All Forum Posts by: Chris Grenzig

@Preston Dean I personally like to make sure I have a set amount of reserves for each property to cover things, so if you have a pool of funds sitting aside personally I would just earmark a certain amount that you don't touch except for that property (or an emergency). That way you know it's there for a rainy day or capex. 

I think since it's personal and you're the only owner, I would open a high-yield savings account and get 4-5% on the money. Sure you could do a money market or put it in an ETF or something, but this is one of the options where the balance "can't" go down or is extremely low risk while making a decent yield. You can pull from the account and have it in your property's account within a couple of days if need be. 

@James Haight Jacksonville is a great place I lived there for 3 years (2020-2023) and only just moved to Orlando 1 year ago. We've bought 150+ units in Jacksonville, we still own and manage 51 units there, and we manage for other owners in the area as well. 

A "good area" is subjective and depends on what you're looking to accomplish. You could go for C/D areas like 32208, 32209, etc and try and get the 1% rule which might cash flow better on paper, but you're going to have plenty of other problems to deal with. 

Or a good area could be the most desirable and expensive area in town because you think it's going to hold value, appreciate, and attract high-quality residents. 

I personally prefer C+ to B+ assets and locations because I think you get nicer areas with little to no crime, but you get a good blend of appreciation and cash flow. I like areas like Orange Park, Riverside, Avondale, Murray Hill, San Jose, Mandarin, Southside, San Marco, East Arlington, certain areas of the Northside, and some other areas. Like any location each area or zip code has better pockets and worse pockets, so don't paint certain areas with too broad of brush, but those are just some of the areas I've preferred and think are good areas for what I'm looking for. 

@Jesus Rodriguez welcome man! There are a couple of local meetups/events I know about but I'm still learning. GOREIA and CFRI are REIA's in the area but they cost money to join and attend. The highest and best meets the first Mon of every month near Ivanhoe, they post about it on IG @highestandbest (it's labeled as a clothing brand for some reason but the events are solid and free)

We've bought 150+ units of Multifamily and still own and operate 51 units, we also manage for other owners in Orlando, FL and Jacksonville, FL so if I can be of help feel free to reach out

 @Sean Conroy I would talk to the city and confirm exactly what you can and cannot do with the current zoning and land use if you haven't already. Just because you have enough land doesn't mean you can do what you want to do and you might have to apply to re-zone which isn't guaranteed. 

Development probably isn't going down much, so you'd have to run an analysis on the potential yield of the project and what the risks are. Then you would compare that to what you could do with the equity and buy other existing properties. 

Development isn't easy and a lot of stuff can go wrong. Not to say buying an existing property doesn't have its own challenges, but development is just different. 

Another option would be to subdivide the land and your property and get the land entitled and shovel ready to build whatever you can build and then sell the land to a builder/developer. You get some upside potentially by spending time and money to get the property ready to build, but you don't take on the construction risk. Then take that money and put it to work elsewhere. 

 @Michael Dallas this sounds like it could either be a great deal or a suckers bet, and unfortunately, it's impossible for any of us to tell. The renovation could cost tens of thousands of dollars or maybe there is a foundation issue they're not telling you about. Or they could be being 100% honest with you and they just want to see someone young and hungry do well. 

My recommendation would be to put the deal under contract, then during your inspection period talk to everyone and anyone that is local that buys properties like this and ask them if they know the property or anything about it and ask them if they think it's a good deal. There are plenty of deals I know about that have been sent around off-market or were previously listed and never sold and it's because there's some issue with the property that you might not know about. 

However, I also got one of my best deals ever off-market as a double wholesale because rents were $700 and I knew they could be $1200 with a little bit of work. I jumped on it very quickly and was incredible for me and a family member who partnered with me. So it's definitely possible, but I have seen the other side of the coin too often. 

 @Alyssa Lake In today's world for Multifamily most deals are DSCR constrained and not LTV constrained. When cap rates were 6-7% and rates were 4% most deals were 75-80% LTV and you might exceed the 1.25x DSCR requirement but a bank wasn't going to go above 80% LTV.

Today rates are 6-8% and cap rates are 5-7%, so your lender is probably going right up to their DSCR level, which is probably around 1.25x DSCR, and because your occupancy is lower, you're going in cap rate is not great, and because occupancy is lower it's probably viewed riskier so your rate might be higher.

That's why for deals like this, you will see people utilize bridge loans where they will lend up to 75% LTV and fund capex potentially because the property has problems and they are looking more at the future value and operations. However, your term is probably only 1-5 years and your rates are much higher.

(We have acquired 150+ units across several properties as well as being property managers. I mention this so you know we have a background in financing deals and acquiring them, and not just managing them since my profile label says property manager.)

@Sonia Arreguin we just had a resident pass away and we requested a certificate of death. They are most likely having to do the same thing for banks and other things they were involved in, it shouldn't be anything they have an issue with. 

I would probably lean towards letting them out and waiving the fee in return having a conversation with them in person or on the phone that they're giving you their word that everything will be out 100% and everything will be spotless. It's not going to force anything, but you can let them know "hey I'm sorry you're having a rough time, I'm willing to work with you on this but I need you to work with me as well".

Check with your attorney for the deposit, in FL the deposit has to be made out to all occupants on the lease, so that could cause complications. If there is an estate or something else that lays claim to it and you gave it to the father, it might cause some issues. 

@David Felt hopefully you had an attorney help you draft the lease, ask them what you can and cannot do within the bounds of the lease and your state laws. No one can 100% answer you what you can do here.

The one general question I would give my opinion on is if the resident is responsible to pay for the damages, do no wait to use the security deposit. If they are deemed responsible have them pay now out of pocket, or worst case you cover it and come up with a written payment plan for it (but ask an attorney about that for sure).

Too many people use their deposit as last month's rent at move-out even when they're not supposed to, and now you have past damages (this incident) and any potential move-out damages or costs that have not been covered. 

 Loss to lease is how much loss you're getting from the current market rent to your current lease. 

If the property was vacant right now and you think it would rent for $1,000 but your lease is $900 than you have $100 loss to lease which is 10% of $1,000. 

Consequently, you could also have to gain to lease which is the opposite, but seen a lot less in residential. 

So if market rent was $1,000 a 3% LTL (loss to lease) would be $970, so on renewal, you might not even touch their rent or maybe you go to $990 or something. 

But if market rent was $1,000 and you had a 30% LTL your lease would be $700, you probably wouldn't also renew to $990 unless you were definitely okay with them potentially moving out and re-leasing. Because you have a $300 delta, you might only renew a $100 more than the current lease since you might feel anything more than that is too big of a jump and you want to keep the current residents. 

We had a 24-unit property where we didn't want everyone to leave at once, but we had rents at $700, we could get $1,000 on the market, and we could get $1,200 if we renovated the unit. So I think we did $150 increases in year 1, $100 in year 2, and $75 in year 3 or something similar to that. We ended up turning over about 75-80% of the units in 3 years and eventually had all the remaining units close to market rents. Market rents I think were up to $1,100 after 3 years for un-renovated and $1,350 for renovated. 

When you have a MF property it's a little bit easier to stagger the increases because you most likely don't want to drop occupancy that low, so when you have 1 unit it's just kind of figuring out what's important to you and than just trying it and seeing what happens. 

 @Steve Tse we're not in Boston but I'll still chime in. In Florida right now, market rents have mostly stayed flat for 1-2 years, and expenses and insurance have gone up. If I tried to base my renewal on expenses only I would increase above market rents and probably lose my current residents because of that. 

Now most times a resident is under market and this isn't an issue, but I'm just illustrating a point. I would always run a rental survey every year and see what the current market rent is and see what your loss to lease is (market rent minus current rent). Then come up with an increase based off of that. Usually, we keep the renewal to a discount to market rent to incentive people to stay and not incur vacancy and turnover costs, but that discount depends on many factors. 

- How good of a tenant are they?

- How much loss to lease is there? If it's 3% then the discount to market might only be 1-3%, if it's 30% then our discount to market might be 10-20%. 

- Are you okay pushing more and having to re-lease the unit, or would you strongly prefer not to have to do that and give up more on cash flow

- What do you personally feel comfortable increasing the rent for? 

- what do your local laws allow, are there any restrictions