All Forum Posts by: Katherine Earle

Thank you everyone for your input.  This has been very helpful.

John

@Katherine Earle
My personal opinion is to keep scaling up to bigger MF properties. The further you get away from 4units the easier it is to qualify b/c they are basing it off the property's financials and not your own. In addition, you start to get the economies of scale. Obviously either works but having extra doors helps keep CF more consistent over the year. It keeps all your units in a similar area, so it is easier to manage and cheaper from a PM point of view. When I bought my 14-unit it cost me $135k/door and I put about $30k/door in reno so all in for $165k and the single-family homes next to the building were high $300k-low $400k. I was able to buy a lot more doors and the rental rate between them was not as dramatic as the price.

Will these multi-families be your first properties?

My personal opinion is that anybody starting in real estate should begin with a lower price single family fix up home. There's a learning process involved with real estate investing and there's a lot more exit options with an SFR. If you decide multi family is where you want to wind up, then it can always be sold, or kept, or whatever... It's just a lot safer investment from a potential loss standpoint. (due to financial or management failures)

I would work through the listing agent, and go from there. Do you have the capacity to back out of the deal if they refuse still? In the CO residential income contract we have specific things we request from the sellers in the contract and a deadline to produce them. This just kind of comes down to what you can get the listing agent to do by asking nicely, and if they refuse, what you can get them to do based on their contractual obligations. 

@Katherine Earle most important step is to have a solid partnership agreement that details each of your responsibilities and covers what happens if one of you dies or wants out.

You should charge for your normal services. Important to create a papertrail to avoid future disputes.

You can then agree or choose to reinvest those fees back into the partnership.

If I’m understanding your question correctly, you are trying to figure out how to find other investors to partner with or to lend to you to accomplish your deals.

If that’s the case I have no clue if the chicken came before the egg…. But I know for a fact the deal came before the money. If you find a great deal and can show the numbers make sense you will find the money. 

Relationships require a value exchange. So if you’re looking for the capital you either need to be the deal finder or the laborer. Since your a RN I’m guessing you don’t have a lot of free time which leaves you with having to find a deal along with proving to the investor that you have a good enough relationship with a contractor that the job will actually get done.

If I miss understood the question sorry for the long response. If you find a deal and still can’t find the money let me know and I’ll work directly with you to find it.

@Katherine Earle, at first glance, I would ask yourself what you bring to the partnership. If your contribution is the management and leasing, then adding those fees as an expense, and then also receiving your share of the investment, seems like double-dipping. 

On the other hand, since you've already suggest to this investor that he purchase the property alone, and he hire you to do the management and leasing, and he wasn't interested in that arrangement, then clearly you bring more to the table than just those two functions.  

That being the case, since these expenses are legitimate expenses that the property would have incurred, whether you performed them or someone else, I don't see why you shouldn't be able to charge for them. 

With that in mind, I will second @Kevin Sobilo and say that however you decide to go about this arrangement, these details should be discussed and formalized beforehand.

One other thing you may want to keep in mind, is that you should look at your long-term relationship with this investor/partner. If you think there is a potential of him being there long-term, investing with you in future properties for years to come, then it might be wise to compromise slightly to ensure he's still making something when all is said and done.  Every investor expects a return on their money. And if you do end up charging for these services, and he ends up not making much after that, he may not be enticed enough to follow you to your next deal.

Lastly, from a financing perspective, since a management fee is a basic expense that every property has, even if you decide not to charge for these services, lenders will still include them in their underwriting when determining the NOI and value for the property. Depending on the size of the property, it's usually between 3-5%.