All Forum Posts by: David Moore

@Jeremiah T.

I tried a property management company for two months this summer.  The short duration should indicate whether or not I would endorse one.  I self manage.  

@James Canoy

I think there might be more to the story.  I assume this is your first purchase. If you've done your homework, and used the calculators on BP, and know the numbers, then it doesn't matter what our 'darker selves' thinks...those doubts we have.  But also consider, your fearful reaction could be good.  So, if it is okay, will you provide more details about your deal, and your situation?  My son in law just finished his residency, is an MD, and they aren't exactly rolling in dough because the student loans are huge.  What is your situation?  What is your debt level like?  

Weld and Sons Plumbing.  We've used them for years in our residence and now our rental property.

@Hurricane Hamilton

Cool name, by the way.  I would do this deal with an inspection contingency.  I like your numbers.  Does it put money in your pocket each month?  Yes it does.  I would start by bidding a lower price...something your are comfortable with.  Other buildings in Kileen are actually priced for less.   You need to make sure you don't pay utilities, however.  If your cash flow is less than you've estimated, then I would hesitate.

I own a four plex, and in the process saw a lot of properties with deferred maintenance.  The inspector will find issues that will exceed what you pay him, and give you leverage on price discounts.  I like that it is a brick building...the exterior looks decent.  I don't see vertical cracks.  

Paying less is super important for managing tenants.  If you get it for a price that gives you more cash cushion, your pressure to raise rents is lessened.  You can get legacy tenants.  They won't move, knowing they could not get a better price.  

If you pay $500.00 for a good commercial inspection, that could be money lost, sure, but it could save your wallet huge.    

@Jeff Sitti

We as real estate investors sometimes forget there are other things than real estate to invest in.  I have a contrary play.  Compounding interest is the best play.  We could be at a market top...who knows?  But, invest it in a mutual fund paying an average 8% return per year.  At age 65, retire with a cool $3.6 million.  Yes, just $100K put in, compounded monthly over 45 years, is $3.6 million.

@Josh Cook

Attorneys are outrageously expensive...I try to avoid them. Why do you need an LLC? Why not just a DBA, since the LLC is just a pass through entity, anyway. And why a trust? If you are just starting out, acquire some cash flow first, before seeking out one of these other options.

@Amber Gonion

Another poster made a good comment that some things should be considered, such as expenses for vacancy and for repairs. Still, other issues can come up with townhomes. One is that the municipality will require a rental license. And, does the HOA permit rentals? The liability for the HOA could cause problems.

But there are two other factors that really stand out.  One, the resale of the unit is limited.  If you need to sell this unit, it's not as easy, since the market for Townhomes is smaller than the market for SFDU.  There is also a smaller appreciation play, especially for a 2 bedroom townhome.  And the other factor, is the investor put down $25 grand for a $400.00 cashflow.  Don't discount the cost of cash in this transaction (something we all are tempted to do).  

@Patrick I.

I personally tear apart the financials on all deals I look at.  I also consider properties where there is a big lease loss factor.  For the four plex I bought in 2016, I saw a big lease loss factor.  The rents at the time were nearly $200.00 below market.  I surmised in my analysis that market rents would continue to climb, the the point where I will reach at least $350.00 higher market rent per door than when I bought it, by 2019.  So this building is a serious win.

Higher rents in a property actually increase the value.  Though technically, my four plex is a residential property, the fact that I pull, right now, nearly 50K in rents, makes it more valuable to investors.  So although my property is valued as a  residential, there is a factor that the higher rents mean a higher cash flow for the buyer, and hence, a higher purchase price. 

So, cash per door is a good factor for calculating value when you buy it.  But you have to have a strategy to extract more value from the property.  And that is easier said than done.   I frankly struggle with the idea of settling, and not being disciplined to seek value in all of the properties I go after.  

@Justin Young

First things first.  Most exciting thing in your profile is that you are a follower of Christ.   Like Paul, we will not boast in anything except Christ, who is our rock.

I would advise you to read J Scott's book about Flipping Houses.  Not that you want to Flip Houses, but he makes a very strong case for finding your back yard.   I have properties in Southern MN and in the metro.  I know those areas, and I know the good deals from the lousy ones. 

There are some great multifamily plays out there.  You just have to go find them.  I am marketing to find my next deal.  I recently looked at a 10 cap in Rochester, MN, and turned it down.  The reason is that, with limited capital, you have to choose where to dive in carefully.  

For my next acquisition, which I'm looking for by April or May 2018, I have a specific cash flow I'm aiming for.   It might take more doors, or more than one property.  

My recommendation is Jay Lohn, who is an investor/realtor in the Twin Cities.  He does not push.  He is also a BP member.  He has a team that can assist with rehabs, and he has great bank connections to help your find financing.  

I just want to chime in that I agree with most of the posts that indicate you should raise rent every year.  The one exception to this, is if a competing building is near and holds rents flat, then it puts a brake on how much I will raise rents.   

Some have said reward a good long term tenant.  I've seen buildings with long term tenants, and most are in disrepair.  We keep our buildings in really good shape, and that cost is borne by the rents.   We will continue raising rents by 3 to 5% per year.   

The other thing I do not do is give gift cards for renewals.  I know my job is to pay the bills, maintain the building, and respond when something needs fixing.   Tenants job is to pay their rent.  No incentive, or  thank you card is necessary.  

There is no nice touch, or class thing to do that makes business sense, other than giving them a well maintained building.  That is my job.