All Forum Posts by: Charles Kennedy

Hi BP,

I am looking at a property in the Tallahassee that needs some work and therefore looking for any recommendations on a GC in the area for a mostly cosmetic rehab. Thank you in advance.

@Account Closed I'm with you on the feel of it, but it seems like most investors recommend going LVP because they often have to replace the carpet?

BP!

I'm under contract on my first property - a 2/1 condo in Atlanta. The flooring in the living room appears to be either laminate or vinyl. I want to match it in the bedroom (current bedrooms have horrible, old carpet), but am unsure I will be able to find the same flooring! 

Should I just try to get as close as possible or should I go a different vinyl plank look in the bedrooms? I don't want to use carpet due to the replacement and cleaning I will inevitably have to do.

Any advice?

@Adriel Hsu I think you'll need clarification on that from the seller. If the payroll is for the property manager, then yes, it's far too high and you generally just pay a fee and the management company pays the salary to their employees. However, it could be for an on site handyman or full time cleaner/janitor. I think payroll and contract services can sometimes pay for the same things on different properties, dependent on whether you have someone full-time or not.

Also management fee is based on expected gross income (EGI), which includes other income, not just rental income. so $27,700/554k =5.00%.

@Adriel Hsu Even though, it's class C, your expenses still shouldn't pass 50%. Your R+M will likely be higher than an A/B, but I don't think it's unreasonable to get under that. I'd try to talk to existing operators in the area and ask them their opinion on OPEX. Organize your expenses on a per unit basis for them to take a look over. I'm not sure why pest control isn't being 100% reimbursed... Copier printer rental could be slashed. You can buy one for $2k... probably cheaper from someone going out of business. Mgmt fee is at 5%, probably reasonable for a "smaller" apartment.

Best of luck.

@Adriel Hsu that 57% expense ratio is high too and sounds like it gives you some room to improve NOI. Typical apartments are around 40-45% so there is room for operational improvement. Try to identify what is causing that higher OPEX %.

The reviews on google for any apartment are always bad so don't give too much credit to those.

Other things to consider: Look at historicals, is it at an all time in terms of occupancy? Lower than normal? How does it compare to market? don't be afraid to call up apartments nearby and ask them what they are occupied at. I do it all the time for my day job (CRE lending). What is driving their other income of $62k? On-site washer/dryer? Fees? Pet rent? Make sure you understand these items.

Talk to seller's and try to understand why they want to sell. Ask about large CAPEX items and when they were last replaced. Call insurance brokers to see how their current rates compare to what you can get.

Feel free to PM me.

@Braden Burton you still have nearly $89k in equity in the property, although you didn't personally put that in. That makes your return on equity 4% based on $3600 annual cash flow.

I agree with @Brian Garrett, you are not accounting for any maintenance capex. Does that loan amount take into account taxes and insurance? I know sometimes banks have you pay that amount with mortgage. You will get hit with a roof replacement or some large expense of say 5k-10k, which will knock out 1-2 years of your "cash flow".

This is a mistake too many house hackers make, they say "I only paid $300 in rent with my friends paying my mortgage", but haven't factored in vacancy, maintenance, capex, etc.

Regardless, you bought at a good time, and enjoyed some appreciation. Well done!!

@Bill S. seems like you address why some people (Jefferson Lilly) doesn't do septic. I remember hearing him constantly say it, but can't seem to recall why. These reasons seems pretty good, if you aren't even allow to replace it, you're going to be in a pretty crap situation. This also may be the case as he doesn't want to end up with the property if the next owner fails.

You could have bought another property with that cash!!

Kidding - It's important to enjoy the money you work hard to earn. I'm sure some on BP will give you crap for splurging, but at the same time say "Remember your why!". Perhaps your "why" was a desire to buy a sweet car!

Enjoy.