All Forum Posts by: Gregory Schwartz

Spend 4 years learning/mastering direct-to-seller marketing. Once you have deal flow you can....
1. Wholesale
2. Flip
3. BRRRRR
4. Get your RE license and sell these on market

You can also use the marketing skills you learn and direct it toward apartments or commercial real estate and jump into that asset class. The point is that the hardest skill to learn is marketing for deals. Focus on the skill not the business. 

Can you consolidate the portfolio (sell a few properties) and decrease your debt? 

Also what are the market rents? what is the potential rent? 80% of professionally managed properties in my area are at market rent but under potential rent. What do I mean by this.... Well the PM companies rarely push rents and dont like to work to get the best rent rates, as a result they create a mediocre average rent rate throughout the market. I can usually get 10-15% over the market rent, I call this our potential rent rate. So what is your potential rent rate?  

I'll probably get pushback on this... but here's my experience. I have 4 units, 2 have formica and 2 have quartz. There has been no noticeable difference between all 4, same income, same 5-star reviews. 

@Steve Tse thanks for the background. I think that all sounds very fair and in keeping with how we raise rents. What is the monthly rent? What would it cost to turn the unit / get it rent-ready for a new tenant?

I don't aggressively increase rents if a tenant's current rent is within the turn cost / 12.

For example, if you need to replace flooring, paint, and fix up a few things... your turn cost might be $5-7k.  $6000 / 12 = $500. In this situation, I would likely only increase rent $50-100. If the tenant pushes back I'd feel comfortable with a $20-40 increase.

Not a perfect system but its how we think about it. 

@Nathan Gesner I agree 100%. You said it much better than I did

A few things to note
- Know the market value of your rental, because I guarantee your tenants do. 
- Your expenses don't mean anything to a tenant. The market dictates the value of your rental. So dont use the "taxes when up" excuse with a tenant
- Raising rent to market rate could prompt a tenant to move to save money. For me, a turnover costs around $2,000. Spread over 12 months, that’s about $160/month. So, if I’m under market by $160, but the tenant will signed the renewal thats a win. I’d rather avoid the turnover and save on out-of-pocket expenses.
- Having a set % and applying that each year is lazy and will result in higher vacancies. See my first point

@Sanjeev Advani Thanks for sharing. I think the important takeaway is that you need to know what's going on in your local market. Dont rely on national number to drive your investment strategy. 

For example, in my market, we see MF building permits way down for the last 2-3 years. However, SF permits have been booming. 

If you live in Texas this is a great resource to see how much MF inventory is growing in your market https://trerc.tamu.edu/data/building-permits/

@Casey Coffey great negotiations! Lots of equity and a house that pays for itself even when you account for capex, future vacancies, etc! That's a big win!

@Joe Villeneuve makes some good points. We really need to account for and highlight the fact that there are more expenses than just PITI and equity is a fun number but it really doesn't have any true value until we tap into it. And of course, the process of accessing the equity comes with its own cost / expenses. Sell it and you have agent fees, closing costs and taxes. Cash-out refi costs money to originate the new loan, appraisal fees and your PITI will increase affecting cashflow.

Overall I think this is a great deal! Congrats 

@Chris Seveney really, you think it's ok if all the apartment complexes stopped sharing rental history? 

Would you approve applicants without a verified rental history? 
Doesn't this hurt the tenants trying to move to a better location or larger home for their family? 

I have to deny this family who is otherwise likely very qualified. My unit sits vacant longer and this poor family will struggle to find a good place to live. We all know the type of landlords that dont screen tenants, they're horrible and usually dont take care of their properties. So what kind of living conditions will this family end up in? 

I really hope it's not a policy that becomes widespread.  

I generally dont like the idea of charging for more tenants. It just gets messy, and complicated and opens you up to false allegations of Fair Housing issues. In my rentals anyone over 18 that wants to be added to the lease can do so given that they pass the same screening as every other tenant in my portfolio. Of course, if the unit is at capacity then we can't allow any more occupants. IE not more than 4 people in a 2 bedroom unit.