All Forum Posts by: Evan Polaski

@Chris Matthias

I won't say I have the best and easiest way, per se.  Mine is an excel document

Issue - Repair - Count - Cost Per - Total

I.e. I had a tenant that had a TON of holes from hanging pictures:

Holes in Wall - Patch and Paint - 47 - $5 - $235

But a step better, as @R. Elle Berry noted, I go through 

Move-in Checklist - chance to walk through unit with tenant and sign off on condition.  Gives tenant chance to note any issues PRIOR to giving them keys and letting them move furniture in

Pre- Move-out Checklist - prior to tenant leaving, I walk through with them and the move-in checklist and let them know what I am seeing that can be repaired prior to end of lease or risk losing part of security deposit.  This is also a great opportunity to explain what a clean apartment is.

Move-out checklist - within a day of tenant moving out, I walk through and denote any issues that were not present prior to tenant's moving in.  This is where pictures are needed of any additional damages, ideally with close to matching move-in pictures.

With this process, I have only once had a tenant pissed that I kept part of the security deposit, and that was because she paid a contractor to come in and make all repairs we discussed in the pre-moveout checklist, but she forgot to remove all her artwork and left a boat load of holes in the walls.

@James Bolt

Title report will find any liens.  I would check building department for any building orders on the property.  These not recorded as liens, as they may not have financial obligations tied to them, but they are required to receive any permits.

And I would ALWAYS buy title insurance, if you end up buying the house.  In the roughly one to two dozen properties I have bought, I have had three claims through my title insurance.  It is certainly interesting how various parties will start coming out of the woodwork trying to get a piece of a property that has been brought back to life.

@Tanner Thomason

Greg's logic aligns with my experiences as well.

But also, there are a few faults in your logic.  Regardless of closing day, your lender will prorate your interest for the month.  So close on the first, you will be paying a full month of interest on the loan at closing.

Rent is the same way.  As noted, if the tenants are paying on time and pay with physical check, it is already in the mail and made out to the seller before the first.  If they have autopay setup, it may have already been pulled before the first, and even if it is pulled on the first, most auto-debits run at open of business, so unless you are fully signed and closed before 8am, the money is going to the seller anyways, and you will need to reconcile.

While I generally prefer later in month closings, like Greg noted, even mid-month would work.  Most rents will be paid and deposited by the 15th, so you can get credit at closing.  It allows enough time to notify tenants and confirm several times that they updated payee/address for the coming month.

But besides the very typical reconciliations that will happen not matter what, you are not "getting more money" or losing money in either scenario.  As noted, your lender will charge your interest from the day you close to first full month, regardless.  So, it really comes down to whether you want to pay more at closing and longer until first direct mortgage payment is sent, or less at closing table and sooner for first direct mortgage payment.

@Kim Swidarski, this is all general, as any feedback is from a public forum, but from my personal experience (which may vary from yours):
1. No, you don't need to.  If you have lived in your current property for at least 12 months, you can go buy another owner occupant home and get a traditional mortgage.  People do this all the time.  If you can afford to buy a second without moving, you can also get a non-owner occupant mortgage in your name.  Terms may be a little less favorable, but it is possible.

2. Typically you change your insurance from full coverage owner occupant insurance to liability insurance when rented.  This would typically still cover any damages to the house itself, and any liability for owning the property, but would no longer cover the contents of the house, which is a fairly large line item within your owner-occupant coverage.  I would imagine this would be about a wash to slightly cheaper, since the coverage is technically less.

3. Unknown, but probably

4. Not technically.  Rental accounting is pretty easy in reality, but also doesn't hurt.  There are some things that change.

5. Who cares?  You already own it, so at the end of the day you either bring in more than you spend, or you don't.  On taxes, you will report as ONE property, like anyone else that owns a duplex.

6. Unknown.

@Edgar Cienfuegos, in my area, to be classified as a bedroom, you need a closet and adequate ingress/egress secondary entrance, and climate control, specifically heat, and adequate size.

You need to confirm with your building department on needs to classify, but sounds like you might be close, if not already there.

So that's the technical piece.  The practical side, as Peter notes, is will it really be valued as a full third bedroom.  Only you, or a local agent, can really determine this.  I will say in more "budget friendly" areas, there is generally less loss of value for "weird" bedrooms.  So a three bed, even if the third is awkward, holds more value than higher end areas, where design and flow become more valuable.

That being said, even if you convert this, legally, it will likely not be a true comparable to a traditional three bed house of similar finish and size.  It is likely to be more valuable than a two bed, but not a full three bed value.  From there, you need to understand costs to convert, and if it makes financial sense.

@Andrea Andrade, Zan has some engaging content with his deal criteria posts.

Ian provided a strong list to consider, and I will add one more: you need to have a general macro-economic vision of where things will perform.

The key is to first educate yourself.  Brian Burke's book, The Hands-off Investor is a good starting point.  And then commit to something like 6 months of talking with syndicators of all asset classes to hear what each is saying.  Zan is great at LinkedIn marketing, but there are a lot of other groups out there that focus on similar business plans.  And, you can even get into publicly traded options too, that likely have better liquidity, although you may lose some potential tax benefits, depending on structure.

At the end of the day, every investment has trade-offs and market cycles.  Whether it be the ubiquitous value-add multifamily syndicators, or the STNL guys like Zan, or office, industrial, hotels, etc.  Core assets focused on consistent long-term income, or development that is build and sell.  

I do tend to align with Ian, specifically, in that I don't invest in groups where the founder is under 40.  The GFC (the last real economic cycle we saw until the current iteration) was in 2008 (17 years ago).  If the lead sponsor is under 40, they have only experienced, generally, a bull market.  As such, they have likely not learned too many lessons about the many risks involved in real estate investing.  And even those that are over 40, I want to see that they made a career of commercial real estate operations (Property management, leasing, development, asset management, etc) versus some outside career that they jumped into real estate because they saw an opportunity to make a lot of money quickly, often at their investor's expense.

@Michael Parker, while I am generally happy to help with specific questions, you have not given enough information to even know where to begin.

What asset class are you wanting to pursue?
What business plan?

These would be the first two I would start with.  For instance, a home builder is not really going to be able to provide you much useful information if you are looking to acquire light industrial properties.

The skills/connections needed to be a developer are different than those needed buy an existing hotel and turn it around.

If you really need a basic knowledge I would recommend reading some books from Amazon.  Search Commercial Real Estate Investing.  Some are only a few dollars, so even if they aren't the best, I would imagine you would get more than your money's worth.

To answer the original question, yes.  I have yet to meet a person that likes to be cold called.  I have not met anything that likes to be luke-warm called.  

But, at the end of the day, who cares.  As others on this thread noted, if you get someone that knows what their property is worth, that isn't your client anyways.  I get calls fairly frequently on my personal house and my single remaining rental.  Both have been fully gut renovated and are worth far more than I paid for them.  But the data scrapers only know what I paid for the property, and see that they can offer me more than I paid while still having room to make money on the property.

I,for one, prefer text to calls.  Texts I very quickly respond with a number that is about 15-20% more than the property is truly worth.  I figure if someone is dumb enough to pay that, I will sell.  Most of the time, I just never get contacted again.

Is it annoying that they call or text?  yes.  But do I know their goals and understand they have no way of knowing I know what my property is worth and they won't get a deal from me?  no.

@Cheryl A., I won't say there isn't, as I have not ever submitted a claim to the SEC.  But, given how easy it is to submit a claim, and my general skepticism on the agency (not the intent of the agency, but the underlying reasons I noted), I don't hold high hopes, nor do I know of anyone that has successfully brought actions.  

I would assume asking some securities attorneys would be a better direction to take this question, though. 

I have not heard of any, nor have I tried to.   My guess is between the current climate of both loosening the reigns around private offerings, the reduced restrictions on businesses, and the general reduction of agency autonomy, any SEC complaints are falling on deaf ears.

Additionally, the optics of these cases will not warrant adequate political attention to get regulators attention.  First, most syndicators have not raised meaningful capital, at least meaningful in a business world. Second, the investor base is both not broad enough, typically, nor a sympathetic crowd to the average American.  Most are accredited, and even if you are not and in a 506(b) offering, the fact that someone has $25k/$50k, etc to invest is more than most Americans.