All Forum Posts by: Lee Ripma

Hi Jay, You’re not getting any love on this one so I thought I’d chime in. I’m always very interested in what your take on markets is! I’m a CA based Kansas City investor. I’ve got a few potential deals I’m looking at in KC but the market is hot and it’s hard to find value add deals that are not based on proforma numbers. I’m thinking about adding the Cleveland (and maybe Albuquerque) markets to my search. I’m looking for value-add apartments in the C transiting to B space. I’m looking for cash flow markets with some (over 3%) appreciation. The 2018 Marcus and Millichap market forecast sold me on Cleveland as exactly what I’m looking for. Now it’s all about finding the right submarket and the right deal. Very interested on your thoughts on the stock! Looking forward to hearing what others have to say!

I do a prelim screening using tenant cloud, no fee. It gets their contact info, email, and asks a few questions: Is your credit score over 600? Are you willing and able to pay rent online (free)? Do you make 2.5x the monthly rent? Do you have any evictions? They are self reporting, but they now know what I’m looking for. Once they do this, I send them an email from Smartmove and they pay for their own background check. Some people have trouble with tenantcloud because the platform isn’t that great (lots of glitches). I’m not sure it’s the most efficient way to do it and I’m thinking of switching to cozy for the application and the background check. I don’t take anything but online payments through ACH transfers. Tenantcloud has this setup through a payment processor called Dwell. It’s free but I pay tenantcloud $9/mo. I think Cozy actually does the same thing BUT they don’t do online leases. I really like online lease signing-so much easier! If others have suggestions for platforms I’m open. I don’t have enough units for buildium or app folio. I do first qualified candidate to complete the background check for all adults in the unit. When I filled up my units in Nov/Dec I had 5 that I needed to fill, so I didn’t have the problem of a ton of applicants. I did have several who wanted it, but had evictions in their background check.

Linda Weygant She’s great and was on the podcast. I use her from CA!

I’m using tenantcloud. It’s a poor mans Buildium. It’s only $9/mo and it has online lease signing and rent collection. It also has easy accounting features. Their listing features don’t work well and the customer service is terrible. While it has some problems I haven’t switched away from it yet. The thing I can’t stand about Buildium is that they charge 50 cents for every ACH transfer, which are free. If cozy had lease signing I’d switch to it.

REI guard is hands down the best! I got quotes from a bunch of companies and has Shelter at first. Just use REI guard and save yourself the pain!

I would first start with figuring out how much capital you’ll need to take the whole package down and renovate it (if needed). Have realistic expenses for everything including closing costs and due diligence. If it were just you how much would you need? Ok, now that you have that number back out how much you can contribute (5%, 20%, etc.) and the kind of returns for you and for an investor. You can offer debt, just paying someone a fixed rate of return for their money, I would assume 9-12% interest. You can also use debt and equity, they get a share of the deal and associated reruns from both cash flow and sale. I’d use 12% cash on cash as a minimum return or a 15% IRR if it’s over a period of years and you plan to sell. That’s just a suggestion and each investor cares about different things, so structure accordingly. Now that you know what you need and the options looks at what you can offer. Maybe you can put up 30% of the capital and do 100% of the Work. Try to find someone who will give you 70% of the capital for a 50/50 split. Your goal is to find a way to make a deal that’s attractive to a private investor or a RE investor so that the returns justify the risk. It’s about structuring a win-win deal for everything. It’s your job to put together something that works. Maybe you borrow money, maybe you start an LLC together, etc. You need to know the numbers for different scenarios. Good luck!

@Jeff V.

Interesting, I guess they must just set their own policies. Make sense they would because they hold the loans and don't sell them off. Thanks for letting me know what you're getting, I'd be thrilled to be able to cash out 65-75% ARV!

@Jeff V.

Commercial loans don't have seasoning periods. They just want to see that I have skin the game so won't let me cash out all my money, even if the value is there. 

This is an interesting question and one that many have on BP. I have 100k and I want 10k a month. You have less money then you want every year, so you're going to need more capital or you're going to need to build it up in a way that allows for large increases in the value of your property, like major renovations, a sale, a bigger property, another sale. If you leverage it you'll be able to make it go further but you still won't be there yet. I personally see two options if you can't get any more cash 1) Go the house hacking route in southern california. However, you're going to have a hard time finding one with 100k even if you go FHA. The loans simply will be too big. Think about where you could live with your job and shop in that market. Find something that is major value-add and put a lot of sweat equity into it. You could also consider buying a SFH and house hacking it but use the bedrooms as airbnbs. Or the same duplex/tri/quad with airbnb, self managing and hoarding cash. Focus on getting as much cash saved up as you can from that activity so you can put it into more investments. 2) Buy a value-add apartment out of state. I personally would buy and out of state value-add small apartment for the cash-flow. There are many markets where you can get a 10-20 unit. I personally like Kansas City and currently invest there. I am also going to Cleveland to see about adding properties in the area to my portfolio. You'll be able to get into something that costs 400k or so but just be careful that you have enough money to cover repairs and if something goes wrong. Buy something that is value add and increase the NOI by increasing the rent and decreasing the expenses. Once you have increased the value either do a cash out refi or 1031 exchange into a bigger property. Keep doing that over and over and you'll be able to get up to your 10k a month goal eventually. Remember that the real weath is created when you do value-add not when you buy cash flow. You can buy cash-flow but only if you already have a ton of cash, which you don't. I hope that is helpful and know that I'm in a similar situation in SoCal and doing the out of state value-add approach!

@Jay Hinrichs

Thanks for your reply! I figure if it's going to be expensive then it could at least be easy, and if it's cheap it's worth working harder for. I know it's worth it to pay HML fees, it's how I got started. I can't figure out how folks get all their capital out of properties based on an appraised value. All the banks I have talked to want LTC once they realize how much more my appraisal is over my purchase plus renovation. Something to figure out this year for sure!

@Stephen Turner  

Let us know what you decide to go with!