All Forum Posts by: Miles Stanley

@David Dachtera

Pretty sure its drywall, not certain though.  Since it was built in 1984-1985, wasn't drywall pretty much the norm at that point?  Can't drywall be textured too?

Hello BP,

I walked through a property the other day and i noticed these types of cracks in the drywall.  The structure was built in 1985, condition of foundation is unknown.  In your expert opinion, do these photos indicate foundation issues or is this just drywall shifting due to framing settlement, etc?  You can tell where the owner tried to fix some from before...some repairs held and others did not.

Thanks,

Hey BP,

I getting a duplex under contract that needs some TLC. Does anyone have any referrals for the following:

1. Foundation assessment & repair
2. painter - int and ext
3. Carpenter
4. Cabinetry refinishing
5. cleaning service
6. pest control
7. Flooring/Carpeting
8. Drywall guy

I will start calling people in the phone book if i need to, but i would values a good referral any day of the week.Thanks!

Hey BP,

I getting a duplex under contract that needs some TLC.  Does anyone have any referrals for the following:

1. Foundation assessment & repair
2. painter - int and ext
3. Carpenter
4. Cabinetry refinishing
5. cleaning service
6. pest control
7. Flooring/Carpeting
8. Drywall guy

I will start calling people in the phone book if i need to, but i would values a good referral any day of the week.

Thanks!

@Brent Coombs

Well this deviates from the CapEx discussion completely.

Why would you put all your money into principal pay-down just to pull it back out again?  I suppose your assuming the initial purchase loan is at a high interest rate, but this also depends on your strategy.  I would think if you bought low and forced some appreciation then refinanced, you wouldn't need to pump cash into the mortgage to do what you describe.

Unless I'm misunderstanding you...

I'm interested in BRRRR since buying retail doesn't make sense to me. It sounds like you are talking about BRRRR, but i haven't heard of your particular method you just described.

Thanks,

@Brent Coombs Well it just depends on if you want to pay down debt or use that cash flow to grow faster and pay down debt later.  All about your goals.  

Yes you could funnel all your cash flow into the LOC payments, but again this just seems like a different way of accounting for the expenses.

Thanks,

@Brent Coombs Well assuming the total of all LOC payments is less than what you "guessed" in the analysis for CapEx, then no worries. But that was just for a single component being replaced...say the AC goes out, then a couple years later its the water heater, then the fridge goes out, etc. You could argue that the accumulated LOC payments to replace this and that will start encroaching into what you estimated for your 'free-and'clear' cash flow. And as @Jeff B. said above, the LOC money isn't free.  So really your $5k AC repair will cost you much more over the long term if financed with the LOC.  Although I'm sure the interest, etc is somewhat of a tax write off too.

I think having reserves is just part of doing business.  All good companies have some cash reserves so they don't get caught with their pants down when the poopy hits the fan.

That being said, its sounding like the answer to this is 'do whatever lets you sleep at night' and is within your comfort level.  I'm learning that tends to be the answer to a lot of these things on BP.

I value all the input received so far, and will take it all into account moving forward.

Thank you!

@Kevin Siedlecki i still like the idea of having cash on hand. My thing is, if I use the LOC to replace a $5,000 AC unit, that is a payment of about $100 minimum for as long as it takes to pay off. That's about 4 years of cash flow being eaten away by LOC payments. Even if you pay more per month, its still coming out of your cash flow. So i think in a a way you ARE paying for these repairs with money that would be going in your pocket...you're just diverting that money from your bank account to the LOC. Just my 2¢.

@Jeff B. So you do contribute to a CapEx/Reserve account every month that you also initially fund at the get-go?

What did you mean by "Month over month, I increase that account and offset via the Owner Contribution"?

On average, how much cash do you keep at the ready for each property?

Thanks both of you for the input!

@John Barr

The property manager i have this info from charges 10% of the rent every month, but as you know there are turnover fees, etc, so i just threw in another 1% to add a little fluff for that over the course of the year.  Do you have any referrals?  8.3% sounds good, but I'm betting its bc you have multiple properties with them.  If not, then wow!

I assuming 10% for CapEx for now. I did a post about the best ways to account for CapEx and unfortunately i got no hits on it. I have heard of the method where you figure the total replacement cost and work it back to a monthly figure (which seems too idealized, and tends to be a cash flow killer ~ i estimated i would need about $250 per month using this method...greater than 15%) and i have heard where people just have an reserve account with a chunk of cash in it ready to go. When the account is depleted, they funnel cash flow back into it to refill. So i don't have a true hard and fast figure worked out yet for CapEx for myself. Any tips? Accounting for it is a given, its the how that I'm seeking advice on.

Thanks!

@Jared Bouzek

Fascinating. I can still purchase the entire property if i wanted to with the unsecured LOC correct? Or use it for the repairs, etc. Just not use it as a down payment?

Thanks!