All Forum Posts by: Justin R.

@Sean P. Get a “Second home” loan and later decide you want to list it as a short term rental. Perhaps you want a “vacation home” and will also rent that out while you are not using it?

Regarding commercial lending they are usually less interested in you, and more so on the property itself, unlike residential owner occupied “conventional home loans.”

They will look mostly at DSCR, and LTV.

@Olivier Colson You will first want to find out if the locality has any “Just cause” regulations that prevent you from non renewal, or any other provisions that may keep a section 8 tenant in place. Perhaps you can call the local housing authority for some direction as they too would want you to do things appropriately.

Can you ask the sellers to get them out before closing?

Any chance you would want to live there? If so that usually supersedes just cause ordinances. Don’t falsify this though is you don’t have the intent.

Lastly, if they are good tenants, but section 8, and near market value, let them stay. Some areas section 8 actually pays higher than market rents.

Just some other ideas. Best to you!

@Terra Padgett as someone that has retired early off of my rental property cash flow, I will say it is predictable at scale, over time.

One property does not provide predictability either on short term, or over the course of one year. For example a roof replacement would dramatically lower your returns for the entire year.

At scale you can predict every month there will be a few setbacks every month, therefore it is planned. This is why it is important to have an operational account that always has a minimum balance. The investor just takes the additional reserves as an owner distribution.

My personal distributions are less than 20 percent of the monthly gross revenue. The rest is debt service, fixed/variable expenses, and reserves. Even at that I do face economic challenges and pitfalls, I am not protected against future rate changes.

It can be done, but it’s definitely not as “easy” or as simply lucrative as many guru’s teach.

A partner is looking to sell this deal and I currently have my hands full. Price was just dropped 200k. They got their hand full in other local projects. There is an option to renovate the current 16 unit (currently vacant) or use the plans to develop the 36 units which it is zoned up to. They are also possibly willing to partner with the right investor. This area is super strong (Georgia Southern University just a mile away, and the Hyundai Super plant set to open later this year.) Reach out to me, or the agent on MLS if interested.

Such a great thread! Also congratulations on being in your position. 

Last year I sold 10 properties valued at just a little more than you from my portfolio. They were the "problem child" performers for me and all in one geographical area. I farmed the my portfolio in that region to a bunch of agents; and when I got an offer I was happy with I sent it to my CPA so he could run numbers and let me know what total effective taxes I would be paying after Cap Gains and depreciation recapture.  For me personally it was a way bigger pill than I was willing to swallow.

I came out with a plan BEFORE I started my 1031 timelines, so I wouldn't be under stress and make a bad decision. Here was my plan.

1. 1031 into one single apartment complex that would have a return that met my demand (6.5% or higher in a class B area.)

IF I couldn't find that within 40 days I would

2. Invest with a Quality syndicator in a TIC (Tenant in Common)

IF they were not closing on a deal for me to go on title within this time I would....

3. Invest by day 45 with a DST that specializes in secure cash flow investments (NNN type stuff.)

Just an idea. I ended up with my second option (Investing in a syndication) because I couldn't find a property myself that I felt optimistic about during the cap rate crunch. I didn't feel rushed though, because I had a backup plan, and even a secondary contingency plan.

I also think the loan harvesting is a great idea, especially if you mix that with a great property manager. That 8% is so worth it, you have done your job, let someone else take that part over now.

Cheers!

As an investor with ODC, and someone who has spoke with Brandon directly a handful of times about ODC, I can tell you that he does participate in the decision making process' at the company. He has placed people in key positions that are really good at what they specialize in, but Brandon has remained the leader of the company. 

I also feel they have grown too quick for my liking, but I am confident Brandon and the team are great sponsors, are ethical, and are looking out for their LPs. 

 Ive done seller financing a few times as a lender, and the borrower. I have never used a loan service company. Use the title company or closing attorney to draw up the contract, amortization schedule, and file the lien. They are professionals and know how to incorporate this as part of the closing process.

This is from my experience only and in the states I operate. 

 Congratulations on 2,000 doors!

All joking aside I think door count is a fine metric. I view this metric inverse to most investors. To me its simply the numerator of an equation. If two people have the same NOI after debt service, but one has fewer doors, that model is most likely more efficient.

A few years ago I had several more "doors" than I do today, but my ROI has increased due to re-focus and efficiencies.

 I understand your frustration. You do have to remember a few things here. The first 6 months are acquisitions, removing non paying tenants, and taking over operations/management which is just the beginning of the stabilization process. I too was spoiled by the 8% pref def along with huge exits during the run up economy and ever compressing cap rates. I am optimistic on this team that the exit will still be strong. I do feel they need to be better at communicating assurance in fiscal solvency to their LPs, but at any given moment they could theoretically pause infilling, and pay the pref distributions. The reason they are not, is because this is a value add fund, not a bond.

I am hopeful (as I also have vested interest as an LP) that your 
"Very disappointed" turns into "very happy with results" by the fund exit.

Cheers!

I’m thinking it may be a great idea to start a group of several higher level investors (50 units and up) to create benchmarks, KPI’s, and outside opinions of portfolio. Basically an informal audit of ones portfolio.

This could be as simple as creating a few benchmarks (specific ratio of expenses, total PM fee ratios, vacancy rates and duration,etc)

As much as one could assume they have a well oiled portfolio, an outside investor could find areas of improvement.

Let me know if anyone would be interested, or if such a group already exist.

Cheers!