All Forum Posts by: Kathy Henley

@Seth Golding  The managers of the 45-unit can layout the common repairs and you can negotiate your hourly, as they will count on you.  What level of customer service do they want to give their tenants?

We hired a guy that is licensed for HVAC repairs, but can do everything – outdoor lighting, change ceiling tiles, remove pigeon nests, general plumbing repairs and door repairs. He earns about the same money that he could for a heating/HVAC contractor, but likes the steadier income, variety and being on his own. We guarantee him 30 hours a week, which leaves him flexibility to do other work. His materials & parts purchases go on the business credit card at Home Depot or Grainger. He is an employee.

@Kim Knaust You get to choose your own company name, bankers will keep their opinions to themselves. What kind of company will depend on your age and goals.  There is no hurry to set up the company.  The important thing is to keep accurate records of your business expenses.  If a separate bank account takes less day to day work, do so, but it could be in your own name and avoid business fees.

When the time comes to sign contracts and separate your business activities from your personal assets, it will be the time to talk with your lawyer or tax person of what kind of corporation to establish.

@Lindsay Conway  Time to take your banker to lunch.  Make a date with the bank manager and ask questions.  I am confused by the low prices, writing from the west coast.  No matter, the principles are the same. Are the properties worth more than you paid for them?  Do you have signed leases for the duplex?    Visit the bank and ask for a loan against the asset. The rents are income, in the eyes of the bank.  This will give you access to more cash. 

 Depending on the interest rates - as interest expense will eat into your cash flow.  Pay off the loans with the highest interest rates first.  What is property #3? Does it cash flow and do you have a lease?  Go see your banker.  Don't touch your Roth.

@Account Closed  No matter, there is always another one. Everyday I print out a listing and go over the expenses/income/ leverage plan and find my offer number. This practice helps me prepare for finding the right deal, as my focus is always on the cash flow and there are a couple of ways to make it happen.  Last year I found three.

Be ready.

@Joe Burns  You have the right attitude!  How about hanging out with real estate investors and soaking up their knowledge. Carry water for one of them and listen.  Learn what works and what to avoid in your area, as real estate is all local. 

@Jonathan Nguyen You said 'commercial'.  Commercial leases layout many layers of the owner's future income.  Ask to see each tenant's leas. I work in the office of three commercial investors. They verify every aspect related to the investment. How much money comes in during the year, how much goes out. 

Are the tenants paying for the common area maintenance?  Who pays for the HVAC repairs, or the roof repairs, tenant or landlord?  You will find the answers in the lease. Stepped up rents will be laid out on a schedule. Ask for the rent rolls to see if any tenants are behind in payments.  Don't overlook the leasing commissions, service contracts and property tax expenses. 

Warranties are not part of the deals in my area.  Detailed inspection reports of the land and building are mandatory.  The buyer pays for these third party reports.  The property condition report will tell you the life expectancy of the roof, parking lot, and the major systems. Your lender may require such reports so that you, the borrower, will keep a reserve of funds for future expenditures. So the buyer is back to looking at the leases, as to know where the funds will come from, to evaluate the deal's worthiness.

A letter of intent may get you started.  Information will be exchanged and money will be put in an escrow account to show that you are in earnest.  More information will be verified (tenants asked to sign a paper verifying the facts of their lease) and expenses verified (copies of the energy bills and service contracts shared with the buyer.)  More money goes into the escrow account. Your offer will include deadlines for gather the above information, usually 45-60 days. Price negotiation may continue as facts reveal themselves.

@Account Closed  You have a chunk of cash, this is terrific.  You are looking at multi family, which generally spreads the maintenance costs.  Tell us more about the deal. 

@Ellis Barfield Yes the starting costs are steep for many parts of California.  This ties up too much capital and doesn't make sense for us. Note:  There are troubles coming to California.  Hang on and there may be opportunities for you in the next downturn.  

Or, if you too will be relocating, where can you groom a team that knows the local habits of tenants, that could watch over your properties and guide your purchases, until you get there? To choose a region, watch for migration trends of working people. Wherever this may be, learn how to value properties based on its income stream. 

@Marques J.  I have an investor friendly realtor who works on commission.  The part time description is confusing. PM me

Are you buying buildings, rehabbing and then renting to veterans? It is good to know who your customer is.  What criteria makes it Vet-happy? There are plenty of bulky properties (multi-properties) of one bedroom units. Some have a longer footprint than others, if stairs are an issue.  Make a list of the needs and your agent will find it!

@Everton Bradford I have done it a few times, but be very selective, as the monthly interest payments lower your cash flow; it is a loan.  If you find a value add deal, where there is an opportunity to make improvements and  increase the value of the building, a re-fi may liberate the borrowed down payment.  Do you have the time and cash flow to make it work? 

There is a risk. If your market took a dive you would have to re-think the financing of two properties. Know your numbers and what cycle your area is in.