All Forum Posts by: Mackal Smith

Do you do criminal checks? Do you allow felony convictions? What is your income criteria? You should think about income at 3X rent. I don't take anyone with prior evictions. Does your management company actually speak with the former landlords? My properties are all in South City so I'm not in the areas you mention. I do believe however that rigorous screening is key to staying away from eviction issues... I found a great thread on here last year that outlined great info someone was using to screen tenants. I'll see if I can dig that up again and post here later...

Good luck!

mac

I think you'll find that it varies quite a bit by geography. Here in St Louis, my properties range from 130/unit/month (after debt service, taxes, property management, 10% reserves for CAPEX, insurance, 8% for vacancies, and utilities) to around 210/unit/mo. A lot of it depends on location even within the small geographic area where my rentals are...

 - mac

Hey David, @Maggie L. is right, there are any number of reasons but in my experience with the properties I have picked up, one of the reasons I see that owners sell is because they have owned the property for a number of years, didn't put CAPEX money back to keep the property up and have just ridden it down to the point that it's going to take some money to get it back producing again. In most cases, I can get a property back up producing without having to invest huge sums of money. Sometimes it's a roof, sometimes it's a compressor (or 2) that were stolen. Sometimes it's a heating unit/boiler, sometimes it's just all the deferred maintenance that gets to seem overwhelming. For me, I can usually pick it up under market, do maybe 10 to 15K in deferred maintenance, new paint, sheetrock, tuckponting and be right back on market rents. There's more to be made (I especially like some of the REOs around the Benton Park area) but until I quit working full time, it's hard to get spun up for more than 10 to 20K in repairs.

Another reason I have run into is that current owners are looking to leverage their equity and get into some bigger (or at least different deals). Some want to move into more B or B+ neighborhoods and are willing to take a lower cap rate to get there. I have seen quite a few bundled deals where this is the case. What I usually see in those deals is one or two pretty sweet properties bundled in with a couple of dogs...

I hear it all the time. "You really need to use smaller banks because they can provide portfolio loans they keep in house and can be more creative". I think that is probably true for the most part, but for an investor that has a little money, I have been amazed a what a national bank can bring to bear to help me solve problems.

Long story short - CPA tells me if I keep cashing in stock to buy properties (even long term gain stocks) it is going to push me into the highest tax bracket. Crap! Do I quit investing? Do I get a partner? No, I go talk to small banks about a line of credit. Good news! I can get one using a property I have paid off. That's great... but I don't stop there. It just so happens that I have been using one of the national banks for a couple of commercial loans. I call up that banker and explain the problem and even though he can't really help, he introduces me to the VP of Private Banking Relationship Management. "What the heck is that", I wonder? 2 hours later and I walk out of there with a $200,000 line of credit! Holy cow! This big huge slow moving national bank actually moved mountains to help me. Don't overlook what a big, slow moving, national bank can bring to bear, it could be the biggest mistake you make!!

Hey @David Coombes, I invest in the same area. @Peter MacKercher is right. There usually is a reason landlords are selling (and while the 2% rule does come into play, in my experience 1.3 to 1.6 is much more common.) To be honest with you I have found on a few of the properties that I have bought, it has been a mom & pop operation where they use the same insurance agent they use for their primary residence. That can be a fatal mistake. I'm closing on a 4 family next week that has been owned by the same family since 1980. When I looked at their expenses I was floored by the fact that they are paying 3,400/yr for insurance. On all my properties I'm paying more like 300 to 600. A mistake like that can kill ANY cash flow an owner could see...

Hey Mitch,

I'll throw my hat in the ring also. Like@Maggie L. @Alex Tillman, @Ronald Perich, and @Peter MacKercher mentioned above. I would stay away from condos. no one has mentioned the HOA fees, but they can be brutal. Yes, you get the lawns mowed and access to pools, but you also always seem to get people on the HOA board who get a little power and go nuts. You have to be very cognizant of "special assessments" which can add literally thousands of dollars a year to your costs. As mentioned above, St Louis is a great cash flow city and really pretty unique from many places in the rest of the country because of the number of 2 and 4 family homes that you can pick up for great prices (and which still return great rents).

I'm biased because all I buy are small multi-family (and  you are getting some great advice from local people here). For my money in the price range you are talking about, you can pick up a great 2 family and live a pretty luxurious lifestyle (or pick up 2 for that price and have some great cash flow...)

- mac

@Daniel Dietz

Sure Dan,

Here you go...

1.) The lowest rent to price ratio on a property I have picked up is 1.6. All the others are between 1.8 and 2.6. St Louis is a great market right now. Rents are relatively high and property costs relatively low. That's the main reason I don't want to slow down my buying. I find deals every hour with rent to price ratio between .8 and 1.2, but every week I find one that is at 1.5% or higher and about once or twice per month I find one that is greater than 2%

2.) Terms are 20% down with a 20 year amortization and 5 year balloon at 4.75% commercial loan. To be honest I haven't really even shopped around much to get a lower rate. When I formed my company, I opened up a company bank account at US Bank. I was introduced to the commercial loan officer there and he has financed at these terms. Taxes are low, insurance is low, I'm paying 10% for property management, holding back 10% for CAPEX, figuring 8% for vacancy rates. I just closed on the following deal a couple of weeks ago:

90 year old duplex rehabbed 4 years ago. Price was $54K, I added a new roof and tuckpointing totaling about $6200. Rents are $700/mo on the lower unit and $750 on the upper unit. That's my best rent to price ratio....

Hey Princess,

Welcome to bigger pockets. I invest in St Louis and love it. I'm a buy and hold investor but not opposed to a flip or two. I've only been investing in Real Estate a little over a year, but I managed to pull together 13 rental units and looking to grow to 40 or so over the next couple of years.

I pulled together some links for you that I have used and that have been hugely valuable to me.

The Start Here page has some great info:  http://www.biggerpockets.com/starthere

For a great start in getting educated about investing take a look at BiggerPockets Ultimate Beginner's Guide - This free book that walks through many of the key topics of real estate investing.

Go listen to all the podcasts- There are more than 160 of them. I just finished show 143 so I have listened to almost all of them. They are a fantastic way to learn about this business. @Josh Dorkin and @Brandon Turner are fantastic hosts you will absolutely fall in love with the podcasts!  BiggerPockets Podcast

If you are thinking about flips, go take a look at http://www.biggerpockets.com/flippingbook this is a fantastic resource as well.

And last, there are some great REIA's here in St Louis. Take time to go and spend some time with each and network a little locally, but more than anything else. Just jump in!! The forums are awesome!

Best of luck,

mac

Hey Gregory,

Please understand this is not picking on you. You asked for honest feedback. I think the content itself is ok but if you are looking for the presentation to make a positive business impact, you need to make sure that:

1.) There are no grammatical errors: Watch your use of the word "threw". Threw is the past tense of throw. The right use in your presentation is "through" not "threw"

2.) The overall look is professional: Keep to 1 or 2 fonts. It looks like you used at least 5 or 6 different fonts. This becomes visually distracting. Also watch your placement and spacing for titles. You have titles that partially wrap part of the words or graphics that obscure part of the titles. Use consistent graphics. Less is more. Instead of using 4 different Tuna Fish graphics, find one that best represents your company and ideas and build the presentation on that single graphic

3.) It conveys your point in a very succinct manner: Things look pretty good up until you get to Renatus Real Estate enrollment. I can't look at that graphic and understand what you are saying. It may work for you if you are standing in front of someone and it is background while you explain, but the slide is not self-explanatory. 

After you get through (see what I did there... not threw...) all the slides explaining your business idea, the slides about Marketing, your Geographical Market, and description of property within your market just sort of pop up out of nowhere. You should have a slide close to the beginning that shows what you will be talking about:

• Vision
• Business Idea
• Marketing Plans
• Deal Analysis
• Geographical Market
• Property  (or Investment Return) Goals

Then go on to break each of these out. The goal with any presentation is to:

• Tell them what you are going to tell them
• Tell them
• Tell them what you told them

Again, I'm not trying to be overly critical at all, just hoping to point out things I have learned along the way.

- mac

Welcome @Sangharsh Aggarwal,

I'm an investor in South City. I love the area, I love the improvements I'm seeing in different parts of South City. I work in IT also and have for the past 30 or so years but the more I dive into real estate the more I love it. I've only been investing a little over a year, but i have picked up 13 units so far and looking to acquire another 30 or so in the next couple of years.

Feel free to reach out. I love to talk about real estate and I like to help...