All Forum Posts by: Bruce Scannell

Anytime @Courtney M., don’t mind at all.

Courtney M. , I understand your position well. I live in Southern California but grew up in MI myself. I ran into a very similar problem when I started, even if I could afford one house out here, how would I scale that? There’s definitely a lot of unknowns investing out of state, but I feel the risk is still lower, considering the starting Investment is quite a bit lower. Even if you invest local to learn, you’re going to run into hurdles you have to solve on the fly. And worst case you loose a tenant for longer than anticipated, or have cost overruns as a percentage, it’s still a smaller hit in holding costs in MI. Also, I’ve found that not being near my properties has forced me to develop the systems and network to maintain versus having the option of doing it myself, which can be limiting. Regarding turn key companies, I’d be careful and make sure you do your due diligence, don’t assume they are what they say and that they have your best interest in mind. There are a few companies who are being exposed right now, but of course there are more honest companies out there as well. Just my opinion, but either way good luck on your first investment and feel free to reach out to me directly with more detailed questions. Bruce

@Ryan Marker, if Illinois is too much to start a LLC, you can always look elsewhere. In Michigan, its only $50 to start, then $50 per year to maintain. On top of just being able to get an EIN and open a business bank account, you'll also get the personal asset protection that comes with the LLC. Definitely something to think about...

Thanks @Anthony Dooley. You're right, thanks for the advice. I think I'll wait till the end of summer and order an appraisal myself.

Hi Dale Radcliff , sounds like you’re heading in the right direction on BP and you’ve also been able to realize and accept your current position, as not optimal. Considering that, I think adding value to existing investors in the area is the best way to start. There are a lot of out of state investors who are always looking for reliable, trustworthy contractors, me included. So continue to network here and build the rapport, and get to know others who are doing what you want to do. I think that will help your knowledge base more than any books will, as well as give you the time needed to improve your credit and financial situation. Good luck! Bruce

Thanks @Anthony Dooley. My current financing isn't terrible, but the amortization is short, and I'm looking to extend that with Fannie Mae. Our NOI is already high enough to be more the 1.3M, but the brokers I'm using who are approved by Fannie Mae/Freddie Mac say that the appraisal will come up shorter due to recent sales. Is it true that poorly run properties in the same market can still bring down the value of mine, which is run better from a NOI point of view? If so, this is somewhat discouraging, and aligns itself with the comparable philosophy like single family homes. Thanks!

Hi everyone, Before the story I’ll cut to the chase (and you can read the story if you want)... Anyone have experience improving the MFR appraisal to maybe bump the value some? I have a small multi family (26 units) in southeast Michigan that we purchased from a burned out owner almost two years ago. We have raised the income by over 10% and slashed the operational expenses. The NOI looks strong, and if we use the same cap rate we purchased at it pencils out to a value of over 1.5M. I have been talking to a Fannie Mae lending partner and was told the area only supports 75%LTV and with the minimum loan amount, would need to appraise for over 1.33M to qualify. This seems like a slam dunk, but the highest recent per unit sales in the area are about $50k, which puts us at 1.3M and maybe not worth paying for appraisal...wha wha wha So...anyone have experience improving the MFR appraisal to maybe bump our value some? Thanks a bunch! Bruce

Hi Helder M Da Silva Santos . I have people in the area that may be able to help, at the least drive by your place, you can PM me if you want to talk more. Good Luck! Bruce

Wow, this is crazy @Helder M Da Silva Santos, I'm sorry to hear this. Who is the PM that is managing your property? If the PM company is partnered with Morris and the tenant has been working with them, this could be a tough situation of trust and responsibility. I know a good real estate law firm in the area as well if you want help going that direction. I'm not familiar with Morris either, but sounds like a class action lawsuit is in order...good luck.

Hi @Luke Jackson. I know this struggle well, owning in the midwest has its pro and cons, which seem to be common all over. The tenant base is polarizing, some super hard working, some super not hard working; some open to technology and others dead against it. 

To answer your question, tough love is the best way to do it. When we acquire a new property with inherited tenants, who are more than likely a bit "old-fashioned", we usually give them some time to freely ask questions and don't change much at the beginning. Then after a few months, we reach out to each, explain who we are and why we operate like we do, that we intend to make the property a better place to live and give them an open line of communication. At the same time, we explain why we have our tenants pay online and that we have had issues paying offline in the past. We mention that it costs us more to pay offline, between storing their rent before going to the bank, then going to the bank and processing the payment. We give the tenants the option to continue to pay this way, but a fee will be assessed for our overhead to do so. At this time of course there are complaints, but you have to stay strong and enforce the rules. Some will resist, but generally, we get past it.

I hope this helps...

Bruce