All Forum Posts by: Carl Millsap

@Colin Williams does the property meet your investment criteria? Are you working with a realtor?

I'm asking because I don't want you to overthink the potential investment. If the numbers work, the property is solid ie. no foundation issues, and it meets your criteria, make the offer contingent on a clear title, and inspection. 

If you're buying a property with bank financing the closing / title company will ensure all liens are cleared so that you get a clear title.

If you want to know what liens are in place to make an offer based on that it varies by State / City / County. In our area we can look at the county clerks website to see the history i.e. ownership history, mortgage, and liens. 

Check with the property valuation assessment (PVA) office in your area, they may be able to help. 

@Pamela Rogers look at the 20% down as an investment not only in the property but also in the banking relationship.

Let your banker know that while you don't want to put the 20% down, you will with the understanding that on your next deal you'll only be required to put 15% down. 

You can also call around to local / regional banks, some may do 15% down but charge a slightly higher (.25 - .50) interest rate; that's the trade-off for a lower down payment. 

@Kareena Sharma you make money when you buy....with that being said, if the numbers make sense buy, but in today's environment will you be able to cover the mortgage if the tenants don't pay?

Would you be willing to invest out of state where you could buy a larger property for the same $860k but get a better return?

I'm not selling anything just giving you something to consider. LA is an expensive market.

I ran the numbers.... $860k w/ 20% down on a 20 year AM is $4260 before taxes and insurance. If you go out on a 30 year AM the payment drops to $3385 before taxes and insurance.

They've been talking about a market dip for years but it hasn't come yet...I wouldn't bet on timing the market. Remember you make money when you buy....what other opportunities are out there?

@Carrington Allen when I came back from deployment I bought a 4 plex I was living in, then I started buying single family homes. 

Hindsight, I should have stayed with multifamily buildings because you can scale faster, and lower your risk.

If your tenant in a single family doesn't pay you have to cover the mortgage. 

In the 4 plex it took 3 of 4 tenants to cover the mortgage and expenses. Now some 15 years later because of rent increases it now takes 1 of 4 to cover the expenses and the property has appreciated at a faster rate than the single family homes.   

My advice would be buy and  hold multifamily. 

@Sean Grady nice house, I looked at the pictures. If you simply paint it and clean it, don't change the texture of the ceiling or countertops or outlets etc. how much will it rent for?

Now if you do all that you listed how much will it rent for? 

Let's say it rents for $1k with a the simple paint and clean, but if you do the renovation it rents for $1,150 it'll take you 46 months to recoup the $7k investment.

If you do the renovations and it'll rent for $1500 or more then it'll take you 14 months to recoup your renovation investment then I'd consider it. 

I would paint the unit w/ white semi-gloss, paint the cabinets, and add a ceiling fan to the bedroom that doesn't have one then rent it for market rent...let's say it's $1,150. You get the same $1,150 in rent for about $1500 in materials and labor. 

Once its rented set aside money for CAPEX and renovation upgrades; after each tenant moves out improve something, increase the rent.

Use the $4500 - $5500 you saved in renovations to put towards your next property.

Welcome to the game of monopoly! 

@Franz Mischke it depends on the age of the property and the owner's strategy. 

If you're looking to buy a multifamily, in your underwriting plan for 50% of Net Income for expenses as a rule of thumb to see if the numbers work then...do the following:

1. Run 3-4 scenarios with different rent / occupancy levels w/ expenses at 50% net income.

2. Call the PVA, City and County for tax estimates at your planned purchase price, get insurance quotes etc. then plug them in with your projected expenses renovations, reserves etc. to see if the numbers work.

3. Look at the information the seller provided. What can you cut out, what needs to increase etc. based on what you've seen. 

Let the numbers drive your decision.  

Good luck!

@Abdul Rahman closing cost will vary based on the lender  / closing company. When you underwrite a property estimate high on the closing cost. 

On a $225k purchase I'd estimate $4500-$5500.

You can also call a closing / title company for an estimate. They should be able to give you everything except lender fees, and appraisal #s. 

We usually raise rents every 18-24 months. When we lease we are usually at the top of the market which allows us to wait for the increases.  

@Kevin Franklin depends on your long term goals. You can donate to your favorite charity for the tax deductions. 

Depending on where you are in life to me determines the strategy. 

If you're ready to retire or would like to retire in 3-5 years and live off the cash flow then I'd execute the pay off / snowball plan. 

If you're still acquiring properties then I'd stack the cash flow and buy bigger properties i.e. multifamily.

Congrats on putting yourself in place to have a "good" problem.  

@Bobby Balentine not sure how BP insights get the recommended rents but I'd call around to a few apartment communities, check FB marketplace and apartments.com for comparable rents. 

Here are a few ideals:

1. Once you give your intro letter and fix current maintenance issue, then give each tenant a 30-60 day notice that rent will be increasing. I wouldn't offer to stagger the rent right away...case by case basis.

2. Do a hybrid rent increase and utility bill back. i.e. We are going to increase rent $50 - $75 per month, and you'll be responsible for paying a 1/3rd of water and electric every month. Invoice them when you receive the bill. Check your local laws before implementing this....

3. Increase rent $100-$150 with no change to utility arrangement. 

No matter which option you implement, I recommend you have them sign a new month to month lease.