All Forum Posts by: Ben Parr

George, I have 11 in Redford, all between 6 Mile and 8 Mile. Rents range from $750 for a 1 bedroom condo I picked up at last year's tax auction to $1,100 for a nicely updated 3 bedroom with basement on a double lot. A bread and butter 3 bed w/ basement and garage is probably $950-$1,000. If the kitchen and baths are new maybe as much as $1,050-$1,100.

Congrats George, welcome to Redford. Just a heads up, the inspectors here are pretty strict. We've bought houses with newer furnaces or electric panels and they actually make us go back and pull a permit because they were not pulled whenever the work was done.

That said it should be a solid investment. I think Redford has potential to move higher as people get priced out of Livonia, Farmington, Canton, etc. And I think with more and more low down payment loans available we'll start to see more owner occupied houses. Good luck!

@Ian Ippolito

Looks right at a glance. The numbers sure are lining up a lot nicer now.

@Ian Ippolito

I would not count downpayments as paydown. If I buy for $100,000 for cash my equity is fixed at $100,000 (not counting appreciation ,discounts, etc.) If I buy 1 house with an $80,000, 30 year, 4.4% mortgage I will "own" about $20,000 of it at the start of year 1 and about $21,320 at the end of the year. I would essentially add this "below the line" as non-cash income in the amount that I paid down in any given year.

Note in year 10 it would increase to $2,000 and in year 30 it would be about $4,650. 

@Ian Ippolito I do not think your mortgage payment amount is accurate. First, a $50,000 30 year at 4.4% should be about $250 ($500 for two loans) but you doubled the $500 number for your total mortgage expense to get $12,024, when the number should be closer to $6,000

Also, your 80% Loans would need to reflect an $80,000 loan on each property, using a 30 year at 4.4% that should be $400 per property, or $2,000 for the portfolio, for a total debt service of $24,000. 

Last, I would also argue that if you are going to include a non-cash item like appreciation/depreciation then you also need to factor in principal paydown, about $1,600 for the moderate scenario (in year 1) and $6,400 for the 80% scenario. 

Then if you really wanted to make an in-depth analysis, look at how each scenario plays out at 10 years, 20 years, and 30 years. Taking in to account rent and non-mortgage expense increases.

I completely agree about the VA's. The VA I use is actually US based and I pay about $10-12/hr, though so it seems to work out pretty well. I did try an overseas VA first and did not have a very good experience. My VA only does a little paperwork, but does a majority of the phone work, whether it's taking maintenance/tenant issues, running background checks, contacting vendors, etc.

I like the time based guideline you use. I'm not sure if my target would be at the 5 hour mark, but I can see that as being a useful guideline. My goal for this year is to add two properties a month, almost doubling the current portfolio size, while at the same time cutting back on my workload. I worry about bringing on too many people though, as it will make the cash flow pretty tight. I really want to bring on an in house office person to do the bookkeeping, sending out notices, etc. I think I'll also want to add a leasing agent sometime this year, but maybe I can find one person to do both.

My biggest concern is increasing overhead costs too much and having there be a lag-time before we get enough properties up and running to really support the payroll. 

I looked around and I couldn't find much on this with a couple of quick searches so I figured I'd reach out to the pros.

Over the last 10 years I have built up what I consider to be a pretty decent Buy and Hold business. I'm currently at 33 properties, and I'm talking to a few banks about commercial lending on packages of our single family homes, so we may soon be looking to deploy a lot of capital quickly, possibly doubling our portfolio this year.

For the first 2-3 years I did everything myself. Then, from years 4-8 I started relying more and more on contractors to do the maintenance/rehab work. Around year 8 I hired a virtual assistant to handle most of the phone calls, do most of the tenant screening, etc. Last year I hired my brother (who is also a part owner in about 20 units) to manage and do some of the maintenance and showings. 

This year I have hired 2 full time maintenance/rehab staff to work for my brother.

My question is, what pitfalls have you stumbled across in an increasingly large organization? How have you managed the more and more staff? How do you decide when to hire even more staff? How do you handle backlogs of properties to turnover/rehab? What other issues did you come across that I'm not even thinking of? What is the one position you would hire sooner if you could do it again?

I just got a nice little 3/1 under contract in Redford, but my work crew is already 3 projects behind. If someone else is interested I'd be willing to part with it for $29,000 or so. It does need work, I figure $3k for new supports in the crawlspace/jacking the house back up, $1,500 for drywall repair/painting, $2,500 for a new furnace, there is a boiler on site but it is disconnected so I'm not sure if it works. $400 for a water heater, again there is one on site but it is disconnected. $1,500 for flooring. Garage and yard clean up $1,000. Total work estimate $10,000, or at least that's about what my cost would be. 

This was my first auction too, and I also found most of the properties sold for prices that were maybe 5k less than MLS deals. With all the added risk I just don't see where the profit is in it. I did pick up a couple of properties in Redford Twp. Now I'm just waiting on deeds to see if I got a home run or two, or just a base hit.

Congrats @George P. I know your feeling of casualness very well. I've been investing in two different Metro Detroit areas heavily, Madison Heights, and the 48240 zip of Redford Twp. Once I have a number of properties in one area I end up just using my past experience in place of running new numbers on every single house. Especially when I'm buying the houses at a quick pace, and in the same neighborhoods. 

Good luck with your future acquisitions.