All Forum Posts by: Bryan Hartlen

@Jamie Parker are you having trouble getting properties under contract OR assigning the contracts to flippers?  

We don't use the 70% rule for anything except to decide if we're going to look at the deal… and even then we just want to see if it's close before we spend time running numbers. Our analysis is ARV - Rehab estimate - Finance Costs - Holding Costs = Profit. That Profit number needs to be above our minimum threshold (which is large enough to handle any rehab oh $hits).

I live in Phoenix but invest out of state. We haven’t bought a property from a flipper here for years. The margins are too tight and most deals are being offered at 80 - 85% of ARV. That said, I’m assuming that someone must be buying these wholesale properties.  The Nashville market may be similar.  You may need to offer more to sellers and sell to a smaller group of investors (who may buy with cash and/or are willing to work on tighter margins).

To help understand your market better, put your name on your competitor wholesalers’ lists and see what they are “offering” and compare those to what you would expect using your current model.

Call the PM (I don’t think HABD will provide information on a property you don’t own - even if you can get them to answer the phone). Ask when they last requested a rent increase, what the request was and whether or not it was accepted.

Note that you’re dealing with a true bureaucracy.  There are specific rules on when rent increases can be submitted for review, but there are no guarantees when they will respond. We’ve had increases submitted in Sep that weren’t approved (retroactively) until June the following year. We’ve also had increases submitted in Sep 2023 that still haven’t been processed.  

We have Sec8 in Birmingham, AL. We have yet to find a PM that knows exactly how to drive top $$ rents. There are general guidelines but nothing formulaic. In our area we have 3 different HUD agencies that provide vouchers to qualifying tenants. Each agency has slightly different criteria and limits but the process for setting rents is roughly the same and has 2 components. 1) The tenant voucher is based on the tenant's specific finances and number of people within the family unit. The voucher is the most that Sec8 will pay for that person's rent regardless of where they rent. 2) The second part of the Sec8 equation is the market rates for specific neighborhood's and property types (SFR vs apartment, # bedrooms, # baths, utilities included vs paid by tenant, etc). This is the max that Sec8 will pay for any property and is the information that you can find online. This means that a tenant may have a voucher that says they qualify for say $1500 but Sec8 may only be willing to pay $1200 for that tenant in a specific property. All sec8 rentals are subject to review and approval by the housing authority issuing the vouched. So once you've approved a tenant at an agreed rent, it goes to the authority…. This is where the voucher cap and specific property limits get looked at. We've also found that at least one of the authorities (Jefferson county) started to run some kind of property specific rental comps which can also affect the max they're willing to pay.

Back to your question on maximizing rent: In general, the better the neighborhood the higher possible rent. The more people in the tenant’s approved household the higher the possible rent. Rent increases need to be requested with supporting rental comps annually. 

@Account Closed, we’ve never self-managed.  We’ve always used a PM.  With today’s technology it’s certainly  possible to manage an OoS property (and many investors do).  When things are running smoothly it’s hard to see the value of paying a PM 8 - 10%…. But when there are issues, not being local can make managing situations much more difficult than if you were local.  

For my partner and I, it’s a question of effort vs return.  We’ve made the decision that neither of us want to deal with an after hour emergency call from a tenant so we use a PM company.  The problem we’ve found, despite using other investor’s recommendations and extensive interviewing, is that so far, every PM company we’ve used is mediocre at best. The effort to manage a PM is not insignificant, and even with the effort to manage them the results are not what they should be.  So every couple of years we get to the point where we can’t accept the PM company’s performance and we have to look for a new PM and hope we find a unicorn. 

@Drew Sygit & @Adam Bartomeo,  we're experienced investors and I don't believe our expectations are out of whack.  We don't buy in warzones and we explicitly verify that the PM is experienced with Class C/D properties and tenants and Sec8.  

We've had issues with bad tenants where we've had to evict.  That's not on the PM but how they handle the eviction process is.  Every next step of the process gets executed days or weeks after it's supposed to.  When we follow up it takes multiple business days and sometimes more than a week to get a response. 

The latest example, we had a set out (Sheriff watches over as old tenant's stuff is removed from the property) on Dec 13th.  We're still waiting for the PM company to provide an inspection report on the setout & a rehab estimate for the turn. Even with a week off for Christmas and New Years, there's no reason for this delay. 

@Travis Biziorek: self management isn't something that we're willing to undertake.  We'll sell the properties if we can't find a PM company that works. 

We're out of state investors that have 3 properties in Birmingham.  Class C/D neighborhoods with both Section 8 and private payer tenants. Managing the PM's is becoming a problem. I'm assuming that they're either understaffed and/or we're small potatoes for them.  Wondering is anyone here has had better than mediocre experience with their PM company. 

We've recently received term sheets for hard money from Conventus that are quite competitive.  I'd like to hear any good and bad recent experiences you have had with this lender.  Thanks. 

@Steven Catudal

- LLC with detailed operating agreement

- Bham has tons of Sec8 opportunities. Note that Sec8 comes with added costs & issues due to bureaucracy and state of the HUD departments in the area. As an example, our request for rent increase that was submitted in Sep 2023 has not been processed and may never be processed. So we either sit tight or we don't renew the tenant so that we can place a new tenant at current rates. Investing in Bham Sec8 properties requires somebody with street by street knowledge. It's not an area that you can say this zip code or this neighborhood is good or bad. Appreciation in most Sec8 neighborhoods is very low so it's a cash flow play.

- I would highly suggest you plan on using a property management company. This seems counter-intuitive as I doubt you’ll ever find a really good PM company but the headaches of managing any kind of a problem remotely overshadows the ongoing concern that a PM company is inefficient and expensive (at least it does for us).

Personally, we would not do that deal.  Return is too low.  Risk is too high - $85k rehab is more than lipstick.  High probability that you’ll uncover an oh-$**** issue that will reduce or eliminate your projected profit.