All Forum Posts by: Roy N.

Steve Might do you require tenants with pets to carry damage coverage for their pet(s) as part of their tenants insurance?

After months ... well, maybe a year, of lurking, I've submitted my "introduction" post and made a few other small contributions to some of the fora.

Now I've sat down to raise the questions responsible for my being here in the first place and I'm not exactly certain how to start ... so, rather than try to write eloquently, like any engineer, I'll resort to a bullet list of the facts ;-)

1) As alluded in my introductory post (http://www.biggerpockets.com/forums/55/topics/88317-new-sort-of-in-canada ) I realise we have arrived at the point where, if we are to grow our real estate business to meet our objectives in a reasonable time period we need to start using other peoples money (OPM) to purchase properties.

2) I've helped raise both private and public funds for startups in my past, so the principal and general process is not foreign to me.

3) Despite the above two facts, I am presently seeing the task of approaching people for private financing as a "necessary evil" and am loath to do it. I also know, I need to straighten this out in my head before I begin looking for financiers or I'll be unsuccessful at convincing anyone.

4) I've been {over}analyising this trepidation and I know it is due in-part to the fact I am uncomfortable "selling" - but this is not new and I have always been able to overcome it in the past and was actually very good at pitching.

5) In the past I was operating in my engineering domain (specialized area) and I was extremely confident my depth of knowledge exceeded that of the investors and fund managers to whom I was presenting.

6) The difference this time around is I'll be pitching/selling a far more general idea (a rental property) to an audience whose experience in the domain may likely exceed my own. So it boils down to confidence in my analysis and domain knowledge.

7) Rationally, math is math and unless I made a horrible mistake in one or more assumptions, the numbers do not lie.

8) In my current analysis/screening of properties/deals I am looking for
a) positive cashflow;
b) operating expense ratio <50%;
c) debt coverage >=1.5;
d) PE <3;
e) Cash-on-Cash of 10-12+;
f) BER <=75 (80 at the max)
g) I tend not to be driven terribly by the CAP rate if the cash-on-cash is good - in the local market it is extremely rare to find a multi-unit with a CAP >7.5 to 9

In our analysis we use an opportunity cost of 8%; a maintenance & CAPX set aside of 10%; and assume a vacancy rate of 8.33% (1 month in 12) ... we try to be conservative

9) I do realise that while the above ratios have been fine for us, they may not be sufficient for a potential private money financier. However, I would think so long as we can demonstrate the cash-flow can service their note and provide sufficient reserve, as a debt financier they woud be satisfied.

What I am looking for at this point is

a) a general indication of whether we are rowing in the right direction;
b) tips on how to package/present an offer to a financier ... in engineering it is analytical and easy, my experience thus far in real-estate (with Sellers and conventional mortgagees) is there is a far higher degree of subjectivity in decision making.
c) Any indication on what we may need to change in qualifying our properties prior to striking a deal ... i.e. do any of our conditions need to be tightened?

Any and all feedback is welcomed ... after digesting it, I should be able to focus future questions a little better.

Mike Rodrigues: Here if you receive your downpayment funds as a *gift*, inheritance, lottery winning, etc. - as long as there is no expectation of repayment - conventional lenders will have no issue.

I'm a long way from Florida and across the imaginary line, but conventional mortgagees work pretty similar regardless.

Kay March:

In our lease we explicitly require Tenants to obtain our consent prior top affecting any repairs or alterations to a property ... and in most instances we will insist they use our standard trades/service providers to carry out the work. We find this allows us to better tract the state of each property and the quality of work ... in one case a tenant wanted to upgrade the kitchen faucet and she paid for both the new faucet and our handyman to install it.

Similar to the annual inspection indicated by Rob K, we reserve the right to inspect our properties once per quarter. In some instances, we might only inspect annually or semi-annually, but in our student units we make a point of going in once a quarter.

Hello,

I am looking to make contact with real estate investors, brokers, or property managers of multifamily properties in Saint John, NB.

My objective is to better understand the different areas of Uptown Saint John and the characteristics/challenges of running a property in the City. On the surface, there appears to opportunity in Saint John - a larger inventory at better prices - when compared to here in Fredericton ... even when you consider in vacancy rates, rent levels, etc.

My first reaction to such a discrepancy is: "There must be something about Saint John, or specifically, Uptown Saint John, I do not know/understand that is responsible for the discrepancy in inventory and prices between there and Fredericton (and Moncton)."

I agree with John Carpenter and others that it pays to understand how things are done - and done correctly - as it permits you to better estimate project costs and to deal with the hired contractors/trades.

However, for many of us who have another principal business or profession and invest in real estate as a side venture, our time is typically better spent billing our customers in our "real" job or undertaking strategic business activities as J Scott outlines and not swinging a hammer.

In my case, I've spent time cultivating relationships with my carpenter, plumber, electrician, etc. and have built a small crew who handle much of our renovation/rehab work {much as John Carpenter describes his role above}. I still shop/invite bids on my jobs just to keep everyone's pencil sharp (mine & theirs). I do frequently assume the GC role on larger projects because its a skill set I have {2+ decades of project management}.

One area where I do find myself spending lots of time researching and, ultimately, advising/arguing with my trades/contractors is around energy efficiency and new {or new-old} construction approached that improve building performance. I am surprised on how slowly some of this knowledge is making its way into {certain} trades.

These introduce yourself fora always give me the sensation I am standing up at a meeting for some 12-step programme - though I've never actually been to such a meeting and it is most probably my perception does not match reality.

So, it begins ....

Hello, my name is Roy and I am a real estate investor.

It started a few short years ago when "test sites" for new software being developing. We originally planned on approaching other landlords/owners to use their properties to test our software, but in the end decided such arrangements would be too cumbersome in the early development. So we went out an purchased two properties - a single family home & a duplex.

Then we bought another property and then {you know where this is going} ... then, somewhere along the way the idea of rental properties became interesting. We are about to close on property number 4 and are cultivating three other potential acquisitions.

I few things I have learned during our short life as real estate investors and landlords:

1) Running a real estate / {residential} rental business is a lot like running any business ... and it is also very different than other businesses.

2) Purchasing rental real estate - at least the small 1-4 residential properties we've acquired thus far - is surprisingly far more difficult (for empirical geeks) than acquiring another business. We have been amazed how few owners/vendors appear to treat their properties as a business - requests for basic information like financial statements, operating costs, vacancy rates, turnover rates, etc. is frequently met with blank gazes. Perhaps, we still are not speaking the correct language? My gut tells me that as we grow-up to larger (8,12,16+ unit) properties things will become more business like and familiar.

3) Contractors ... let's just say, your average contractor in this industry is much different than in the software / IT sector.

We funded this real estate "startup" using an investment from our software company and, to date, our acquisitions have all been financed through a combination of our own funds and conventional lending. I know well, from running other businesses, that to grow this venture at anything more than a snails pace - or to make the leap to a larger multi-unit residential or commercial building - we will need funds other than our own.

I've been lurking on this site for {quite} a little while now, gleaning what information I can. Now it is time to step out of the shadow and begin asking questions and better tap into the wealth of experience and talent resident at BiggerPockets.com.