All Forum Posts by: Marcos De la Cruz

Is it a paid off $100k home or $5M home? 

You can’t ask for a good cashflow amount, only a cashflow rate of return. 

And that number depends on you, your market, your property and your goals. If your market won’t appreciate you obviously need way more than the 5% you can get in the bank with no risk. If it’s a 1910 mansion you obviously need a boatload more to pay for maintenance/repairs than a 2025 condo. But if your goal is to earn tax deferred income and appreciation you can pass to your heirs tax free you can accept less. 

Tough to answer due to so many feelings about risk tolerances and what other investments could be making you as a ROI.

I feel leverage of real estate is the real strength of this asset.  Paying cash is safe and admirable, but it totally takes away this strongest tool of real estate investing.

If I asked you if you could figure out a way to earn a higher rate of return than 7%, then you should be pulling equity out and rolling it into another.

None.  The first mistake is the property is free and clear.  
If you achieved this by paying all cash, then you are losing money.  The CF is only playing catchup to the cost to you of the property.  If you paid all cash, you paid full price for the property, and the cash flow, any amount of cash flow, is only playing catchup.

Marcos - I agree with Greg's comments ("Gregs" think alike :) that cap rate is not relevant for a duplex. Everyone's investment criteria varies and sometimes it varies by location and type of property. For a residential (1-4 unit) deal, a "buy and hold" duplex for me (without driving value via renovations/BRRRR'ing) would be CoC between 8-12% and/or about $250 per door. For a duplex that you're renovating and potentially BRRRR'ing I would look to target to get 80%+ of my cash back on the refinance and then cash flow a bit less - maybe $100-$150 per door. Once again, if you ask 10 people for their investing criteria you'll get 10 answers, but over time you'll develop your own criteria based on what's a good deal for you in your particular market. Good Luck!

Remember: cheaper doesn't mean you'll make more money.

Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Try interviewing at least three managers.

1. Ask how many units they manage and how much experience they have. Feel free to inquire about their staff qualifications if it's a larger organization.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, a leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.

4. Review their lease agreement and addenda. Consider all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. A tenant complaining online might indicate that the property manager handled them appropriately, so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything possible to expose properties to the broadest possible market? Are their listings detailed with good-quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!