All Forum Posts by: Axel Meierhoefer

@John Fierke Hi John Congratulations on your first purchase.

A few points: I recommend creating a series-LLC structure. I can refer you to the folks I work with - feel free to DM. Using the state the property is in might not be ideal depending on the state and its rules. There are issues to consider regarding corporate veil and anonymity. Each state has a process called "foreign entity registration", so it's not an issue to have your LLC or several as part of a series in one very business owner-friendly state and then apply this registration process in the state the rent is coming from.

Your estimate for property management fees applies to long-term rentals. it's higher for short-term rentals. A great resource for everything related to short-term rentals, management, technology to run it smoothly, integration with teh booking platforms is provided by Michael Sjogren. Here is a link you can use to begin researching: https://www.facebook.com/Short... He also has a great and free "masterclass video" that shows how you can optimize your property performance. I am not an affiliate or anything but he has great content for this topic.

@Wyatt Anderson I am retired military - small world.

It sounds like the property is close to where you are right now. I would definitely use the VA loan to purchase it. If you can reasonably expect to get at least one more assignment before you get out, you can move without any penalty and use VA again to buy a property at your next assignment station. That could then be your first investment property after you leave the military.

In case you decide to stay in the military, the best approach is to keep buying a well-performing property at each assignment location because there is no cheaper way to get investment funds.

It might sound a little counter-intuitive, but I'll be happy to explain. Feel to DM and we can set up a call

@Amanda Osmond Welcome to Bigger Pockets.  Sounds like you have a great market right where you moved.

If you ever like to explore the US market, please DM and I'll be happy to support you

@Lisa Borowy Hi Lisa

Yes, meet-up groups and real estate broker groups, etc. are a good way to connect in addition to Bigger Pockets.

As to getting a license, it would really depend on your goals I am mentoring people in developing a passive income portfolio. The goal is to reach what we call the Time Freedom Point and the path to that point is what we are developing together and purchasing properties along the way. Very early in our program, we analyze the personal financial situation and then the actual goals you have. Most people I help and I have done it for myself for the last 15+ years, want to own properties that perform well so they can reach their Time Freedom Point sooner rather than later. That also often means investing out of state or at least too far away to manage yourself. 

If you know that you will have a lot of well-performing properties in a reasonable distance to where you live and invest, you might want to get a license so you can do your own deals and don't have to pay any commissions. If that's rather not your case or you don't plan to be that actively involved and rather work passively like me and my clients, then I would not get a license. Our tribe has nobody with a license and we are doing well, progressing down the path towards our goal.

If you like to chat about it, let me know. DM me and we can set up a call to get to know each other and see if I can help.

@Bob Bevis OK, got it

I don't have much experience with this because I normally do what you describe in 1-4 units. One thing when I once looked into a deal like that that ultimately killed it was these two things:

1. The property boundaries were such that I could not easily solve any septic issue or find any way to connect to city sewer. Technically it would have been possible but the cost was astronomical.

2. The attempt to convert the zoning invoked a ton of rules that don't seem to apply for office, like parking, distance to adjacent buildings, rights for neighboring businesses, etc. and when I tried to find ways to mitigate, they existed but again costs too much.

Overall it initially appeared like a no-brainer but I made the mistake of only focusing on what I knew, meaning the reno and renting it, and having plumbing to create bathrooms and kitchens, and enough amps for electrical, and maybe splitting meters for utilities, but that other stuff that converts from commercial office to residential was a very strange, all unfamiliar and would have been very expensive.

Might not be the case in your deal but probably worth checking out

@Brian Paredes Welcome to Bigger Pockets. You are in the right place.

When I started, just for myself and my family, I was hoping to have a platform and mentors, as you describe.

If you look around you will find many posts of mine discussing residential investing using turnkey providers and staying under the 5 door threshold.

I love mentoring and in my tribe, we are following the Ideal Investor Journey to the Time Freedom Point. If that sounds interesting to you, feel free to DM and we can set up a call and get to know each other. If what we do appeals to you, you might like to join us. In the meantime, I agree with others on this thread to keep reading and listening to podcasts and audiobooks. I am currently listening to the latest Ray Dalio book "The Changing World Order". So far I really like it

@Jeremy Christensen In my experience lenders are willing to accept research for market rent or rent info from the previous owner to get you the loan.

I am not sure, based on the title you gave to your post, why you seem to want to continue this mismanagement? I would offer the tenants a fair rent/lease agreement and if they rather don't want to accept it, offer them a move-out bonus. You could, if you haven't purchased the property yet, maybe request the current owner to do the same.

In any case, a change of ownership gives you the option to make changes. You could, with a fair deal, i.e. 60-90 days after purchase setting move-out dates for tenants that don't want to pay the new rent, then do a renovation, which is probably necessary, and subsequently, lease at market rates.

That will also allow you to improve the value of the property.

I have been offered deals where the current owner made promises to tenants (with and without lease agreements). If those are turning a potentially good deal into a bad deal, I always stay away. I am a nice landlord who wants to have a good and fair relationship with my tenants, but if something was mismanaged, as you said, I want to fix that issue and have both a good value property for a fair value rent. If tenants don't want or can't be part of that, I give them an option to leave in a reasonable amount of time, sometimes with a little $$ incentive for moving.

@Bob Bevis I am curious where to take the money form for purchase and renovation?

You said it is hard to find good deals. Can you share what kind of strategy and deals you are looking for, how you normally finance them and what short-term and long-term outcome and goals you aim to achieve?

Sorry for answering your questions with questions but it appears to me that you are looking for a comparison of what this opportunity could be to what you would normally do. That's why some more info would be helpful.

@Kelly Olson Hi Kelly. I am doing what you are looking for. I call it mentoring. I developed my own Out-of-State Turnkey residential real estate portfolio to generate enough cash flow to not have to work anymore (at least not in a regular job).

I believe it is natural to tell my friends and family what I am doing and more and more of them encouraged me to share the things I learned with the public. That's why I post here on BP and I offer to mentor people who look for advice.

I am not selling any properties or act as a real estate agent/broker. My main goal is to help people, just as you described, and avoid mistakes - some of which I made myself in the past.

I also don't charge for an initial conversation just to get to know each other, learn about goals and options to proceed. If you like, just DM me and we set up a call.

@Daniel Wang I am a big fan of property management for two reasons:

1. You as the owner can keep a somewhat removed position with the tenants. Basically the option to have a bad cop - good cop situation. The property manager will work and keep costs reasonable, make sure that the tenants pay for what they damage, etc. but if there is a need for the owner to be asked and approve something you can be the generous one. This also applies when you want to increase the rent and your PM has to sell that to the tenants.

2. The PM will help you keep your investment passive. Based on what you wrote it appears that you intend to keep growing a portfolio. That will probably include properties so far away from your location that you could not manage them anyway. Having a PM and getting used to leading the PM and communicating in the role of an owner is educational. You should also consider creating an LLC so that you are not only the owner of the property but also a business owner. People who come to me to get mentoring and want to build a passive income portfolio that leads them towards their personal Time Freedom Point learn how to do these things and ultimately really have a fully passive (both money and activities) organization.

As for the renovation question. I know that a duplex is considered a residential property that is evaluated by comparison to other similar properties in the vicinity. Still, I always recommend looking at the rental property as if it were an apartment complex to determine if spending money is smart. Any complex that has more than 5 units is considered "commercial residential". The valuation is calculated by the rent roll, meaning how much rent per year are you getting, and then a multiplier is applied to calculate the overall value. In that scenario, if you had a place with 25 units and you get $12000/year in rent that would be, just hypothetical $12000 x 25 x = $300K. Now you subtract your expenses, typically about 45% ($135000), and you are left with $265K. To get the value you divide by the cap rate. I believe 8% is reasonable. That means your apartment complex would be valued at $3.31 million. The main point here is the rental income. Obviously, if you could ask for more rent and your rent role would increase by 10% the value of the complex would also increase by about that amount.

If you believe a renovation of your duplex property would allow you to increase your rental income substantially, you would do it. The problem is that the renovation costs money that you probably should finance. Let's say you have a property that cost you $300K to buy and pays $1250 in rent for each side of the duplex + $2500/month total. Your expenses with vacancy, property management, CAPEX, and maintenance considered would be probably around $2000 and cash flow of about $450/month.

Let's say you spend $50K to renovate the property and you refi after that renovation, the bank accepts the total $50K as a true increase in value and gives you 100% of the money. You would have to increase the rent by $250/month just to maintain your cash flow and a bunch more to increase your cash flow. The question is if that is realistic? If you feel you are making good rent that is close to market rate, adding more money for renovation will only reduce your cash flow.

As an alternative, if you could afford to do the renovation and pay for it out of pocket or at least have most of it, you could get yourself a second property for about $150K fully managed that would probably pay you $300/month in cash flow and your overall asset value would increase substantially more.

I think there are very few cases where a duplex that rents reasonably close to the market rate would be worth renovating a lot to increase cash flow. The one scenario where renovating might make sense is to substantially increase sales value, but then you are not developing a passive income portfolio and focus mainly on the appreciation.

Check what the purpose of the investment was and then decide if renovating or investing in more properties is the better approach to reach your goal.

If you like to discuss this, send me a DM and we can set up a chat.