All Forum Posts by: Neil Schoepp

@Rigo Medina

Have a look at these they may lead you in the right direction

Texas Reia clubs

Events listed on BP

Local real estate networking (via BP)

Meetup.com

To your continued success

Neil

@Aaron Guthrie

Congrats on deciding to plan your life instead of always reacting to it. A podcast that may interest you is #169 It's how David Greene, a police officer from San Fran, use his ability to work overtime to his advantage. Your 22 so essentially you work your balls off from now until 30 sinking all available resources into your real estate. It's gonna suck for a bit but when you hit 30 and are very comfortable it WILL be worth it. I got a very late start as in my 20's I thought going out on the town every night with the boys after a 4x12 (1600-2400) to blow off some steam was the thing to do. I was wrong. Now I'm doing ok but playing catch as I get serious about what I'm doing. 

Reach out to a local Texas REIA group. I can't speak for any on that list but it's a starting point. Attend as many meeting as you can. You will eventually gravitate to the really good ones and leave those that are lacking behind. Now click this link and go listen to Dave tell his story. It's a template you may consider using.

https://www.biggerpockets.com/renewsblog/2016/04/0...

So, tell me a little about the property.

This one line opens up many doors.

If I can get them talking then I can figure out what the main concern is. If they inherit the property, if it's free and clear, how long they have had in the family. I listen to HOW they talk about the property. Is it just a house or is it very endearing to them. Are they selling for the money, because they can't maintain it anymore, are moving out of the area, don't want to do another eviction or chase down people for rent payments. 

@Dennis Meppelink

I am really not that concerned that he is coming from a place where he doesn't have a landlord. I would screen him just like anyone else. Below are a few of the things I take into consideration during the screening process.

In this specific case I would do my best to verify his story of not having a landlord. Home sales are public records, he moved from home then where is home lets talk to mom, dad, uncle whoever? Divorced then the house will or was in his name. You should be able to get a grasp if his story shakes out or not. 

A couple of other screening techniques I learned while lurking around here on BP.

If he arrives in his vehicle is it a mess or well maintained?

Does he speak appropriately and respectfully?

When he fills out his application is it neat and completely filled out?

As part of my screening I talk with his references and employer. 

Find a reason to visit his house. Follow up question, drop paperwork off to him the reason doesn't really matter what comes next does. While there what is the condition of the exterior grounds? What do you see, hear and smell? When the door is open what does it smell like? Is there a mess. If you are invited in then ask yourself this. If he were to offer me a sandwich right now would I accept or is this place so gross that...... Well you get the idea.

You can only do so much and make the best decision with the information you have. Mistakes will be made we cannot be right 100% of the time, but these suggestions should give you some ideas on things to look for.

Oh yeah and always check Facebook. I have learned some very interesting things with a five minute search.

To your success.

Neil

Hey @Account Closed welcome aboard! 

I would do individual searchs for each topic your interested in.

Some may be:

BRRR strategy

Fix and flip

Multifamily

Putting teams together (property management, contractors, attorneys etc.) , which should be done BEFORE you purchase. 

In the financing arena you have 

Seller financing

No money down 

Personal loans

portfolio lending

1031 exchange 

203k 

I started out thinking I would just buy a few Single Family Homes (SFH) and rent them out. Then I found out about multifamily and how if it is 5 or more units then you the owner can force the value up by making the property produce more income (ie. Raise rents, add a laundry center, charge for parking spaces, late react fees, etc.) or cut expenses by separately metering all the units, applying to the town to lower the taxes things like that. So now I am looking into buying multi family because I feel I have more control over its value.

As you read more about what's available you will hone in on what best suits you and then you can have laser focus on that strategy.

Hope this gave you some food for thought, I look forward to seeing you around the forums. 

@Dawn Roof

More times then not the gross income will be over stated and the expenses will be under stated.  They say trust but verify. VERIFY EVERYTHING! 

Submit your letter of intent based upon the numbers provided. Make sure you have the proper contingencies in it. Due diligence, inspections, financing, extension periods, renegotiating base on new information you discover, etc.

this will lock up the property for you and the seller will need to get you the financials and any other inspections/paperwork you may need or that they may have (ie: lead base paint, phase 1, any ongoing warranties or contracts etc) 

As you get more and more info you can then adjust your offer price.

For example you always plan for vacancy

Also, What was  the seller basing gross income upon. Was it what you could get in rent? Remember your offer should be based upon what the actual gross income is right now, not what it might be in the future. 

To verify the sellers numbers

1. Call three insurance brokers and get three different quotes, you'll be surprise sometimes how different the spread will be.

2. Call the trash company and ask them

3. Call the utilities and ask them (electric, propane, gas, oil, water and sewer)

4. Call the tax office and ask them

5. Call your property manager and ask them what they see as being potential problems (imminent repairs and not so imminent). Is this specific area, even this block rentable. @Carl Mcknight makes a great point in that large increases could spell massive vacancy in the future and even evictions. Ask you PM about this. 

6. If it is on a septic as oppose to public sewers then bring an inspector in that specializes in septic systems. This should be in addition to your general property inspection. Roofs, septics and foundations are the three big ones. And anything local, I know some locals have termites, I locally have radon gas concerns.

7. The best way to verify rents is with tenant estoppels. Basically a form the tenant will sign verifying what their rent is. I would also verify what was paid at time of moving in. Was it first last and deposit. Or something else. And how much was that deposit, don't assume it was one months rent.

Compare what the tenant is telling you, to the signed leases, to the rent rolls.

To your success.

@Frank Houpt

I start with picking an area of the country I think I would like to visit and I have direct access to either by an "easy" drive or direct flight. My airport does not offer direct flights to the entire country. 

Is it in a landlord friendly state? 

I then look at population growth actual and forecasted. In an upward trend?

I then do the same for employment. 

When I find the above I start looking at specific zip codes.

As you research your area you want to look at things like is the city/town being aggressive in attracting employment. Are there activities in town such as parks, museums, theaters, colleges, highly rated school districts, etc. Google is your friend here.

I recently found this site on Soi migration data it will give you a bunch of info on how many and where people are moving from and to. 

Now it's time to reach out to people here on BP. And ask their option of an area. Ask for recommendations of property managers and real estate agents. PM are worth their weight in gold. They have knowledge of rents, demand, turnover, specific blocks that perform better than others. They may even know of properties coming up for sale or owners that are tired and want out. They will also be able to confirm or refute your beliefs of the area based on your preliminary research.

Hope this gives you a jumping off point.

I wish you much success. 

Neil

@Robert Juanes

When working the numbers it is customary not to include the debt service (mortgage) or the capital expenditures in your operating expenses. Your operating expenses are exactly that: those expenses that occur as a function of operating the property. You don't need a mortgage to operate a property, you may need it to buy the property but not to operate it. 

Another thing to consider is your debt service payment and my debt service payment on the exact same property will be different so we never figure that into the NOI but rather subtract from the NOI.

So in your case you would separate the 760 into debt service (which is your principle and interest), taxes, insurance. The taxes and the insurance get separate line itemized under expenses. 

So it looks like this. 

Gross income - operating expenses = NOI

NOI - debt service = cashflow

I could be wrong depending on your down payment and the terms of your financing. But the 760 PITI (principal, interest, taxes, insurance) seems a bit low on a 185K property. Do you have solid numbers on the taxes and insurance? Did you at least use a mortgage calculator to come up with your debt service number? I am in the Northeast where things are a bit more expensive so that could be it to.

I will tell you that when you pull out the capital expenditures that brings you to 1598 which increases your cash flow to 627/ monthly or $209 a door. I read once that multi families should aim for a minimum of 100 a door (but they may have been talking about actual apartment buildings as oppose to "plexes". If it were me I would consider this property further the way things stand now. 

I've yet to buy anything but a SFH so you may want to search out those investors that buy small multi families and get their take on it. It is always best to view it from a few different angles.

@Robert Juanes

Robert when looking at deals it would be of help to break down your expenses. This is especially important so that we could suggest additional expenses that you may have overlooked or maybe even say for this type of property you do not need to include this or that.

Your analysis should look similar to this

Gross Income    25500 (2125*12)

Operating Expenses  (you still need this number)

Net Operating Income (NOI) you get this number by subtracting Operating Expenses from Gross Income.

To get your operating expense number add up the following 

Taxes

Electric

Water & Sewer

Trash Pickup

Lawn care and/or snow removal

Gas / oil / propane

Vacancy (use 5-7% of gross income)

Maintenance (10% of gross income)

Insurance

Home owners Association Fee (HOA) You may or may not have this one

I like to include a 5% misc expense ( i use this as a reserve)

You may be paying all of these or just some. They certainly should not be figured at a generic 10%.

You can gather this information in a variance of ways.

Tax collectors web page for the county your property is in. Here in my county I gather my info with the County name then state abbreviation and GIS. This brings me to a map site that I can now search.

Ask the seller for his numbers. This will get you in the ballpark but you MUST INDEPENDENTLY VERIFY those numbers on your own. Call the power company, trash company etc and ask them. An example of this is I once thought it cost $65 a month for trash removal. When I called the company they told me it would be $28. 

Call 3 insurance companies and ask them for a quote. 

You get the idea.

After you have those numbers then list your financing

Purchase price (for now you can use the asking price but after your analysis you'll come up with your                                  own price then negotiate something as close to your price as possible)

Down Payment (This could be as low as 0% if your a VET and as high as 20 to 25% depending on                                     your investing strategy)

Interest rate 

This will give you your monthly mortgage 

You now subtract your mortgage from your NOI and your looking at your cash flow.

When you put all of this together you"ll have a much better picture of how this property looks. Then post those numbers and we can offer you more and better feed back. 

I wish you Success.

@Daniel Chang This makes it extremely clear. Thank you. I looked at it for awhile trying to find that relationship and just couldn't see it.

@Justin R. Thanks for the help. I appreciate you reaching out.

@Andrew Noway Just my two cents but there are two things I would be paying attention to.

1. The MP has no skin in the game.

2. Your GUT is telling you something isn't right. That's your sixth sense. It has seldom failed me in over        25 years of paying attention to it.