenant screening than the existing owner? Inherited tenants are indeed a mixed bag, but I think it depends more on the asset class than you having control. If you buy in rough areas you'll have rough tenants. 100% of my purchases come with tenants in place, but I focus on multifamily. Tenant risk can be mitigated but you'll have to do some diligence.

I try to avoid properties where flippers put tenants in place since they how lower criteria and focus on maximizing rent roll. For properties where tenants have been in place longer I tend to favor, but it’s important to walk the property to see the condition. You can also request an estoppel certificate to verify lease terms.

You should also learn the tenant ordinance of your area. How easy is it to evict or bring rents up to market? That will be important.

Watch out for expansive soil in the Bay Area - it creates foundation issues if not properly drained. Older houses actually have stronger framing, but mechanicals all need updating. Upgrade to copper supply, ABS drain, and updated electricals. 

this will all cost more than $50k esp if you need to do some interior upgrades. Insurance will also be higher for homes >50 yrs so don't forget about that. 

Ok the story is making more sense now. But if the deal was still good then why not just take the difference out of your promote? Was the sponsor group not highly confident in the underwriting to begin with? 

I agree with your overall premise, but perhaps there's a learning for the sponsors as well. Maybe build in more conservatism in your underwriting and complete DD earlier. I inspect exterior in parallel with interior, so within a few days of getting under contract I have a clear idea of the renovations. 

$18M is a small deal to syndicate, so perhaps the group is still early in REI journey. However, it's great to see you focusing on Investor Relations and not just trying to land a deal. I highly applaud the sponsor group for doing that!

There will always be a pool of buyers for small MF, and you have better control over the appreciation. SFH will sell on a pure comp basis, but MF will attract investors looking for yield.

The key to buying MF is finding assets that are not managed well so you can improve the NOI with some modest effort. You can increase rents with light renovations, or improve expense efficiency. It takes some knowledge, so study up before jumping into a deal.

Perhaps I'm getting caught up in semantics, but I'm struggling to understand how a "home run" deal becomes infeasible over a new roof on an $18M valuation.  I know it depends on layout, but I'm guessing a new roof will cost $200-300k max.

that's not chump change, but I wouldn't walk away from a home run for 1.5% valuation difference. Seems like your margin was fairly tight. The time you spent chasing that deal was worth more than $300k. 

I agree with your discipline sentiment, but people should always value opportunity cost as well. 

there were some suggestions in the post above. Did you try contacting any of them?

A lot of your points are confusing so I’ll look to clarify. Adding more hazard insurance to your home won’t do much to protect the equity from a lawsuit. However, adding personal umbrella will - so I agree with having umbrella to cover a large portion of your net worth.

In terms of keeping lawyers away. If all the properties are held under your personal name, then it doesn't matter if you have a loan or not. If the properties are held under LLC and you have proper management of the LLC, and it's not a single-member LLC, then it may be a deterrent if you don't have much equity on the home. Cashing out only 10% is not a deterrent since that means you'll still have $900k equity on a $1M asset. You'll likely need 65+% leverage to reduce the appetite.

I wouldn’t necessarily 1031 to a larger asset because you have transaction inefficiencies with disposition and acquisition. I would refi and buy another asset, or just sit and enjoy the higher cash flow. Depends where you are in life.

Generally I used licensed contractors when liability is involved and handyman when there's minimal liability. If the fence encloses a pool, then I used licensed. If it's just a privacy fence then unlicensed suffices. 

sure there's a law above $1k, but we all know CA has lots of laws and many are stupid. That being said, the difference between your quotes are very small. Yes it's ~30% respectively, but only $2-3k absolute. Only you can make the call on whether that is enough to buy you peace of mind. 

agreed on new investors, but I was referring to OPs primary statement "when trying to scale"

I don't think many investors look at DTI because it's less relevant. Most of the crowd is looking for positive CF assets, which should not increase DTI, unless you have less than 2 yrs REI experience and cannot count rental income towards income.

But you're talking about scaling, so I think DTI isn't where investors hit constraints. Curious if you've seen otherwise with investors today?