All Forum Posts by: Nathan Gesner

It depends on the number of units, occupancy rates, age and condition of units, etc. Some people build a separate Reserve account for each property based on X number of months vacancy, 10% of annual gross rent income, or some other system.

I have one reserved account for all properties. The amount I hold in there is based on worst case scenario of several major systems failing at once. For example, could I handle replacing a roof on one unit, a furnace on another and still be able to recover the fund before the next disaster?

My reserve is small right now because I have four single-family homes in good condition. I am in the process of buying an older 11-plex and will build a bigger reserve but it will still be one reserve for all units and probably equal to a couple months of gross rent income.

Just ask. I own a small office and would have no problem taking on a very part-time investor that is only buying/selling for himself. You don't cost me anything, you don't require supervision or training, and I can earn some money from the deals you close. I wouldn't recommend running to your local Keller-Williams or Berkshire Hathaway! Big, name-brand offices are looking for agents that produce. Look for a small office with just a few agents. Even better: find a local real estate investor (REI) club and try to link up with another investor that is already licensed. You can work with each other to find more deals, learn from each other, etc.

Even after you are licensed, there are on-going expenses to deal with: board dues, state dues, NAR dues (if required), insurance, and continuing education. I spend at least $1,500 a year just on those.

My last deal was a hoarder house. I bought it for $57,000 and it's now worth 3x that. I'm working on purchasing an 11-plex at about 30% below market with immediate growth potential of another 10-20% with little effort. Both of these deals came to me directly, without ever touching the market, because I am licensed and they know I handle rentals. It's a good thing to have an inside track!

Go to the National Association of Residential Property Managers (NARPM.org). Hover your mouse over "Search Directories" at the top of the screen and choose "Property Managers" and then narrow your search by area. If you've never used a PM before, I recommend researching online to learn what they do, what they don't do, and how to differentiate between a good and bad one. 

Here's one of many good resources: CLICK HERE

Go to NARPM web site and search the directory. Educate yourself on how to interview and find a quality PM. Too many just hire the one with lowest rates and then wonder why they suck!

I've used it and don't see any problems with it, other than being a little slow compared to a spreadsheet. Then again, I'm not crunching numbers on a dozen deals a day so speed doesn't matter much. 

Private money is always loaned at a higher interest rate, which will cost you more. You've already crunched the numbers and proven the point. Why would you pay $2,000 a month when you could pay $1545?

Hard money lenders should only be used when traditional financing is not an option. You found a great deal but don't have the down-payment saved up, so you can borrow from a hard-money lender, a family member, a local investor, or my cousin Guido. Try to find someone reputable (not my cousin!). Try to avoid family and friends because it ruins relationships.

When using a non-traditional lender, it is even more important that you purchase below market so you have immediate equity. You can refinance with a traditional lender after 1-2 years (sometimes even less) and get your entire interest rate down to something reasonable instead of the 8 - 12% the hard money lender will charge you.

What is your long-term plan/goal? At my age, I am in the acquisition phase. In ten years, I want to be in the "pay off" phase where I pay down all debts. Once that's done I'll be in the "sipping cappuccino while gazing upon the Arena de Verona" phase. Seriously.

I want my "retirement" income to be $50,000 a month or $600,000 a year, a pretty reasonable goal. Projecting rent income ten years from now, I will need approximately 34 single-family homes (if buying apartments, I'll need more units). I have now started acquiring as many units as I can towards that goal. I'm new at this and expect I will miss the mark some years and exceed it in others, but at least I'm working towards something!

Last year, I bought a single-family (spent the rest on my personal home). This year, I'm already working on buying an 11-plex that will bring in the equivalent of five single-family homes for 1/2 the price! This puts me on track to have the equivalent of six single-family homes in two years and I could easily exceed that since this year is just starting.

As I acquire properties, the cash flow will go to reserves for major improvements, emergencies, vacancies, etc. Once the reserve is built up, all cash flow is used towards buying more property. Once I meet my goal of 34 units, I start using that cash flow to pay off the smallest mortgage. Then the next. Then the next. It quickly snowballs until I am debt free. My net worth is in the multi-millions, I have no debt, and I can live very comfortably for the rest of my days while donating graciously to help others. Then I'll die and it will go to my ungrateful children or the tax man.

At least, that's the plan. ;)

I don't mind the "look" so much as the lack of a subject line to tell me what the new discussion is about. I can't spend all day clicking over to BP to see the subject line only to find out it doesn't appeal to me.

Seller doesn't want to carry.

I got my answer because the local lender is happy to loan on the deal and we have enough equity in our other properties to handle the 20% down. 

I have an acquaintance that wants to sell an 11-unit complex and a property with 5 units. These are C-class properties in B+ locations. Rent income is a minimum of 10% below market. Owner is paying for utilities that could be transferred to tenants to increase annual income by another 10% or more.

I think he would sell them for $550,000. Within two years I can make the necessary improvements and rent increases, bringing property value to $750,000 or more. The monthly cash flow would be around $3,500 and I would pour all of it right back into improvements or prepping for the next investment.

My question is, how should I purchase these?

1. Local lender: meeting with him tomorrow. We are in a small town and he knows us, knows our business (#1 property management company), and we have financed a couple investment properties through his bank. He will likely require 20% down ($120,000) and we may not have that much in equity and cash.

2. Hard money lender. I think the numbers make this an easy route but I don't want the higher rate and I don't want to convert to conventional financing in 1-2 years when rates are significantly higher.

I would appreciate any recommendations you may have!