All Forum Posts by: Mackal Smith

I have great luck with upwork.com. You can interview people from around the world at all kinds of payscales. I have a great bookkeeper I hired him in India from upwork.com. He does books for a number of investors, has great phone presence, is knowledgeable about US tax code and the best part is he is about 1/4th the cost of a US bookkeeper. I interviewed 5 different bookkeepers from all over the globe. I don't think I could have found a better resource in the US. There are all sorts of different skillsets listed to choose from or you can post your own criteria and choose who you want to interview.

Just a thought, but I have had a great experience with upwork...

For me time of year is the main impediment. Winter months are difficult especially around Christmas/ New Year. The second biggest factor for me is the property itself. I focus on multiplex properties (2 to 4) and 2 bedrooms are my sweetspot. 1 bedrooms turn over more and draw a different type of tenant than 2 bedrooms. These are usually a little harder to find good quality tenants for. 3 bedrooms generally means a family with school age kids so really April/May/June are the prime rentable months for these. 

The secret is to have some reserves behind you. You don't want to invest your last dollar on the property then be completely reliant on rents to cover without some cushion. You need to be able to sustain a month or 2 (or even a few months) without renters without it affecting your finances. Also, most of the time this is a break even business except that your principal is being paid down each month. Yes, you will make some money on the cash flow and some years will be better than others but what you will probably find over time is that after 5 years you are only slightly ahead in terms of income. The real value in real estate is a long term game. Appreciation if it happens is a great thing but if it doesn't you are still paying down the principal each month and over time whether or not you get appreciation, you get increasing value.

Norm Tyler is my guy. He has inspected all 25 units I have bought over the past couple of years. He does an awesome job and can arrange for a sewer scope as well if you want. His number is 3147046834. tell him I told you about him, he;ll get a kick out of that...

That sounds risky to me. I'm a pretty conservative investor so my risk tolerance is not high, but in my opinion you should go in assuming the worst including a traditional loan. If the property cash flows enough considering that then it is a deal worth doing. If you have to rely on IO and an idea that rents can be raised, it seems to me that the math isn't working until you tweak it artificially. If it were me I would keep looking but again I'm a really conservative investor. My fairly simple rule is a minimum of $100/door cash flow per mo. I always beat that, but that is my bottom number anything below that (even $99.99/door) goes on the scrap heap. Good luck, and keep us updated...

I like to have my money leveraged because I control more assets that way. In St Louis, that same 100K would let me acquire as many as 5 properties. To help mitigate the risk of rents, I always buy duplexes or better and I buy them in such a way that 1/2 the property will at least cover the mortgage, taxes, and insurance. It's rare that I would have a completely empty duplex, 3 plex, or 4 plex, so for the most part I'm covered. Of my 25 units, I do have one duplex I own free and clear but even that property is leveraged as collateral for a Line of Credit so I can pay cash for a property, fix it up and refinance...

Like everyone mentions, it is definitely a personal choice, but leverage (done in a smart way) can definitely grow your portfolio more quickly than owning outright...

I buy properties that need some rehab. Not major, but everything I have bought has needed a roof or new furnaces, or new air conditioners, (it's always something). The fact that I was buying one right after the other (25 units in a little over 2 years ... all duplexes, triplexes or 4 plexes) meant that cash flow was non-existant. I slowed down a little over the last 4 months or so and although I still have some repairs, it's really nice to be able to see some 5K to 6K returns with minimum out. 

I was on a mad track to acquire 50 units, but it is really nice to slow down a little for 6 months or so and let my coffers fill a little.  I would encourage others to do the same... when you are on a death march to acquire properties, it sometimes feels like you are not seeing any returns. Take a few months to back off and get some income... it's not a race!!

Karlyn where are you interested in investing in St Louis? I own 21 units in South City. I have 17 I have bought on my own and 5 I own with a partner. I've only been investing a couple of years, but I have built up a pretty good network of bankers, brokers, tradesmen, and investors just by telling everyone I meet that I am an investor and what I'm looking for. Even when I was looking for my first property I still had an elevator pitch of the type of properties that interested me from an investment standpoint then I just bugged the hell out of everyone till I got my first deal.

There are a number of real estate agents/brokers here in STL that are also investors. Find them, interview them, make sure they are investors in the area you like then use them to help you find deals. If you find something good, offer to partner with them. If they don't want to (or can't) go to any of the REIA groups (Southside Investment Club is a good one) and use the networking time to talk about your deal and what you need. I know from experience that if you find a deal, you will have more people rushing in to help than you can imagine. Almost every investor I know is happy to help new investors, Maybe not with money, but with expertise or introductions. It is all valuable it's really just a matter of you getting started.

As you start to look at properties and make offers, you will automatically meet owners, investors, closing agents, brokers, and of course a few shady characters but the bottom line is that a network is built by you taking action and I have found that as a result of that action it happens naturally. The other thing I have learned: The more serious you are about investing (meaning you not only learn and make offers but actually make the deals and buy something) the higher quality your network becomes. When successful people see you actually doing something, they are quick to jump in and help...

Unfortunately I have acquired the other 15 units over the last 2 years. One I paid cash for but it is the one I used as collateral on the line of credit. So there's really not enough equity in the others to roll it in. Even a 51/2 or 6 % (even up to 8%) interest rate would still let me cash flow on the property. So interest rate doesn't scare me. The single mitigating factor in selling the property right now is that I let my son rent the bottom unit for about half the market rate while he digs out from under his college student loans. The more I consider it the more it seems like just keeping status quo for a year then looking to refi again or sell might be the right call. I am considering contacting the appraiser and using all my charm to see if he would consider taking a look at my comps and potentially reconsider his appraisal. I bet that's a real long shot.

I bought a duplex in need of rehab for 49K using my $63,000 line of credit. I paid cash from the LOC then painted, reworked kitchens and baths, turned the upstairs unit from 1 bedroom to 2 by adding a closet and closing off 1/2 a very large family room. Total out of pocket was about $65,000 (so the entire LOC and a couple of thousand to boot). The idea was to refinance and move on to the next project keeping this one as a cash flowing rental.

When I evaluated comps before starting, it looked like $70K to $75K appraisal should be achievable. Since my bank would loan 80% of appraised value I was looking at a refi of $56,000 to $60,000. That would mean by adding a little money I could get my LOC back and be able to move on.

I hit 2 problems... 1st once I actually got around to getting the refi started, banker told me that it wasn't just the APPRAISED value, it was 80% of the lower of APPRAISED value or COST of Property + IMPROVEMENTS. Since everyone that rehabs (at least I think) expects that the cost of the property + the improvement costs does not equal value. The simple fact that I have done the work to get it back to NICE means I have built in equity... ok whatever, I'll just cook the books a little to get my costs over the appraised value. I don't like doing it, but it is easy enough.

The second problem (and worse problem!) is that I actually paid extra to get the appraiser to walk through the property rather than just pull comps and drive by because my lender said that the appraisals were almost always higher when they did that... Well,the appraisal came back at $55,000 which means at most my lender will refi $44,000. I was more than happy to add a few thousand to get my LOC back up, but $20K is much more than i had planned.

I'm weighing my options here but also looking for advice. I truly believe (and based on recent sales of comparable properties) I think I can get between $68K to $72K if I sell. This would make me a small profit, but my goal has been to keep the property. I could hold it as -is for a year or so. The LOC is good for 2 years and since I'm paying interest only on the loan, I could add a few hundred per month toward principal and then try the refi again next year. (Of course this would preclude me from doing another project since my LOC is now tied up). And I guess my third option would be a private money loan. I have not done one before even though I have met many folks that would be likely private money investors if I asked.

I guess I'm looking for a little advice. What do you think? - Just a little background. I have 15 other units that are cash flowing well myself and I own 5 others 50/50 with a partner. This is the first one I have bought and did these more extensive renovations to so basically this is my first "flip" to myself. any advice is welcome... 

I have been pretty successful so far in my real estate investments. I'm still working full time, but over the last year and a half I have been able to pull together a total of 17 units made up of duplex/4 plexes. I'm really loving what I'm doing. I'm in the middle fixing up a new acquisition and getting it ready to rent, however I'm really interested in getting into some bigger properties. I've been doing a lot of reading and listening to podcasts and I'm anxious to start but I want to make sure I'm not missing something as I start to evaluate the properties and think about syndication.I have a partner I took on for the last couple of properties I have acquired and both of us are anxious to get started.

That said, I have found a couple of apartment complexes that seem to be a pretty good deal. I'm using much of the same criteria I have used on my smaller properties to evaluate but I want to make sure I'm not missing steps. Both of the complexes feature single bedroom apartments. they are both multi-building (one story) complexes with each building housing 4 to 8 units. The 36 unit is around 1.1M and the 38 unit is at 960K. Both are in the same general area I invest in regularly. I would call the area a B- or C area.

I'm asking each of the owners for OPEX costs, vacancy rates, CAPEX they have done over the last few years, and any improvements they have made to the properties. I suspect the utilities are split (at least gas and electric) but I would bet that the water/sewer/trash are shared so I expect that OPEX cost to be significant. There might be the ability to use RUBS to split those costs out, but I haven't seen the mechanicals on the properties yet.

I have a great relationship with a Banker here in St Louis, so I figure the loan probably won't be a problem although I'm not sure whether they will want a sponsor for something the size of these complexes or not.

My partner has friends that he thinks will want to invest, and I have access to other investors through numerous REIA's and other networking contacts I have made over the last couple of years so I feel like getting the downpayment will be fairly straightforward.

My question for this forum is this:

I feel very confident evaluating duplexes/4 plexes. I know what to look for so I feel like I have at least the basics down. There are things like cockroach infestations I need to think through on at least one of the properties and they all are going to require some roof work and/or getting the apartments up to speed. Those are costs that really are not going to increase my NOI (except the apartment updates) at all but they have to be done.

What are my next steps? How should I go about evaluating these enough to feel confident to make an offer. On my smaller properties, I'm more than happy to make offers sight unseen because I know the area and I know what I can get for rents, etc. I'm just a little out of my ballpark on 36 or 38 units.

Any advice would certainly be welcome!!