All Forum Posts by: Llewelyn A.
Llewelyn A. has started 23 posts and replied 645 times.
Post: Top cities for evictions and Top cities for least evictions

- Investor / Broker
- Brooklyn, NY
- Posts 665
- Votes 1,744
Hi David.
Yeah, the real problem with Rent Control/Stabilization in NYC and elsewhere is more of a psychological one.
The regulated renters kind of lives in this isolated environment and has a connection with the value of their apt although it isn't necessarily their property. However, breaking the rent stabilized lease is very valuable to the Landlord who may offer money to vacate it.
As a personal observation which probably cannot be backed up by any real study, most of my relatives and friends who were in regulated apts, despite having access to me, refuses to invest mainly because they feel there is no need when their living is set for life. This psychology sucks the Entrepreneurship out of the person.
I sort of feel guilty in regards to one of my long term tenant. She stayed in one of my apts for 20 years but we raised her rent every year, but at a very reasonable rate. She's probably underpaying the market rent for her Apt by about 25%.
This created the illusion for that tenant that rent she pays is sort of around market rates.
Recently, I explained to her that had she actually bought an identical property 20 years ago, she would have done a LOT better than her current predicament now. If I were to sell the building, I would need to vacate her apt to renovate it. She would be faced with trying to find another apt in a very tight rental market but for about an increase of around $500 per month.
I bought the building the tenant currently lives in for $340k in 1997. Today, it can sell for $1.7 Million.
Yes, she saved in rent because I was generous to her as my longest term tenant. BUT, because I didn't keep her rent at Market Rents, she didn't know how much rents and Values moved up.
If I were to calculate how much she saved on her reduced rent, say an average of $100 per month for 20 years = $24,000 in rent savings, and compare it to how much she would have made by buying an identical property, she would have made around $1.3 Million in appreciation, not counting cash flow.
That's why I feel guilty by shielding this particular tenant from paying Market Rents.
In the same way, I feel rent Control/Stabilization has the same effects on the tenants. They are completely shielded from the Market.
It would be interesting to hear your opinion as a tenant in a rent stabilized situation.
If you weren't a rent stabilized tenant back when you got your rent stabilized apt, would you have been more inclined to buy your own place and secured your cost of living as well as captured the appreciation?
Post: Top cities for evictions and Top cities for least evictions

- Investor / Broker
- Brooklyn, NY
- Posts 665
- Votes 1,744
I think Mitch has the right idea.
I'm a Brooklyn, NY investor, currently have 8 multi-family, 25 apts, 60 tenants.
Last time I had to do an eviction was more than 15 years ago.
I had to do 3 evictions, all of them were from inherited tenants that occupied the buildings when I purchased them.
Despite being in a Bigley tenant friendly City, Market Rate buildings and apts can perform their due diligence so that you can reduce the risk of having high risk tenants. You cannot totally eliminate Risk, but you should be able to reduce it to an acceptable level.
There are several factors for the astute Investor in the NYC Market that wants to reduce their risk of tenants that need to be evicted:
1) LARGE pool of renters. You have a large variety of tenants as a result. This is necessary because there is no point on using some tools for risk reduction if you can only rent to a certain number or type of tenant.
2) LOW vacancy rates (less than 4% normally). Combined with a Large pool of renters, you can weed out problematic tenants.
3) Availability of HIGH quality renters so you can use Credit Scores whereas if you are in areas that you expect to have only low credit scores, this is tool can become useless.
4) Eviction checks are a very useful tool. Tenants know that if you are a Market Rate Apt seeker, which the majority of tenants will be, an Eviction on your record will basically minimize the apts that are available to you. Combining this with the available number and quality of tenants, you almost have ZERO chances of finding an apt. The Strong Tenant Laws are so prohibitive to NYC Landlords, if you have an eviction record, you are at a Yuge disadvantage. Tenants know that and try to avoid being in a Tenant/Landlord case. There are a lot of tenants who are in rent regulated apts that don't share that concept because they don't have the experience of the Market Rate Apt Seekers. If they lose their rent regulated apt, the picking for those apts are incredibly slim. But that's usually when they realize the reality of the Market Rate Apt Seeker.
5) Bank statements are incredibly useful here. I always ask for 3 to 6 months of bank statements to prove you were paying your rent on time.
6) Landlord recommendation. Combined with your Bank Statements, you will hardly be able to pull the wool over my eyes by getting friends to give you a Landlord Recommendation. The Letter of Recommendation and the Bank Statements showing your rents are being paid must corroborate your story.
7) High Income - Generally, we ask for 45 times monthly rent. If I have an apt renting for $2k per month, then you need a combined income of $90k per year. My apts average $2,500 per month. So generally, if you don't have at least $112,500 per year annual Income, sorry.... next applicant.
All of these combine to protect a Landlord in a very Tenant Friendly environment. It's because of the Tenant Friendly environment that tenants who need a break just won't have them, in my opinion. If it were easier to evict, I could give people breaks. But that's not the case and my due diligence is incredibly strict.
I want to point out that places with very tenant friendly laws seem to be very HIGH Appreciating markets. Places like SF and NYC are among them. I don't think this is a coincidence but I won't venture to tie them together in this post. It's just an observation that I have seen over the decades.
Hopefully the reader of this post will understand that just because a City is Tenant Friendly, does not mean the landlord is at the mercy of the tenant. FAR FROM THAT.
Post: Need advice, is this illegal?

- Investor / Broker
- Brooklyn, NY
- Posts 665
- Votes 1,744
I also would suspicions that the new loan is being paid by the revenues of your business.
Do you have access to the most recent Bank Statements or can you speak to your own Bank and see if any funds are being used to pay for the new loan?
If there IS evidence that the loan is being paid for by the operating cash flow, I would address it to the other members who signed off on it and find out why they would do that.
Just curious, how much and how long did you know the Partner that is breaching the OA? Any due diligence on your Partners? This thread is a good discussion not only on the allegedly breach but also on how to Partner.
Post: Rate of Return in investment property

- Investor / Broker
- Brooklyn, NY
- Posts 665
- Votes 1,744
Hi John,
I'm not trying to justify what the OP is trying to do. I'm giving the calculations and then the OP makes a decision.
Once the pro-forma 10 or 20 year projection spreadsheets are fully created and the assumptions are verified to be conservative, then it's just a matter of using that spreadsheet to compare it to other potential Investments.
These are all subjective to the goals and means of the person who is looking at the calculations.
It is not Right or Wrong, it's just Math.
I cannot say that positive Cash Flow MUST happen in Year 1 or the deal is a dead deal. That's up to the person who uses the Analysis.
What I do know is that for me, it's all about the IRR, and I try to achieve higher than 15% as a goal, whether or not it starts out as Negative Cash Flow.
All Negative Cash Flow means is do I want to make it positive by putting more down or do I want to carry the property during that time?
It's about your strategy. The 3 versions of the spreadsheets tell us Cash Flow is about what you are doing in terms of finance, not about what the Investment is doing.
The NOI is the NOI. The Cash Flow changes depending on the Debt Service.
I just want to readers of this post to realize it's just math. It tells us that Cash Flow is a characteristics of the Investor and his means to finance the property, not about the Property itself. That's why the Cap Rate excludes Debt Service.
Post: Rate of Return in investment property

- Investor / Broker
- Brooklyn, NY
- Posts 665
- Votes 1,744
From a purely mathematical point of view as demo'd in my spreadsheets, this is not a disaster. Using the original numbers and the 1st Spreadsheet I posted, It's still an overall 9.24% IRR, but you have to put in $347 per month for the first year, and the negative cash flow diminishes every year until the 13th when it becomes positive.
What I do for investing is analyze the economics of the local, city, State, National AND GLOBAL markets. Normally, you don't need to know the Global Markets, but I do because this is NYC, an International City.
If the Dallas Area has decent FUTURE Economics, then it will cause your IRR to be a lot better and your Negative Cash Flow will be breaking even in years earlier than is projected in my Spreadsheet.
There are a lot of Investors here and elsewhere that eliminates Negative Cash Flow Situations (notice, I said situations because it's the Investor that Cash Flows an Investment), but I personally don't.
HOWEVER, there must be a compensation for me to put in money into the Investment.
Normally, in that situation, for me, I would need to be compensated with a Higher than normal return than what I can get with buying a straight Cash Flowing Situation.
I make intelligent analysis on the Future using Economics and other factors, such as City Developments in the local area and the migration of people to that area.
I can't really advise you for the specific Dallas Area because I am an expert in my Area, Brooklyn, NYC. I never advise or Invest in areas I don't have a thorough knowledge of the future economics of the area.
I think you have a lot of information from everyone's postings including mine. I'm just providing a fresh point of view that doesn't shoot you down just because there is a Negative Cash Flow situation.
Post: Rate of Return in investment property

- Investor / Broker
- Brooklyn, NY
- Posts 665
- Votes 1,744
Hi Robert.
That sounds like a great deal!
But keep in mind not everyone, which may include the OP, can qualify for that kind of deal.
I've been in the business for 2 decades and have $20 Million of Investment Properties in Brooklyn with Partners. I don't expect a single individual to buy like I do and I try to break it all down, which inevitably means that you need to find Partners for those deals since Brooklyn properties are generally over $1 Million each.
While I am not advising anyone to buy in a Particular Strategy, at least half of my properties were initially Negative Cash Flowing. I tend to have to add value to them like House Hacking it with an extra unit that I stayed in to make it at least break even.
In NYC, if you can NOT pay rent and live, you are doing GREAT! Today, there is huge protests about the "Rent is too Damn High." So when you can buy a place and not have to worry about Rent, consider yourself luck in NYC and I suspect, SF.
All my properties, including the ones that I started out with Negative Cash Flows, are doing FANTASTIC. For instance, I bought a property for $140k in the year 2000. That has a Negative Cash Flow for about 3 or 4 years. It's now worth $1 Million 17 years later. I originally put down $28k and renovated it for $40k. That's $68k invested. If I sold it today, I would put in my pockets $895k, that's a profit of $827k from an Investment of $68k. The ROI on that increase is 1,216% ($827k / $68k) over 17 years = 71% PER YEAR, not including about $2.5k in cash flow PER MONTH today! Not bad for a $68k Investment.
Francis, I forgot to answer the other question you had. You asked if it was better to use a 30 year fixed. It's easy to do the same calculations since I have a spreadsheet developed. I'm going to assume that for the 30 year fixed, it's at a higher interest. Let's just say 4% instead of 3.8%. So here is the spreadsheet with that small change:
See how quick it is for me to make a change on a spreadsheet and let it recalc all the numbers? Now, you will have a Negative Cash Flow for 5 Years, and most of it is barely a Negative Cash Flow.
NOW, to appease anyone who is totally disgusted at Negative Cash Flow, all we need to do is add a higher Down Payment and then you no longer have a Negative Cash Flow. So.... let's do 30% down.
Here is the new spreadsheet:
Good Buy Negative Cash Flow.
These spreadsheets are POWERFUL. I would advise everyone who doesn't know how to do them to PLEASE run your own spreadsheets and answer the what if questions.
The above spreadsheet answers the question, What do I need to do in order to make this Investment Cash Flow on Day 1.
I also want the reader of this post to realize that Cash Flow is NOT about the Investment, It's actually more about the INVESTOR. Basically any property can Cash Flow if you don't have a Mortgage. Having a Mortgage is dependent on the Investor, not the Investment.
Hopefully all these spreadsheets didn't put anyone to sleep! :)
Post: Rate of Return in investment property

- Investor / Broker
- Brooklyn, NY
- Posts 665
- Votes 1,744
I totally get what you are saying. But the Geek in me wants to bring the analysis out a bit further. Here is a spreadsheet I whipped up for reference:
Given the assumptions of 3% Rental increase and 3% Expense Increases, you are absolutely correct, it breaks even by year 13 as you can see in column T.
However, I wanted to see how the monthly Cash Flow will be affected. You can see that every year, the monthly cash flow decreases and gets much more affordable. I know a lot of people may say that a $200 loss per year is unacceptable, but now lets take it a bit further.
Let's look at the fact that he has a 20 year mortgage.
In Row 22, I computed the Balances after each year.
In Row 23, I computed the Equity based on ZERO Appreciation... meaning no increase in Value over the years. However, that does not mean he is not building equity. This row gives you the CUMULATIVE Increase in Equity.
In Row 24, I computed the Equity that was gained from the Original Mortgage of $196k (based on the $245k at an LTV of 80%). So Year 1 Gain of $6,673 is Equal to $196k original balance minus $189,327 new Balance after 12 payments.
In Row 25, I took each 12 month period and I computed the gain on average per month. You can see it's increasing nicely.
So... there are two things that are happening here.
1) His Monthly Cash Flow is getting More positive (or less Negative)
2) He is building Equity Faster via Mortgage Reduction
The Bottom Line is Row 26.
I take the Monthly Cash Flow and add it to the Monthly Equity Gain via the Mortgage Reduction.
You can see that it starts out at $209 per month and by year 13 it's at $877 per month.
This all assumes NO APPRECIATION.
I'm not trying to say I'm right or your wrong. I'm just putting out the Analysis so the readers of this post can see that while one can say it's a negative cash flow property for 12 years, he breaks even on the 13th year, all with no assumption of appreciation.
If there were appreciation, an annualized appreciation rate of 3% per year, which really is low even nationally, is really conservative.
I thought since he gave the numbers, that this was a good exercise for anyone interested to see in more details.
I perform this kind of analysis normally so I can get a 10 or 20 year vision on the Investment.
This kind of analysis also serves as a pro-forma business plan which helps others decide if they want to invest with you.
If it can be explained in detail, this can help your business if you are recruiting partners.
They get the bottom line, which is a negative cash flow for 13 years but the cash flow losses decrease each year. They get equity build up every year. And, if there is an assumed 3% Appreciation Rate, the over all return is 9.24% per year as if it was a Savings Account.
It's better to do this deal than to keep your money in a Savings or Checking Account earning virtually zero interest.
Just food for thought!
Post: Rate of Return in investment property

- Investor / Broker
- Brooklyn, NY
- Posts 665
- Votes 1,744
Hi Francis, I'm not sure you understand the calculations, especially in the Table called "Breakdown Over Time."
The problem I find in BP is that most people just don't understand these calculations.
It's an Internal Rate of Return Calculation broken down by what the selling price of the house would be at the time, based on the Value of the house which is dependent on the Capitalization Rate and the NOI.
In other words, those calculations projects your rents and expenses out for 20 years, as well as calculates the Value by using a 3% appreciation Rate, which is extremely low.
It then seems to add all of it together and spits out an IRR of 9.24%
The problem is that the majority of Investors anywhere, not just here on BP, just doesn't really understand that kind of calculation.
Funny, but this is the kind of calculations that I really think all Investors need to know.
What you would really need to know is not if this is a negative cash flow or not, but can you carry the $347 per month loss until the time it break even in cash flow, which those calculations don't tell you.
Then, if you can do that, by the 20th Year, taking everything into account, including the negative cash flow for that short period of time (I can calculate it but am pressed for time when you would break even on cash flow), it would be the equivalent of putting your money into a Savings Account at the rate of 9.24%
Now, that's not bad as an Investment.
Also, the 3% Appreciation Rate may be far below what is the historic rate in that area so it could be way off and that would mean you get a much greater return.
ANYWAY.... my views are very much out of the mainstream but that's because I fully understand all of the numbers you posted. Most people can't get beyond the negative cash flow so they don't see the entire picture that you are presenting.
Post: Six-Figure career switch to Real Estate Agent?

- Investor / Broker
- Brooklyn, NY
- Posts 665
- Votes 1,744
Hi Solomon!
Funny, but I'm in your boat, sort of anyway, but i'm 52 next April! :)
However, I've been a very successful Real Estate Investor for 2 decades, so I have an edge.
I also invest with Partners, 12 of them. Each Partner had made a lot of money.
When I was planning on moving on to a new business and holding off of Real Estate Investing, my Partners became VERY disappointing as all of them got in and made money because of my leadership.
So, I decided instead of starting off right away with the new business I was planning, which is a software development business, I would just get my License.
Once I looked into it, I saw that there are 2 requirements to getting a Broker's License in NY. 1) Have 2 years Salesperson Experience and 3,500 points OR 2) Have 3 years equivalent experience and 5,250 points. The Point system involves buying and selling Properties, Signing Leases, Collecting Rents, etc. I'm way past the 5,250 points.
So.... this gives me an automatic opportunity to become a Broker without first becoming an Agent AND I have my Buyers already lined up.
I'll probably want to start off at a Brokerage Firm first, thought, because I don't have any legitimate Sales Experience, but I'm sure to pick that up very quickly once I start to work in Broker Business.
For others who may read this and are Brokers themselves, I would appreciate any advice on what to do in my case. Is working in a Brokerage firm as an Associate Broker a good start or should I just open my own Brokerage and hire an experienced Associate Brokerage to run the office until I learn?
Aside from my personal goals, you probably know a lot of people through your former employment that knows how hard working and ambitious you are.
Maybe you should do some Pre-Marketing work where you should already send out feelers to selected individuals that you can confide in about your plans to become a Sales Agent.
As a Marketer, you probably already know what kinds of questions you might ask.
"Once I get experience as a Sales Agent, would you consider using my services if you were planning on Listing or Buying a Property?"
etc.
Really, you are the Marketing Expert. Use your Expertise to do pre-Marketing to get a fairly good determination on potential leads even before you start.
That way the conversion of Leads to Opportunities can be quicker as you'll know exactly who to target.
In some way, you can start branding yourself, get a website going, put on some great Marketing materials, see if you can build your business as quick as you can and then you have proven to yourself that you are not just an employee that worked at a Marketing firm, but an Entrepreneur that can take the skills that your learned to be a Marketer and employ it to your own business.
There are so many ways that you can do things now, with social media (Instagram, Facebook, etc.) and other digital marketing, and again, being an expert at it, I can't see how you cannot succeed in Real Estate, which is ultimately a Marketer's dream job.
JUST MY OPINION! But I believe this is food for thought!
Post: How are you collecting payment?

- Investor / Broker
- Brooklyn, NY
- Posts 665
- Votes 1,744
I use Rentalutions.com
I have 25 apts, 65 tenants which means I have a lot of roommates.
While I pay a subscription to allow all the tenants to pay for free, there is no other transaction fees applied to either them or me.
They can pay as often as they want, again, without any more charges to the tenants or me.
I also love the fact that they tell me when the Rent is Scheduled by the Tenant, including recurring scheduled rent payments, when it is drafted from the tenant's account, and when it is scheduled to deposit to my account(s).
I usually download the data into my own personal software so I can run reports and talk to tenants that are problematic by showing them that they are drafting the payments too late, or are splitting the monthly payments incorrectly.
I also love the fact that every roommate sees each other's payment and is reminded before the rent is due. They are told to pay on the day of as well and are given a warning email when it is overdue and when they will be charged a late fee.
Transactions are 3 business days.
Rentalutions also has Apt Maintenance and my tenants can communicate with me via the website.
They have a tenant screening and tenant applications.
They have Syndicated Listings to other websites.
Also, what I really like, is that I can email them and really expect a reply within 24 hours and a lot of time much earlier than that.
It's all rather easy and I can set up any number of Bank Accounts for any number of properties.
I've not had any issues at all with Rentalutions and I will continue to work with them as I increase my portfolio size.