All Forum Posts by: Luciano A.

@Joe S.

I remember being told not to have one when doing Section 8. I have put them in but using not the cheapest, base level. I go one level higher thus a much stronger motor to withstand the tenant abuse. Also if you have a bread butter house most likely you will have dishwasher so will help collect the debris coming from the dishwasher. It's like in anything, you get what you pay for. If you pay a few bucks more you can get stronger disposal that can withstand a tenant's abuse.

In addition, when we send out a welcome packet to new residents we have a flyer that tells you the Dos and Donts of using the disposal. 

Best of Luck 

@Mitchell Sawin

I would treat this like any other deal. We normally like to have 5-year leases on our commercial buildings so I would check if they have a lease and how many years are on the lease. If this is a single-occupied tenant is it a NNN or Gross rent?

If I were to purchase I would think they would stay for years to come but would sleep better if I can lock them in for at least the next 5 years. The bank that will look at the deal will also want a long-term lease to give you better terms.

Best of luck 

@Jack Hendrickson

This is a loaded question because there are many factors on whether to buy or not. If the area is all composed of 1900 builds and others are buying and not tearing down then it's possible to find a good buy. If you have the only 1900 home in the area then it can get costly. But again if the area is predominately the same age then you shouldn't have issues finding trades that are familiar with the age of a property. However, as in any rehab what you see might not be what you get once you open up walls. If you are going to rehab the city will require you to bring things up to code and that is when it can get very expensive. For example, if you remove say the plaster walls and want to put sheetrock the city might have you insulate all the exterior walls. Even if you open one wall. This is something to consider. Each City operates differently as does each inspector and how they are feeling that day. If this is your first buy I would advise you to drive around find other similar properties being rehabbed and talk to the GC or owner and ask them about their experience and any pitfalls on that project. Ask what did they find that was unexpected and if any item was a budget buster. I think older homes were built like tanks unlike homes today. Back then a 2x4 was a real 2x4 lol. But who owned it and their upkeep is also important. 

Best of luck 

@Nicole Flakes

Hello, fellow Houstonian. As many others said here there are factors to consider. Time, your knowledge, and experience with dealing and managing people. Self-managing is not everyone's cup of tea. Some don't have the ability or personality to self-manage. I think with technology and some education about the laws you can self-manage easily. What I have found is if you fix everything while the unit is vacant then rent it out you can have a better experience self-managing. I think finding a good handyman that can fix things but doesn't charge you outrageous rates would make managing a lot easier. 

Best of luck 

@Cassie Wright, Jr.

Make sure you figure out your rehab cost to bring the property up to code, add to the purchase price and see if it is worth taking on. Once you start opening walls and doing rehab the city will require you to bring things to code. 

As @Joseph Bramante pointed out that a multi-family in the eye of a lender is 5 units or more.

In general 1-4 units are looked at by the lender as residential so they use local comps to come up with value. If the area you are investing appraisees for say $300k and you are buying for $150k and you put in $150k you basically could have bought a fixed up property for the same price thus no value add or equity. The lender will look at you and your income taxes first to qualify you as a buyer before looking at the property. So even though the cash flow is important it is not weighted the same as on 5plus units. On commercial properties, the NOI is very important. So rents, expenses can bring up value if done right. The neighborhood has some play in CAP Rates but that is for a different discussion. If you increase the rents like the ones at your 4plex but say on 6 units it can mean $$$ in equity.

That being said. I own numerous 2-4 units as well as larger apartments and have bought many with tenants in place. 

Before you increase rent I would suggest you go in and fix the exterior like a new roof, siding, windows, exterior doors, driveway, landscaping. ANy improvements to show the tenants there is a new sheriff in town. Then go into each unit and ask each tenant what they don't like about the unit (best to do this during your option period). You would be surprised what some will consider acceptable. However, fix stuff that will become a phone call in a month. Like leaking toilets, ceiling fans shaking, faucet leaking. If you address the maintenance issues and get outside to look nice, the tenants will be happy to pay more. I have done this a dozen times. Once we put residents in a hotel on us for 3 weeks (very stressful). After say a month or two then send a letter to increase rents but don't try to reach market rates. Once a tenant moves out then go in rehab and get market rents. 

Look at comps in your area from your realtor and see how other rentals look as well as what sold that is similar to make sure it is a good buy.

In Houston, I have walked over 40 properties in the last three months from duplexes to fourplexes but after rehab it would be like I did all the work for free because the sales price plus rehab equalled to market value. 

Hope this long paragraph helped.

Best of Luck

It would be nice to chat with other like-minded individuals. I'm building on the Southeast side of town but have been looking at Pearland, Alvin, and surrounding areas. See you there. And thank you for your service.

@Prachi Metha

A friend of mine started Airbnb and like you weren't getting traffic. Being new and not having any reviews, he decided to look at what is out there and discount his to be the cheapest or as he would say, best bargain. Once he got a handful of bookings and good reviews he started to raise his prices. The first handful of guests he wasn't a strickler on the rules, at least to a degree. Like not taking out the trash. He was basically trying to buy good reviews. Once he got those reviews he started to get more interest. No one really wants to be the guinea pig, especially on vacation. Reviews help guests to make decisions. 

Best of Luck 

@Steven Moore

It was many moons ago when I started but I understand the struggle. I have helped a few guys starting out. I even had a neighbor next to one of my rentals that I became friends with who I advised they should rent their house out and buy a new primary. They bought a house about 5 miles away. I think banks and IRS require a second home, (ex vacation home) to be a certain distance to be considered a second home not an issue if you take primary and make it a rental. 

If you are still trying to get into the rental business send me a DM. I have a couple of rentals in Katy that I am rehabbing so can take time to chat at the job site. 

Be cool to have a meetup in the Katy area so that both new and veterans can come together and just talk. Nothing to sell or courses to signup for. No business cars being exchanged. Most of my friends see my real estate success but haven't jumped in so talking RE with someone who doesn't care is like watching paint dry. Lol

@Joe Splitrock

I had a question about the deductibility of interest you mentioned. If you refi a rental and do cashout refi I cant see why IRS wouldn't allow deducting the interest from the cashflow of that property given the loan is tied to that property. In Multi-Family, we do that all the time.  Forcing the appreciation and cashout refi to pull our money out. I wonder if any accountants on here can give their input on this. 

I am not saying you are wrong. I am just curious as I think many people doing cashout refi on rentals arent aware if this is the case.

Best

@Mel Hayes

Congrats on doubling your equity. Something many people don't consider when doing the BRRRR strategy is that taking out all the money you have in the deal can lead to very little cash flow. In an upmarket like the one we have, it sounds like a no-brainer. But if the market were to correct itself then that $100 per month and dealing with tenant repairs etc will start to feel like a money pit. Those are the landlords I see walking away from their properties.

One toilet leak can cost you $150 from a plumber. That wipes out 1.5 months of cash flow. 

You have to decide what you want. Don't concentrate on the number of doors you can buy. Look at how much they are paying you and if that amount is worth it. 

I have been investing for a while so if I were to take 15 of my low leveraged properties and compare them to someone who has 30 doors but overpaid for them, highly leveraged then I will make more than them. I'm conservative on my long-term holds. 

The market is red hot. Being over-leveraged will have its own consequences in a downturn.  Best to have equity and cash flow.

Best of luck