All Forum Posts by: Gerald Demers

Hello @Aryelle Collins.  The first and most important thing is make sure when you connect with people, your first priority is them.  What do they need, what is going on their lives?  Too often, we meet someone and off we go telling the world how good we are the opportunities we present.  So, start the Zig Ziglar way: I can get anything I want as long as I help others get what they want and need.  

Talking about money, when the conversation does come to you, talk about why you do things first, then what.  Read Simon Sinek's Start with Why.  Brilliant book!  You want to find people that believe what you believe and then you can talk about specific opportunities.  

When I do discuss what I am doing, I never ask them if they want to invest, I always ask if they know someone that wants to supercharge their IRA or make above average returns. Many times, they will say yes, ME! Okay, let's talk about that. Never corner a potential investor and never be in a hurry for money. It is a far better to play almost...hmmmm, not disinterested not overly eager.

Also, of all  the many people you know, how many know what you are doing and what you are looking for?  For most of us, that percentage number is surprisingly low.  Why?  

When I talk to people, if they are not sure or not interested, I always suggest that i can keep them in the loop when I have new opportunities and of course, when I close off opportunities, i update my people as well.  If they start seeing you ask for 60K for 123 Main St and later, you recap the 123 Mainstreet project FROM THE PERSPECTIVE OF THE SUCCESSFUL PRIVATE INVESTOR/PARTNER, they get more and more comfortable with what you are doing.  Alternative investing, no matter how successful it is, is really scary for most.  

When discussing investment funds, it is always an investment, even if they ultimately will be a lender.  No one wants to be a lender but everyone wants to invest.  

From a legal standpoint, changes to SEC legislation allow you to advertise for investors, but you can only accept accredited investors.  

Did that help or did I miss the mark?

Gerald Demers

Hell @Jack @Jack B., what are you asking for in this post?  Are you looking for suggestions on other things to add in the list:

For us, if the property has carpets, upon moveout, they must produce a receipt showing carpets were professionally cleaned - no Rug Doctor rental hack cleanings.  

Our tenants are responsible for pest service,  We have a super deal with our pest guy.  $250 for service for the year.  $100 for initial service and $150 for the rest of the year.  Many times, we pay for the initial service and charge the tenant $150 and they manage the pests and calling the pest guy to arrange quarterly service.  After that, it's only $150 for each year since he is there consistently and things are under control.  So, part of the move out is that they show that in the last week of occupancy, the pest guy has been to the property.  If you have to make the call, there is an XXX charge for you doing it.  

Regarding utilities, if the utilities are currently in our name, I inform the tenants the day MY service is terminated.  If they don't want interruption of service, they better get on the phone.  

We have a move in/move out inspection report.  The section they sign when they are moving out, they are also declaring they understand that once this move out report is complete, they are also releasing the property to us and any property inside is considered abandoned (make sure you quote the specific state statutes regarding abandoned property) and the cost of it's removal is a cost bore by them.  Do you have a move in/move out inspection report.  Its simply a three column list of all the rooms and items within each room.  Column 1 is the item, Column two is condition upon move in and column 3 is condition upon move out.  Tenant initial the bottom of each page in the appropriate area.  The footer of the doc has tenant initials under both the move in and move out columns.  

Yard service.  The yard must be maintained prior to moving out.  Again, if this is not done, your yard service will do it and the cost is bore by them.  

Cleaning and trash, same thing.  They received the property in a move in clean condition; that is expected when they move out.  If not, it will be cleaned at a cost bore by them.  

Another management help is to not wait until they move out to fix some damages and charge them for the repairs right then.  This way, they are not leaving the lease with so many things damaged, they don't bother doing the other necessary things because they know they already lost their damage deposit so screw it, just leave!  

Gerald Demers

Hello @Corey G.  So, you have enough leaks happening often enough that you are considering adding a monitoring solution that you can monitor once or twice a day?  

Maybe you can define "a leak" for us.  Are you talking about a broken pipe or leaks into a fixture (for example, a toilet always running or a steady drip into the tub)?  But fixture leaks don't suddenly create a huge water leak.  

What is going on with your properties that these "leaks" are happening so often, you need a monitoring solution.  The monitoring sounds is usually a means to isolate where the problem is but it seems that is not your purpose.   

Gerald Demers

Hello @Brian Naumann, great game.  

If you are part of a local REIA, many of them have a method of posting to other users for help. So, post you want to host an evening Cash Flow game. Other investors own a game so some of them come over and you can have several games going at once.

Meetup is another method.  And of course, right here on BP.  

Make sure you have a financial calculator and the easiest way to win is to be the custodian.   :O)

Gerald Demers

Thanks @Gita Faust.  But who are we kidding; I don't ever open the software; I just look at the reports.  My partner does all the books and admin, I source new deals and talk to private lenders.  We each do what we are best at (as it should be).  :0)

Gerald Demers

Hello @Seth Willis, Before purchase and rehab, I think you have to begin with what type of return do you want on your rental properties.  If these are buy and hold, the fact that you created a bunch of equity with your rehab means nothing - you can't eat equity as they say. 

For me, my model is to have rents no less than 1.5% of total cost.  That means, once the house is complete, it will rent for 900/month, 900 divided by .015 (1.5%) is 60,000.  I cannot spend more than 60K all in (purchase and rehab) on that property.  

I know that 1.5% gives me a deal that supports paying my private lenders a great return, I have cash flow and if rents soften, I can rent it for lower and still cash flow.  

I took a look at the calculator Robert included.  It did not answer your questions about how to estimate.  Many cities' local REIAs have Bus Tours or something to that effect.  In Orlando, they have Junkers to Jewels.  Friday and Saturday are spent learning about all the costs and estimating and then Sunday is on the bus touring several properties and practicing estimating.  If this is an opportunity for you, take it!  It is a great and very valuable experience.  

If that is not available, go through the house with your contractor or a contractor. The idea is they give you their time and you give them a contract at some point.  Or, just pay them for their time and ask a lot of questions.  

With practice, you can look at a house and come up with a quick and dirty estimate and you can also take your time and work though a more detailed analysis.  

You can also call individual trades about specific costs.  I have 1,400 sq ft house with a large attic, how much to replumb or new hvac.  How much to paint two colors (wall color and trim)? 

You need to be able to price rehabs correctly with room for the OOOPS factor.  We do this and on one of our properties, OOOOPS happened three times.  We hate what happened but the bottom line is, the house still cash flows.  

Gerald Demers

Hello @John D., if it has been listed for 200 days, can you see the history of the listing? Has the status ever changed such as going pending, then back to active, then pending, then back to active? What about the price history through those 200 days. What was it as a new listing; how much has it moved over the 200 days? Who is the seller; a bank or an individual? Is it a distressed sale (REO or short sale)?

If an investor property is on the market for 200 days, it's overpriced.  If the price has not dropped or not dropped that much on a regular basis, your seller is most likely unmotivated or needs the selling price to clear the debt. 

If you are not represented by a buyers agent, I would definitely call the agent.  If you are not represented, tell them that they get both sides of the commission.  If you cannot answer the questions above, those are your first questions to the agent.  Otherwise, have a conversation with them; what is going on with this property?  Who is the seller?  The price seems really high; does the seller have a mortgage and they need the price to clear it off?  This is a great question because it might be a great subject to deal.  

The agent has a fiduciary responsibility to the seller first so don't ask questions that could put them in a difficult place - you will quickly lose their respect.  Helping you is not worth their license so telling them "I was thinking of offering 25K, do you think the seller will take it?" won't go over that well.  

Instead, after you gotten more info and some rapport, I think it would be better to talk to the agent about the price, for example, "based on my numbers, it seems 25K is a reasonable offer."  See how they respond.  Ask if the agent would write up the offer.  

Gerald Demers

@Bryan O., we were told about married couples still being regarded as a single member llc from an education session with Aaron Laughlin, Laughlin Associates.  I do not know if that is a general rule or if it's dependent on how you file you taxes (filing jointly or as individuals). 

Thank you for the link to that article.  It was a good read.  I really hate articles that don't have a date; you never know when it was written.   

Like the article, Aaron spent more time emphasizing how easy it is to have your corporate veil pierced, single member or not.  Most don't have proper books and formal documentation (minutes, resolutions, etc).  Or, they pay for a business expense with their personal credit card and then simply transfer funds from the business account to their personal account to pay them back, no expense report.  

Owing a business is a must, but you have to be prepared to maintain it and not just the business it owns or trouble can easily find you.  

Gerald Demers

Hello @Daniel Dexter, I am not sure what you are asking for.  Post your pro-forma?

Gerald Demers

@Bony Mathew, you need to speak to a CPA that focuses on investment real estate because the answer to 99% of your questions are going to be "depends."  I AM NOT A CPA OR ATTORNEY...but I stayed at a Holiday Inn before.  

Is is just you in the business, you and your wife, you and another partner?

Learned something new over the weekend about the dangers of single member LLCs. I also learned that many people think they are safe by creating an LLC with husband and wife owning 50% each. But we learned that the IRS still considers that a single member llc. From a legal perspective, a single member LLC is the same as a sole proprietorship meaning in a law suit, you could be exposing your personal assets to that lawsuit. Talk about seeing a lot of people squirm in their seats.

I can tell you what we do.  

We, two unmarried managing members, have MapleStar Real Estate Investments, LLC and Brooks Young Financial Group as primary LLCs and companies for flipping real estate and notes (S-corps, great to pay salaries, have employees, set up retirement and medical accounts). However, the IRS considers everything as inventory regardless how long you own it so you can't depreciate property. 

Then we added MapleStar Property Management LLC for our rental portfolio (LLC as a partnership - depreciation allowed and all other real estate deductions). CPA set up the chart of accounts specific to this company which functions differently. In Quickbooks, you can switch between each company, having only one open at a time.

There are a few ways that you conveniently move excess funds from the management company to your general LLC. Talk to a good CPA.

PS: Make sure your CPA knows real estate investing. I have seen a few that are great CPAs to help you run many types of businesses but know little of real estate investing and end up missing a bunch of tax advantages. 

Gerald Demers