All Forum Posts by: Natalie Schanne

Becca Cross - If you want to understand the situation, you have to get more hands on with the property. Can you afford to stay there 1-2 weeks? After you patch up an apartment unit (or if you have a pretty one currently lived in by a neat tenant), stage it with nice looking basic furniture, post it on CL yourself and see what response you get. Run applications yourself. Offer it furnished and unfurnished at different prices. Who applies? Who offers to sign? At what prices? Sometimes the ambiance of a place will decrease your rental rates or your amenities don't meet the needs of higher quality tenants. Cap rates are at an all time low if you want to sell. It's generally better to be 100% occupied when you sell since you're effectively asking for a multiple on NOI. When you're on site, check with local people to see what certain activities should cost. How much can you hire someone for? I usually estimate $15-20/hr for handymen, and try to turn it into a fixed price ($100 for painting a 10x12 room + materials). From all the evictions, it's clear whatever you have currently isn't working. (Unless some tenants talked to each other and all stopped paying at the same time.) If you don't trust your current PM to improve, then interview a bunch and hire another. Or self manage and train your tenants to autopay rent to your local bank account, schedule repairs with you directly (then you call a service provider), pay existing tenants a commission for showing the units, and report on weird activities by other tenants. Who can you trust to talk to and handle activities on your property for reasonable compensation?

Shaquan Whitaker - sounds like she wants whatever deal you agree to, to happen... no ifs, ands or buts. Like, if I agree to sell to you for $50k, you're not going to reneg on me in a few weeks (because you didn't get another buyer fast enough). So, you prepare 100% to close on the deal and buy it when you said you would for the price you said you would. Meanwhile you find the next buyer or you partner with a flipper. Describe any assignment to a buyer as a funding partner or co investor, which is true.

@Bradley Tucker - Welcome to Bigger Pockets! I love the Philadelphia market. Let me know if you haven't yet connected with an investor friendly agent. Which neighborhoods are you targeting?

@Joe Kim - Like Patrick said, if you hire a Real Estate Agent to market the property and pay her 1 month's rent, 95% of the time she's paying 1/2 month's rent to the renter's real estate agent. 

So, in exchange for 1/2 month's rent (of which her brokerage company keeps 20-50%), she's taking pictures, writing up nice descriptions of your property, screening tenants, and preparing a good lease. She may potentially hold 'open houses' too. 

So, of your $8,000, usually $4000 goes to 3 other agents, and the brokerage takes another $500-2000, so your hired agent actually gets paid $2000-3500 for leasing your 3 properties which bring you $8000/month in rent.

PMs are different. You've been given a lot of advice about choosing one. Often they are not paying a commission to a real estate agent. Fees are entirely negotiable, whether that's a % or fixed.

However, WHAT IF the PM has a qualified tenant and is choosing where to direct that person's attention? Let's say they have one $3000/mo rental offering a 1 month's commission bonus and your $3000/mo unit, offering a fixed fee of ~$500-1000. Which property do you think the PM will encourage that tenant to sign for first, all else equal? Will a couple weeks of extra vacancy for you be ultimately worth it?

@Davis Sessums - Real life example of a local Northern Virginia SFR flip in 2016:

A 5 BR 3 BA, 2400 SF single family house next to mine in Reston, Virginia went into foreclosure. (I had reached out to my neighbor, the owner to buy it, but he didn't respond to multiple messages. Bad life circumstances - divorce, lost job, drugs.) He probably hadn't paid on the mortgage since 2014 or 2015. We both bought our properties in 08/09 as foreclosures for about $250k.

The house was abandoned for at least 12 months. It had a notice on the door that it was CONDEMNED. In September, I called Wells Fargo to inquire and they said they'd sold it on Auction.com in June/July 2016. Public records show it transferred for about $275k. The Flipper LLC got title and possession in late September or early October. In early October, I saw the remodeling crew go in with pallets of flooring, tile, etc.. They were pros. I toured it before and after - it was night and day. By early November, it was on the market for $400k and sold for $395k. It closed/settled by Christmas 2016. Previous comps in the area for the same house model were $415-425k during the summer / for a longer listing period.

I believe there will always be opportunities for value-add flipping by buying as-is properties and REO's off MLS, buying deeds at sheriff's sales, buying off Auction.com & other websites, and buying directly with direct mail campaigns & networking. The question is whether you have skills or know people with skills to complete high quality but inexpensive construction work. If not, I do not believe there is very much of a margin to pay yourself very much as a middle man.

Specifically, I think this flipping team was able to fix up the house for less than $40,000-50,000, but someone without construction skills trying to manage subcontractors may likely have paid $80k or more to update 3 bathrooms, paint the whole house, put in hardwood floors & tile, granite countertops, new cabinets, stainless steel appliances, etc. 

@Rose M. - use the calculators available for free on this website or free excel calculators. The numbers aren't scary. 

If, as a ballpark, you buy a property you know is a good price for the area, and you can rent it for a minimum of 1% monthly of its cost ($1000/mo for $100,000 home), you will usually have more than enough money to pay all the bills and get some cash back in your pocket on a monthly basis.

JL Crowder - If you're actively member managed, you can deduct any net losses from your real estate against active income (instead of only passive). So Rental depreciation can offset W2 taxes owed. Set up a business bank account for your LLC, fund it, and don't commingle. This helps protect the veil from being pierced. All rent checks go here. Never buy groceries from this debit card. Document your member profit distributions. I met an accountant lawyer recently who suggests filing a separate LLC return as a partnership (1065 k1) instead of on a pass through schedule c or e. Then you report your k1 form income on your personal joint return. He said the audit risk is 3x less. For asset protection, you must make the business look like a business and separate from your personal assets. The less cash/equity the business holds, the less of a target for a lawsuit it is. Note: People can and will sue you for any reason, including frivolous ones.

Jared Samsel - I'm in my 30's. I love my ROTH IRA. I've put about 60k into my Roth IRA (5500 max yearly) and that account is worth almost $200k from the dividend reinvestment growth. (I like MO stock). All that money and compounded gains can be withdrawn without taxes after 59.5. That means I can worry that much less about maxing out later 401k savings (like $20k/yr) in my 40's when I'm paying for my kids to go to college. I'm expecting to be in a higher tax bracket when I'm in my 60's because of accumulated investments.

JT McGraw - When you install the new ones, invest in installing some inexpensive clear or cabinet color matching vinyl / plastic cabinet liners so the bottoms are protected from spills and scraping. I put these in my rental and they've caught dark soy sauce, bright red jams and other spills. It makes it easy for the tenant to wipe down. Mine are floating (not glued down) with a little bit of tape. My cabinets look as good as they did 10 years ago.

Blake Morgan - Do you want your dad to transfer you his stake of ownership of other properties in the future, after you have learned and proven your ability to manage, or would you prefer he sells everything and you inherit only cash? He may be trying to groom you for greater things in his mind. You've received some great advice. Since you've just graduated, it's fair for you to want to pursue your career in Atlanta where you can mingle with other young people and find your life partner, if you haven't already. If I were you, I would: 1. Ask Dad to let me take over the properties (after I've done all the below processes and decide you want to manage it.) 2. Review all his processes, systems and books (annual rent roles, expenses) to determine if you can increase occupancy (90->98%), improve the property rents (below market?), or reduce expenses (paying staff / contractors too much for shoddy work? Install LED lights?) 3. Fly and visit the properties and tour a selection of units. Visit competitors' properties. How do you compare? 4. Meet with people providing services for your property. Schedule on site with 3-5 property managers who would be interested in providing full servicing on your buildings and listen to their pitches. Decide whether you need / want them or an employee, a part-time or on-site leasing manager and maintenance coordinator (however it's being run now). 5. If you can improve the properties in a way to increase NOI and hence the value, do it. If you visit and don't have the desire to interact, then I say tell him to sell it / 1031. NOTE: Multifamily in many markets is being purchased by new buyers at historically low cap rates (5-7% = net income / price) so it may be a perfect time to sell if you can't imagine owning it for 10 more years. Meaning, people are spending 20 x NOI to buy instead of 10 x NOI or less as in the past.