All Forum Posts by: Oren K.

There are dozens upon dozens of if not hundreds of companies that can service / test / maintain the panel.

If you call Napco, they should connect you with their 'authorized' service dealers and you can also reach out to any provider to see if they will service the panel

Just to underscore @Mike Dymski point; I recently met with a contractor in Ohio who took me to another site they were working on to show the quality of work. The other site was a 100+ bed nursing home that was being totally remodeled by a new out of state owner. 

During the tour / discussion, he mentioned that his company did not do the windows so I asked who did. It turned out that the new owner brought in a company from NJ.  There could be more to the story but taken on its face; consider that the NJ company brought in their own crew, housed and fed them for the time on site. The NJ company had to bare the extra costs but still bid low enough to get the contract. There are limits to economics of scale but it is a powerful force.

Regarding the question of expense ratios; I am also an NON-BELIEVER in any claim of 25-35% expenses except in extraordinary circumstances. If you are NOT spending at least 45% or more on management, property taxes, utilities, insurance and maintenance, you are not doing enough to maintain the asset in good condition. Sooner or later it will catch up with you if you hold.

Oren

Adam,

Sub-metering / RUBS may work on paper but you also have to consider the tenants alternatives and not just works for you.

If all other similar properties in the area include utilities, then you will need to charge a lower rent and you are hoping that the tenant is willing to take on the added responsibility. 

As well, in some jurisdictions (check yours), the owner is ultimately responsible even if the tenant is the one that opened the account.

Oren

It's funny how different people approach issues; we have one PM@Kim Younkin happy to connect with potential clients, point them in what they feel is the right direction and in general want to be helpful. Then you have another PM@Peter Lohmann whose attitude is a bit more shall we say mercurial and unless there is potential pay check involved is not will in to spend a few minutes to help someone.

If you have a property under contract, who do you think would would be better to work with? Might warn you off an area that they know is not good? Would take the time to educate the OOS client on local issues to watch out for? To each their own.

To answer the OP question; I think they go hand-in-hand. If you are focused on a particular market, then finding a PM before the property is a great way to leverage the PM's network and knowledge base. As an OOS investor and on the assumption that you don't want to manage remotely, then you need to lock this down during the DD time at the latest. One unplanned trip to a property can wipe out a lot of profits once you factor in plane, hotel, car rental, etc.

Ello,

Another option is to hire a CPA for this year and see / ask questions about what they are doing and various considerations.

Not to take business away from Lance but unless there are unusual circumstances, it is not rocket science. Next year, if you feel you can handle it, you can go it alone.

On the other hand, as you add properties and perhaps entities, it does become more involved and don't forget that you get to deduct the cost of the CPA.

Oren

Marshall,

Is there any new information from when you posted what appears to be the same thing on thread;

https://www.biggerpockets.com/forums/311/topics/42...

You know the old saying about doing the same thing and hoping for a different result ;).

Oren

Jon,

Going tankless single source MF property will require some engineering vs. just putting something in. With a standard tank, the cold water fills in from the bottom so tenants have full access to HW even when a good chunk of the tank is 'cold' and it gives the tank time to heat up the new water.

With a tankless setup, you will need to determine the MAX water flow utilization per minute in your existing setup and make sure you have the heating capacity with contingency in the new set up.

Oren

EriK,

I would say it is not the number of properties as the number of units. If you are buying SFR, they are one and the same.

Property management costs and interest to manage are tied to 'density' of service. The more spread out, the higher the costs and the lower the interest. So if you have 1 house that is an hour away from where a PM generally is, each trip is 2+ hours and he away from the other properties they are supervising. Every little thing cost nearly 1/2 a day. If I was that PM, I would have very little interest and / or charge an outrageous amount. 

On the other hand, if you have a few houses on the same block where the PM is already spending their time, it certainly makes their life easier and so they can afford to charge less.

So find out who is providing good PM services on the same block or as close as possible and they should be your target PM.

Oren

Marshall,

There literally thousands of post on BP discussing, debating and even out right arguing the pros and cons of using the 50% rule. I strongly urge you to spend some time reading and understanding the issue by searching on this topic. Even if you end up not using or agreeing with it, it is a good way to educate yourself.

Yes - the fact that tenants pay their own electrical / gas / heating will reduce your expenses by a few points but you are expecting to run this property with only $25,000 in total expenses (less then 25%!).  This is virtually impossible and not believable. You need to get a good handle on the real expenses including all the small stuff; insurance alone is going to eat up ~$2,000.

Also, you are not cutting your NET in half, it is the GROSS that is being cut in half as ball park since we don't have actual financials. If anything, being an older property you should lean towards a higher expense ratio.

I don't recall if the basic membership allows attaching but I'm sure you will figure that out.

Oren

Not clear if you are including the roof & boiler in the remodeling / capex plan but lets assume you are. Also if the boiler has not been upgraded in 35 years, there are probably other things that need to be done (e.g. windows, sewer connection, drain stacks, etc.).

Lets say you are spot on with your estimate including everything; The bottom line is that you will be all in for ~$700,000 ($600,000 purchase & $100,000 remodeling) and expect to have a Potential Gross Income of $108,000 per year ($1,000 x 9 x 12). Ignoring the currents owners numbers, which I don't believe anyway (~30% expenses!!!), and using 50% for expenses, would leave you with a NOI of ~$54,000 which translates to ~7.7 CAP (54,000 / 700,000) once the work is done and all the tenants are turned over (at least a year?).

A couple of caveats; 

1) As this is an older property, it would not surprise me if the expense ratio was higher 

2) Carrying cost are not included 

3) Unless you have done this a few times before, renovation costs tend to inflate 

4) Your time / effort is also not included.

So my question to you is would you be satisfied with a 7.7 CAP? Can you generate this return with less effort / work? How confident are you in your assumptions / projections?

Good luck,

Oren