All Forum Posts by: Joel Florek

 Thanks for reaching out. Bad tenants suck.... The first thing I like to do is have good units and price them as such. Usually higher priced units eliminate a lot of the issues. But you will always have headaches. Ever have a headache with a boss or tough customer? 

I always start out with a process of responding back by phone or email and getting a quick conversation to let them know my process. It goes as follows. 

1. usually I let all leads go to voicemail. This forces them to leave a professional message. The crazy ones usually call again and again often leaving no or crazy messages. This is a great way to screen out the odd balls. 

2. I have the applicant go to website and fill out online application form for pre-qualification

3. Once pre qualified I follow up with a phone call or email to get a date set up for a showing. At this point I know their income is sufficient, they have indicated they dont have a criminal issue, bankruptcies, and evictions. 

4. Show up on time and see if they like the unit. Do they get crazy with requests for changes or are they happy as is? Helps to give additional verification. 

5. If they like the unit and want to move forward I send them an application through MySmartMove to get a background and credit check. They pay! Assuming this comes back favorable(did they tell the truth and not have any major issues) then we are good. 

6. Send them a lease and have them get it back to me in a timely manor and send the first full months rent with move in fee. 

So far this has produced great results for me. I will get burned at some point but it has been good so far. I dont get crazy with verifying past landlords or calling employers. I just dont have the patience to do that. At some point in the future when I get a virtual assistant to take over this process I will include the employer verification in this process. 

Currently I own 23 doors in Northern Michigan which is 376 miles from where I live. I still handle all the leasing aspects myself. I do have a live in manager that can do showings for me and takes maintenance calls, salts sidewalks, and mows the lawns. 

@Account Closed First you need to find good deals. Then creative financing will super charge the deal. Dont buy a bad deal because creative financing makes it a decent or good deal. 

I worked with Old National Bank. I believe they only focus on work in Indiana. They were willing to lend up to 80% LTV and wanted to see a debt coverage ratio of 1.27 on all loans used to purchase the property.

@Anibal Martinez the decision to sell a property is always tough, but it comes down to a few important questions

1: Are you making the returns you need for it to make sense to keep the property?

2: Could all the funds be better utilized in another deal based on the numbers you are seeing in your market?

3: Does the property fit with your current investing goals? 

If you are going to keep buying small multi family properties and the property cashflows well I would argue to keep it. But I would seriously consider leveraging up with a line of credit and use that money as a down payment to purchase additional properties. Talk to banks and see what options you have. I bought a 3 unit where the numbers were amazing for the price I paid. Has its issues but overall a great cash flowing beast. Does it fit with my longterm goals? No. But it fits with the current portfolio I hold in that town and doesn't take much extra work for the returns I get. I was able to stretch my funds and buy it in cash. I then put a line of credit against the property for a rate of 5.25%. The rate will change over time, so maybe not the best choice for some but its not a large some of money to adjust so I am ok with it as long as I get stellar returns from the properties that I purchase with it. In the future when I start trading up to larger properties (50 to 100+ properties) I will likely sell off my current portfolio to condense my holdings to fewer parcels so that way my time is better utilized. 

@Trevor Rutherford For this 8 unit deal the 6% down payment money I used was actually from a line of credit I had on my 3 unit I purchased earlier this summer. 

@Mitchell Litam There are plenty of good deals available in Cleveland. I have actually envied some of the numbers i see there but dont know enough about that market and am not ready to start investing in that direction yet. Remember that leverage makes the cash on cash returns outsized. You must use leverage with caution but with the right deal it can provide you a fantastic tool. Regardless keep looking and running the numbers. I have probably ran the numbers on 200 to 300 deals over the past 3 years and have only done 4 deals. 

@Rob Ross Generally speaking there are plenty of opportunities in the 8% range, and a few that go higher. But generally for the class B and class C properties you can expect cap rates of 7% to 9% in the mid west. In the fast growing and large cities cap rates still get like you see on the west and east coast. But for $1.6m there are 3 or 4 deals right now on the market that will buy you 30 to 60 units and not require anything more then regular maintenance and upkeep. You just have to be comfortable knowing that you shouldnt expect to see strong price appreciation unless you force through the NOI.

@Jackson I. If a realtor comes to me and shows me a deal I havent heard about yet then I would be happy to have them represent me. They did the work and brought something to my attention. However, I havent yet found a realtor who has been able to bring me a deal that I havent already seen on the market through searches on Realtor.com or Loopnet. When I find a property I reach out the agent who is representing the seller(listing agent) so I can have as close to direct access to the seller as possible. In the case of my 16 unit there were no realtors involved. In my other 3 deals I worked directly with the listing agents. 

@Phil C. and @Trevor Laramee I went through a local insurance company and was happy with the rate. I use high deductibles($10k) which saves me a lot of money. Overall I save abut $8k a year on all my 31 units from what the previous owners paid. Even if I have a claim every 10 years I will have saved $80k over that time period compared to the people who pay for better insurance. If you only have a property or two I get it, but in my case the extra cashflow is worth it. I also look at it from the perspective of I now have extra cashflow to remove dangerous trees or do preventative maintenance to systems that have higher likely hood of causing damage.

For the management I self manage for now so that fee just goes to me. But a fee must still be applied. For those who build their own management teams you can achieve a 5% cost factor. You can even work out a base 5% and they get additional bonuses for beating the planned vacancy rates to allow them to achieve 8% or 10% of gross rents which is industry standard. 

In the future I will likely use a combination of a leasing agent for doing showings and a virtual assistant for handling leases, marketing, recording rents and calling for collections. I am confident I can hit or beat the 5% number with that combo. Will take some refining but that is the plan. 

@Adam Britt it all starts with your first property. I bought a 4 unit to get me started and then focused on finding the next deal. Focus on how do you go out and buy your first deal. Then learn, get better, and go find another!