All Forum Posts by: Charles Carillo

@Marshall Magnus

We have not used these services before; we utilize our handymen for repairing minor plumbing issues but this is easier with the more units you have because of the economy of scale. Honestly though, in the 6 years I self-managed our properties before hiring third party management; I don't remember one time waking up during the night because of a plumbing issue.

@George Paquette

I have found with seller financing that the owner usually has an important item that they are focusing on; it could be the price, down payment or interest rate. I would feel them out and see what they are most focused on and build the deal around that. 

For example; the price is $300k but talk to them about putting down x% as a down payment and y% for an interest rate and see how they respond. If the property has minimal deferred maintenance; I would shoot for 5%-15% down and a term of 10+ years (see how long they will go) with no pre-payment penalty. If the property needs serious attention; I would try and deduct this amount from the down payment and tell them that you will put a clause in the contract that states the work will be completed within x months.

@Ku Thao

If everyone investing with you is truly going to be active investors; you can form a joint venture partnership. Any real estate attorney should be able to structure that. If there are going to be passive investors; you are now forming a security and you need to enlist the services of a SEC attorney.

@Jake Lapenter

If you take a pet deposit; there is anticipation of the deposit being returned. If there are problems with the property at the end of the lease; you need to go through the process of claiming those against the deposit. It might be easier to just request a $250 or $500 upfront fee or just add $25-$50 to the rent. There is going to be more wear on a property if there are animals in the property; even if you do not catch it upon move out.

@Yashar Fred

I do not give any weight to previous landlords and I have actually never called a previous landlord in 16 years of owning rental property.

I want to verify employment and income, credit and criminal. I would also run the names through the county/state court website to see if they have ever been evicted.

@Matt Baack

Typically, you will draw up a letter of intent that describes the main points of the contract. Purchase price, down payment, interest rate, monthly payments etc. Once this is signed by the seller; pass it off to your attorney to have them draft the actual purchase and sale contract.

@Matt Sora

Yes; it can be done if you do a portfolio loan over the properties or you can take a second mortgage against the property with equity in order to purchase the new one. 

@Francesco Per

A number of our partners are Canadian based investors; feel free to DM ME for any professional contacts (attorneys, accountant, lenders etc.) that work with Canadian investors here in the US.

One of the biggest mistakes real estate investors make is not calculating the new property taxes or not correctly calculating the new property taxes when investing. In this episode, Charles explains how to quickly calculate the new estimated property taxes on a piece of real estate.

Talking Points:

➡ Real estate taxes are usually the biggest if not one of the biggest expense items – learning how to calculate/estimate property taxes is crucial when underwriting properties

➡ First off, there are 3 main ways of valuing a property:

o Sales Comps – usually not enough like-kind sales comps in one municipality

o Replacement Cost – is not very useful when determining the true value

o Income Approach – usually used

➡ If the property is on market, the broker will usually have a proforma with where they feel the property taxes will adjust to and this is great to consider but you always should calculate the estimated taxes yourself

➡ About property taxes

o Taxes are set by the county/city property assessor/appraiser

o You are trying to determine where taxes have been in the past and where have they adjusted to after a previous sale

o Utilize the property info (from the broker or seller), the purchase price, the current taxes, current valuation, historical sales and bumps, how often do they reassess and what is the process? Then, based on the historical numbers, what is the millage and assessment percentage.

➡ How do you calculate them?

o First, Google the city/county, the state and tax assessor and you will find the tax assessor page for the municipality, usually the first organic result

o Municipalities make it very easy to search for property tax information on their website since they do not want you calling in. Find the property search tool and search the property by its address – it will allow you to pull up all of the information on the property

o First, I would find the current taxes and the current value stated on the county’s website – you will see values for just land and just improvements but the total value and the current taxes are the numbers you want to find – you will sometimes find an assessed value but you want to find the total value or total market value and divide it by the current taxes to find the tax rate

o Next, figure out what you feel the property will trade at (ask the broker). This is where learning about the reassessment process comes in. Most municipalities will reassess the total value at 70%-90% of the sale price. You can run different models on different estimates of where you think it will end up.

o For example; a property has a $100k total value and the taxes are $2,500 currently. The tax rate is 2.5%. The broker says it will sell for $150k; you can now take; 70%-90% of the estimated sales price and multiple that by the 2.5% and that will give you an idea of the new taxes. I would probably shoot for 80% and possibly make a couple underwriting scenarios at 80%, 85% and 90%. Lastly, I would compare that to the property taxes on your broker’s proforma.

➡ A few closing thoughts:

o If available, you can download/view the current tax bill which is normally available online from the property’s page on the assessor’s website – this is what is sent out to the owner – this bill will breakdown what the total tax amount consists of; the city, the county, schools, police etc.

o If you are buying a property with multiple parcels; make sure you are not missing any – there is usually a link for a parcel map and you can compare that to Google Maps

o Make sure there are no special assessments or tax rebates

o Usually, it will take 1-2 years for taxes to be reassessed

o Call the assessor if you have any questions

o Remember, your lender is going to be underwriting the property as well and their final value and appraisal is going to be based off this type analysis

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@Amanda Eyler

Typically, commercial loans have 5-year and 10-year terms. Unless you have a variable rate, the rate should be fixed during that term. I have found longer terms (up to a fully amortizing 25-year term) through local banks but you will need to call around. I would call all local banks and credit unions within a 45-minute drive of the properties and see what they can offer you.