All Forum Posts by: David Moore

@Chinmay J.

I got the details on the leases.  One tenant is moving out end of this month, so that unit is ripe for rehab.  On the 2nd, and this one miffs me, the landlord, who had listed the property back in September, signed a new tenant as of 12/01/17 to a 9 month lease.   I find that super annoying.  What were they thinking?  The inspection is tomorrow.  Now, their lease has something in it that says the tenant has to move out if the property is sold, but I don't think that is right.  Why should the tenant be harmed?  I'm going to negotiate for the seller to put $700.00 into the closing costs to compensate me for the lost market rents, so that the tenant can stay until 08/31/17 at their same rent.  The seller should pay for this, not the tenant.

@Kevin Martin

It was on MLS. I saw it 60 days ago on Realtor.com, and dismissed it as a terrible deal, due to existing rents, high property taxes, and I had not priced it right. I circled back to it because deals are elusive, and realized, especially after seeing it, and getting feedback from my team in Albert Lea that the area was quite good, and the market rents were higher. I saw a lease loss opportunity on this one. A 2 bedroom/1 bath duplex not far away recently sold for $112K. I thought this being the slow time of year, the lease loss factor, and the generally nice condition of the units really made this an attractive opportunity.

What's sweet about this deal is the lower acquisition price will give me leverage with the assessor.  I believe I can save $400 yearly on property taxes as well.   Every little bit helps.  

We'll cash flow between $350.00 and $400.00 per door.  That is not bad.  

@Chinmay J.

Tough call on Section 8 on this part of town.  I do like section 8 in this town.  I have one great section 8 renter.  But this area is nice.  On the rents, I get to see the leases this afternoon...part of the inspection period.  If they locked them in for a long term, I will make them pay the difference for not having market rents.  Most landlords in Albert Lea go with month to month.  

So, if they have a locked in rent through, say July, I will tell seller I want compensation for the low rents....something like $300.00 for the three months.  Peanuts, really.  I will get that 13 cap out of this deal.

I've seen a lot of places.  This place is nearly all cosmetic.  A rare find.

Just got this bad boy under contract.  Here is the deal, see if you like it or hate it.  I'll take all comers on this one.

Property is on Gateway Drive in Albert Lea, MN, where I own 4 other properties.  It is a side by side duplex, 1100 square feet plus per side, 3 bedroom 1.5 bath, with tenant having separate gas, electric, and water meter (tenants pay all utils).

Original List Price: 139K

My accepted offer:  $118,500.00.

Current Rents: $1500.00

Market Rents:  $2000.00

My Costs:

Finance at 25 year am, 75% of purchase price, or $88K.  Mortgage is $554.00

Insurance $85.00 (thanks NREIG)

Taxes:  $233.00

Vacancy: 5%

Repairs: 5%

Cap Ex:  Needs cosmetics...new countertops, sinks, pergo flooring in kitchen in dining room, minor wall repair, exterior pressure wash (vinyl), minor vinyl repair. I have a handyman in Albert Lea...will get this done all in about 3K.

This is in one of the nicer neighborhoods in town, right next to a golf course, with residential development nearby, market rate rents, and owner/occupied houses, some new development, and some other duplexes.   A nearly identical duplex rents at $1K per side, just next door.  Rents there were $925.00 as long as 6 years ago.  I feel safe going for $900.00

I ran this through the calculator.  Even at the existing rents, which were market rents 10 years ago, this is a 10.40 cap.  I will raised rents to $900.00 a side, two months after acquiring, raising this to a 13 cap.  

Doing the inspection Friday. 

@Mary Ann Casey

Thanks for providing photos.  After looking them over, it appears to me that there is some deferred maintenance in these photos.  A couple more estimates should be sought, but I cannot believe the condition of the walls that are not broken, the lights above the bathroom vanity hole, the dirt on the doors, etc.  There's a lot of dirt of the doors, walls, peeling or missing paint trip on the door jambs.  All signs of stuff not being maintained.

In these cases, we all want to blame the property management company, but who watches them?  There are signs of a missing process.  That PM company should have been showing you before and after condition reports, so you could verify they were taking care of the place, and you need to hold them accountable for these processes.   This is our responsibility, everyone on this thread.  We have to make sure these properties are in good condition for renting out.   

Believe me, I hired a PM company, and found their billings to be outrageous and constant.  I fired them two months in, and went back to managing my own.  I have a team in the Twin Cities, and my best team is in Southern Minnesota.  I go there, and meet people, and learn who does the best work.  You've got to go to where your properties are, and find the right team, even if that means spending a month there.  

Your post indicating you had three properties in various stages of eviction is troubling.  This is a systemic thing...you need to find a team that your can trust, or get out of that market, and find a better one.  

@Liz C.

Yes, my business is an LLC, and US Bank has not cared one iota that it is an LLC they are extending the financing to. The secondary mortgage market is tough for LLC's, but I have a great portfolio lender. It helps when doing paperwork to just sign paperwork as my LLC....there are trade offs.

@Donald S.

The idea is to use capital to your best possible advantage, to its best possible use.  US Bank is an ilogical financial institution.  They want to limit my line of credit based on revenue, but they give me a perpetual 18 month interest free loan for a one time 2% transfer fee, for a huge amount of credit.  I tend to use it to finance short to long term capital improvements.  

With US Bank, you need to get to know one banker.  That really is the key.  It is not easy, because US Bank has high turnover.  So, no don't use it to do a rehab...use it to put capital to its best possible use.  Interest on a BLOC right now is 6.5%.  I'd rather get 18 months at zero, instead of 18 months at 6.5%.  

Quick funny story.  So, about 6 months ago, I call up the Edge line and ask for a credit increase.  I get a letter in the mail, saying sorry, we cannot raise your line at this time.  A couple days later, I get an email....'we've raised your credit line'.  Ha!!

@Brian Zaug

I would say never mix emotions with running your business.  Our job is not to be a buddy to our tenants.  Our job is to present a habitable, well maintained property for our tenants.  Their job is to pay.  I have some tenants who are not sweethearts, but they pay consistently.   

Another quick comment...another poster said you should try to arrange with social service agencies to get him help.  I would advise strongly against that.  You, as an investor, and landlord, have a full plate.  Let the tenants find the help.