All Forum Posts by: David Terbeek

One of the oldest principles in investing (any asset class) is diversification.  Look for both appreciation potential in some of the southern cities (CA is tough because you can't cash flow) and of course, a healthy amount of holdings in a place like Cleveland OH (my market) or Columbus/Toledo type areas.  These cash flow markets have experienced some amount of appreciation to add to the monthly return, just not at the rates of the hotter markets.  Of course, when there is finally a slow down, we will take a much smaller hit.  Only 6 more years to go!

@Akshay Johar  
Every market is a bit different as noted above based on the intensity of
the labor needed to manage, the average rent amount and the unique
things the manager must do (we have an entire department for city
registrations and processing water & sewer bills). One of the
questions you might ask is whether there is a quantity discount, some
are not readily advertised but may be available. In the end, a couple
percent is a few dollars per month - is that the most important thing or
is the quality of service, communication and transparancy most
important.


     

@Michael Lewis from time to time we run across houses that just seem to have ongoing issues no matter how many times they are rehabbed or repaired. One had three owners so two rehabs and still was a problem. One of our maintenance guys swore it was cursed (not sure on that). If you have the opportunity to get out unhurt, I would do it and look for a better place to park the investment.

Assessing the unintended consequences before proceeding is a good move and this is a good place to ask the questions. You may have an issue with a refinance but not because of the DTI ratio. If your refi is to specifically retire that debt, they are not both counted against you. However, since this is a credit line the credit algorithims don't like when you get above 30% utilization (commonly used number if you search credit utilization). Having a high balance relative to the available line may decrease your credit score making the refi more difficult. A cashout refi typically has slighter more stringent criteria than a traditional refinance but nothing that stops most investors. In the end, talk to a lender that is experienced with these type of transactions.

@Account Closed  Okay, please consider Invitation Homes Inc.  They own and manage 80,000 homes, "people's homes".  A quick search shows that The Vanguard Group is the largest shareholder.  Should all 80,000 residents have a line to an executive at The Vanguard Group?

It is true that not all PM companies are ethical, diligent or even nice.  When that happens, they are not able to retain residents.  When the residents move, the owners get upset and eventual move their business elsewhere.  The efficient marketplace and competition are always there to swoop in and correct these situations - putting the bad PM companies out of business.

We were hired by the owner to manage the property, we ARE the landlord. I don't think there should be any discussion about the property owner, they are not part of this equation. The only info we would ever share is that which is publicly available on the tax records.

Consider a stay at a Marriot hotel, if you had an issue would you ask to speak to the hedge fund manager in New York that "owns" the property (FYI Mariott owns very few properties, their primary business is 3rd party hotel management)? Of course not, you speak to the hotel manager or district manager in an extreme case. Why would anyone think this business is any different?

BP is well represented by people investing out of state, over 90% of our clients are out of state or out of country.  It is a bit trickier since you can't necessarily "see" things as they are progressing but if you find the right team this becomes a moot issues.  While management and contractors are key positions, most people start with finding the right agent.  An agent that has experience with investment property, has a solid understanding of rental rates and can refer you to management and contractors is the key to success.

You are smart to be aware that particular corner of Cleveland Heights with East Cleveland schools trades a a discount to the rest of Cleveland Heights.  Properties sell at a lower rate and rents are lower but these differences tend to offset one another and they are not that extreme.  Consider I just estimated rent at $975-1,000 on a 3 bed SFR, a couple streets over in Cleveland Heights schools the same house would be around $1,100 - around a 10% discount.
The area is also geographically isolated from the rest of East Cleveland.
We have represented over a dozen doors in this area and have not had significant issue with excess repairs or vacancy.
You are already well prepared since you know about the nuance of the area.

When we started years ago, I compiled a lease from about 3 different samples that I had found so it contained the general concepts that I wanted.  Then I took it to my attorney for review and tweaks (as I am not an attorney and am not qualified to practice law) before we put it into service.  We have made revisions a half dozen times and each time, I mock up what I would like to see and then let the attorney put it into the legal ease.  Giving them the sample seems to keep the legal fees down since they are not writing from scratch.

I am one of those Cleveland guys that do not reach out to Ashtabula.  I am not certain of who might be operating there.  Have you tried NARPM.org, there might be a member that serves the area?