All Forum Posts by: Michael Smythe

@Kevin S. I'm trying to assist you with a better understanding of your question!

How much work do you think 4 buildings are versus one?

So, how much do YOU want to work in retirement?

@Seretta Hammond obviously, they can do it:(

The real questions are:

1) Is it legal?

2) Is it worth hiring an attorney to fight?

Recommend you start with the PMC contract. What does it require them to do, what does it require you to do?

Many PMC contracts are short and deliberately don't cover much, so the PMC can actually do whatever they want and then you have to fight them about it.

You should discuss this all with an attorney.

@Matt Waggoner depends on the target pool of tenants your properties will attract.

First, what you wrote doesn't violate Fair Housing, so you're legally fine (check with an attorney though).

OPINION
Our company is in its 24th year and some of your requirements wouldn't work for us.

1) Many 600 credit score tenants won't be able to find the info for 5 years of landlords. We only require 2 years or minimum of last 2.

2) "All income must be...", you might want to consider swapping, "verifiable" with "acceptable".

3) Why not state no evictions in last x years?

4) Applicants over 18 - what about full-time college students still being declared as dependents on parents' tax returns?

Can offer more suggestions if you want to connect and trade PMs.

@Anant Radadia define positive cashflow!

Also, in our opinion, many investors make the mistake of assuming their first task is to ID an area to invest in - when they should FIRST be deciding on what Property Class to invest in -> then look for an area.

If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

Our OPINION for the Metro Detroit market (always verify each area for yourself!):

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

@Walt Viera if you can't come up with 3% down to buy a home via FHA loan to house hack, then you're stuck with:

1) Wholesaling

2) Creative financing

3) Finding a family member or friend to lend you funds or partner with you

Depends on how much you want to work during your retirement!

Unless you invest in a syndication, real estate is NOT passive.

If you DIY manage, you will probably average 2-4 hours/week. Yes, some weeks will be zero if no tenant calls. But others, may be a lot more if a furnace or ac unit fails and you have to get 3 bids and meet contractors at the property, etc.

Even if you hire a PMC, you need to spend a few hours monthly "managing the manager" and responding to questions and approval requests.

Please define, "20 minutes east of Ann Arbor".

Also, what compensation are you looking for?

@Account Closed do you know what the #1 detriment to making rentals profitable is (besides nonpayment of rent)?

It's turnover expenses: fixing up a property after tenant moves out and the lost rents due to vacancy.

A landlord really can't afford to turn tenants every year!

Also do the math, each month of vacancy costs an owner 8% of their rental income (1 month / 12 months).

So, tenant stability is key to making money.

Looking at it another way, would you rather lose 2 months of rent every year (turn costs + 1 month of vacancy) or take 5% less monthly rent for a 2-year lease? How about 10% less rent for 3 years of tenant stability?

Which way will you make more long-term money?

Compensation requirements?

Are you a licensed agent, so you can be 1099?

Many of the PMC and Showing Scheduling software companies offer syndication services.