All Forum Posts by: Michael Gansberg

@Andrew Giunta - I have a bunch of experience investing in the Capital District, I believe that area(Albany, Troy, Waterford, even as far north as Mechanicville) could suit your requirements. Downtrodden areas in PA also might work(and would be closer.) 

I'd look for areas that have old housing stock and are charming but have fallen on hard times. Make sure the cap rates are good, but also check recent population changes. Can you find an area which has fallen on hard times, but people are starting to return due to low cost of living, ease of living/commute etc? If you can- then try to pick up some properties with good bones and see if you can catch the beginning of a wave of gentrification. 

Michael 

@Allison Keane Barr - that shouldn't be of any concern, I have a bunch of places in Troy and I don't think I've ever spent a dime on that. Good luck with your first investment- if you think of it, can you post a few pics and any other details you like here after you close? I'd love to hear about it, I'm following this thread.

Welcome to the neighborhood, 

Michael

@Account Closed - don't give that guy any money. If someone tells you they can renovate an 8 unit apartment building for $5k, they're either crazy or dumb(or both.) I don't know the condition of this building, but think about it- you stated that anyone else would charge you at least $40k and that "it needs quite some work." What magic does this man possess that he can do the job at least 87.5% more cheaply than the next guy?

My best guess is that he's operating on a burner phone, and once you give him a few thousand bucks of materials, he'll sell 'em for ten cents on the dollar and move on to the next patsy(with a new burner phone.) Sorry to be so brutally honest.

Hi @Dajuan Brown - I'd suggest checking out Jay Hinrichs' posts, he writes about Indiana investing pretty frequently. If you're considering a turnkey provider, search for threads on Morris Invest. And if you're still considering it, keep searching for more threads until you've changed your mind.

Finding a good property manager is important if you're investing out of state- you should be able to find a well-reviewed one on BP. Good luck with your first acquisition.

Hi @Lynsey Staes - congratulations on stepping up to a larger multifamily property. They can be quite a different beast from the typical one or two family. The primary distinction, in my experience, is the one-bad-apple problem- if you get a bad resident, you must take steps immediately to prevent that resident from chasing the others away or souring them to the building and reducing future referrals.

To your question, I suggest looking at each unit and determining the fair market rent for each one. The current owner may have fallen into the trap of having residents stay for many years without any changes to their rent. That can work well until major repairs are needed- then the owner may not have sufficient resources, and the property can begin to enter a death spiral. It sounds like that might be the case here.

I've picked up my best deals in these situations. The owner is strapped and pressured because of his own failures, so he sells the building at a price that's generous to the buyer. The building won't appraise comparably to similar, well-maintained properties- so you, the buyer, must bid carefully to make sure your financing doesn't fall through. If it's close- say, your bid is $500k and the appraised value is $480k- you might be able to convince the bank that due to under-rented apartments, its true value should be higher.

Once you close, raising rents to market won't be fast or easy. For those who are holdovers(which I assume are the ones paying very low prices whose leases have switched over to month-month,) you can say- "Hey, I know you're paying $530, but the market rent is $650. Let's split the difference- I'll give you a one year lease at $590." Some may take that deal- some may leave- and some may force you to evict them. 

For the ones who leave, you'll want estimates of the repairs/rehab costs necessary to bring the unit up to snuff. You can control the rate of leaving somewhat- for example, don't approach all the below-market rate tenants the day after closing with this proposition. Perhaps do one or two per month so you can see the impact and adjust your efforts on the fly. You wouldn't want to be half-vacant within a month of closing!

All that said- turning an under-rented, under-maintained building into a well-maintained properly rented one is generally extremely lucrative. Cash flow soars, and so does the property value.   

Hope this helps, Michael

@Kelly G. here's an idea. If your sister can do the management required for AirBnB, she can handle the management required for a long-term tenant. Why don't you propose something like that to your sister?

I think the challenge is getting competent management- few managers worth their salt will want to take on a single family home, there's not much money in it. So you can work with your sister, or try to groom someone into being a competent/excellent manager, but finding an experienced manager will be challenging- until you've expanded your footprint substantially.

Why not try Yonkers? With that budget, you could probably get a decent two family, or perhaps two condos. And I think you’ll have better cash flow in Yonkers than you would in Brooklyn or Queens at that price point.

Hi @Jeremy Mulvey - I think one of the R's in BRRRRRRRRR is 'rent,' right? If you plan on rehabbing and renting the home - or even if you don't, because life just throws all sorts of surprises at you sometimes - I'd suggest going with gas forced hot air. 

Imagine thinking- I'll just flip the house to the next sucker and let him deal with it. But then, you find you can't sell the house for what you hoped, so you rent it out instead- residents know that electric baseboard is more costly, so you'll have trouble finding the best residents(or you'll have to accept a price cut on the rent rate and/or hear griping for the whole winter about how expensive the heating is, and you'll suffer higher turnover.) I read an estimate recently that electric baseboard is 4X-5X more expensive than gas forced air.

Hope this helps.

Michael

@Kyle Lofland - I agree completely with @James Wise. But take the case where you could charge tenants for their use(even though you can't) - in that case, they would just demand that rent declined by a similar amount to their new water bill. Maybe it would induce some conservation on their part, causing a net benefit to everyone- but that's a big maybe.

Why don't you just cut your usage by 30% to 40% and save money that way? It'll be pure profit, and your tenants will never know the difference. 

Here's how: buy and install water-efficient toilets. The best one I've found is the Niagara Stealth at Home Depot for about $140 or $150(bad bowl vs good bowl- the good bowl is another $10.) If they ship it to you, it's more money, so pick it up or have your maintenance person do so. It uses 0.8 gallons per flush, whereas a standard toilet uses 1.6 gpf(and a regular high efficiency toilet uses about 1.28 gpf.)

Then install water efficient showerheads. I recommend finding a 1.75 gpm version on Amazon, check the reviews to make sure it's a good one(don't go down to 1.5 gpm, it's too stingy.) A 1.75 gpm saves about 20% over a conventional showerhead.

For faucets, use anything with the Watersense label(which makes it 30% more efficient than a regular faucet.) Aerators work well also(that's the super-cheap way to turn an inefficient faucet into an efficient one.)

Take all these steps, and your water bill should decline by somewhere between 30% and 40%. As a side benefit, whoever pays for water heating will also save money there as less water will need to be heated.

Hey, while you're at it- make sure you have LEDs instead of incandescent or compact fluorescent bulbs in the common areas. Stick to 2700 K or 3000 K color temperature and you should be fine.

It's been my experience that return on investment in water efficiency typically exceeds initial ROI on a good piece of real estate.

Hope that helped, 

Michael   

Hi @Elenis Camargo, happy to help. @Jason Lee described my experience pretty well- I didn’t join a brokerage, and honestly, I’m lousy at self-promotion.  Most of my friends have no idea that I have a broker’s license! 

I got the license thinking I might do some brokering in NYC, but the best thing would’ve been to join a full-service shop here if brokering were really my goal. However, my heart is with real estate investing- so I ended up brokering where I invest, as I have a huge edge in knowledge over the average broker in the Capital District. Even there, I spend the bulk of my time on investing and only a small amount in the brokerage business.

I think if you can be successful in NYC, you can crush it anywhere. Get paid to pick up your skills here, see if you like it- then go knock it out of the park in NC.