All Forum Posts by: Joshua Christensen

@Freddy Hernandez you've gotten some great advice in this post, so I won't rehash all that.

When we're evaluating a new property, we consider a couple of things.

HISTORY If you're dealing with a seller directly, ask them for the most recent 12 months of bills.  If you're dealing with a broker, ask him to request that information as part of your due diligence from the seller.

RUBS/BILL BACK When there are single meters on a building, you can bill back a percentage (based on location) to the tenant. You'll receive the bill.  Example.  You may have a flat $xx dollar amount added to the rent monthly (specified in your lease) for utility bill back.  You receive the utility bill and pay it, while collecting from the tenants.

TENANT PAYS When the meters are separated per unit, make it a requirement of move in to have the tenant provide their utility account numbers to you so you know they are set up and not being billed to you.  Verify of course with the utility companies to make sure they aren't giving you bogus numbers.

EFFICIENCY look for ways to "value add" through energy efficiency.  Update all lighting to LED.  Ask the power company to evaluate for any electrical leakage that you can repair.  Ask a plumber to detect for leaks you can't see.  Add water meters to separate the exterior usage to the building usage (sometimes the water companies will provide a break for that portion).

There are a lot of things to consider and utilities are a big part of operational costs associated with apartment ownership and management.

Best wishes to you.

It depends on your lease.  What's written in there regarding the owners responsibility vs. tenant responsibility.  

So long as your lease supports it, bill them for the repairs.  Fix it and bill them.  My leases state the order in which money received is applied.  Current rent is last on that list.  Any late fees and other fees are billed first, then the rent is applied.  If they don't catch up 100%, they are always running behind.  It's an education process.

When you sit with the new lessees to sign, go over all of this so they understand the process. If they complain, show them this part and ask them to recall discussing their responsibility during your onboarding conversation.

The other option, you can choose not being a landlord if this is to much to handle.  It comes with the business.

Absolutely, CAP is based off NOI and to @Jordan Moorheads point, most sellers of small MF and residential deals don't keep good numbers.  Besides the fact that valuation is based off sales comps not income.

I look more for positive cash flow. What is the DSCR on the deal? Is it north of 1.25? You may be ok. The higher you are on your DSCR number, the better the deal.

These smaller deals are much easier to estimate numbers and look at as there are not as many moving parts.  

Hey Sean, There is a lot of great advice on this post for you to consider.

I appreciate @Evan Polaski's comments regarding partners.  I've had multiple partners over the years while building my portfolio.  I started with nothing, so having capital partners was important as I had skills and experience without cash.  I wanted equity in these deals to build my portfolio.  My sweat and skills made up for my lack of capital.  I didn't want a boss.  Most experienced skill won't want a boss either.  If you find a fee based partner, be vigilent in keeping an eye on them, as there is a good chance they are taking you for a ride to make some cash that's not based on performance.

In terms of finding deals that you can put together without experience, I do a lot of creative deals that banks are not involved in.  It's the banks that want you to have the experience.  I'm happy to discuss further.  I'm working on a 53 unit deal now without banks.

There are so many different ways to skin a cat in this game.  Have fun with it.

If they aren't smart TV's look at an Amazon Firestick or a Roku.  They will plug into the tv and act as the app hub you'll need.  

Best wishes.

Seller Finance.  Subto.  Lease Option.  There are multiple ways to do these.

1. Seller  Finance - the seller owns the property outright.  You have an attorney draft the mortgage and note.  Close with the attorney or a title company (state-specific).  Make payments through an escrow company.

2. Subto - The seller has an underlying mortgage on the property.  In New Mexico, we do a seller finance mortgage note that "wraps" the underlying mortgage to be paid through escrow.  

3. Lease Option - Negotiate a lease with the seller that you are the tenant with the right to sublease to a 3rd party.  The 3rd party pays you and you pay the underlying.  You have an option to purchase the property in 3-5 years at a preset purchase price. 

Risk of a Wrap.  The Due on Sale clause in most / many mortgages.  The bank reserves the right to call a mortgage due upon a sale.  Typically, the only time a mortgage services knows the sale happened is when it shows up on a report for non-payment.  Always make sure payments are handled by 3rd party escrow.  You to the Escrow > Escrow pays the mortgage & the seller.  Never go direct to seller.  HUGE red flag.  I even do my Lease Options through escrow to make sure the mortgages are paid and seller's don't walk with the cash leaving me a foreclosed property and no way to collect.

Ian, I'm all about creating long term cash flow.  6 is more than 4.  Simple math really.

It just has to make sense and to Gino's point, as long as the numbers work and you can pay back the HELOC, why the heck wouldn't you.

To Greg's point, buy the asset and then stabilize it. Pay it off with a commercial DSCR refinance loan once you've gotten the rents up to an amount that will allow you to cash out on your HELOC.

I like using my HELOC but only in short-term scenarios because it's a floating rate and I can't control when or how the bank will make adjustments to the payback variables. Additionally for tax purposes, you have to make sure a personal HELOC is not a problem for the accountant on your business LLC taxes (usually not, just a precaution).

Rinse and repeat my friend.  Happy investing.

Check with YoutTube TV or HULU TV for a bundled package?  

Freevee is an option that has a ton of content and could cost little to nothing.  I think its completely free with smart tv. 

Bring in your internet is all.  

Another option could be to talk with the local cable provider to see what kind of marketing package they will offer.  Sometimes they will pay you to install for added business. I'm not sure how that could work with STRs.  

I'd start with an appeal to the city for a Grand-father clause.  You bought it this way.  

You could go back after the Flipper - who should have known and hold them accountable to get it permitted since they sold it to you that way.  

Ultimately, any upgrades or changes in the future will need the proper permits, so those may just be temp fixes for now.  It will need to be corrected at some point.