All Forum Posts by: Oren K.

As the saying goes: "time is money".

As an investor oriented agent, you very quickly get to be at least a semi-expert in underwriting investments. You should be (or become) knowledgeable about how a bank (or other financing channel) will look at a property, neighborhood values and what the individuals investment criteria are. As well, you need to cultivate a network of service providers from inspectors to roofers and electricians to paving companies.

If you 'just' send a 'MLS listing', that is minimal (I do not mean low) value. If you also send comparables and potential rents, that is more value. If you do some preliminary analysis (e.g. proforma NOI), that is higher value. If you present something which is 'pre-financied' (e.g. a broker / bank you have a relationship with that will fund subject to the investor), that is higher value. You see where this is going.

Another way to add value is to provide insight that an investor (especially a remote one) may not have. For example; an area is gentrifying so while a deal may be marginal now, it will be a great deal if held for X months. Another example; They will be tearing up the street for sewer replacement over the next year so getting tenants will be more challenging.

The general but not easy or simple rule is that the more analysis / filtering / insight you provide tailored to the investor upfront, the more of the investors time you are saving (but investing your time), the higher the quality of the deals you are presenting to the investor. They need to validate / confirm everything since at the end of the day, it their risk but as most people, after 2, 3, 5 times seeing that they get the same answer, they will trust you more and be able to act quickly which is in both your interests.

Oren

Mike,

As several posters have commented it depends on the market, your level of sophistication as an investor, how much work you are willing to put into the selling process, etc. and I very much agree with the comment about agents needing to add value.

In fact, I would say that if you are willing to do the work; price it right, stage the house, market it properly, promptly return calls - as the owner you can do this yourself and just pay the selling agent (if one is involved). But you have to treat the selling process just as any other agent would; Prepare a fact sheet, List on MLS, Protect buying agent, Make yourself available for showings (or a lock box), Keep a log of contacts, etc.

I did this nearly 10 years ago and did not find it a problem. Having said that, I was in a good neighbourhood and in a sellers market. Did all of the above and basically stuck a sign in the lawn. Within 2 months the property was sold at just above my expected sale price.

If your market is more balanced or a buyers market, an agent can provide a lot more value with their network of other agents and prospective buyers.

Good luck,

Oren

For some reason, only the second picture was visible when I looked at your posting until I posted my reply. 

The boiler in the first picture is older and you can see 3 circulation pumps (red things) which look newer. Still may be serviceable but the efficiency is probably way down from what ever it started at. There appear to be 4 zones (units?) being serviced from here. Can't tell if this is gas or oil but assuming that they don't have both, should be gas as well.

One more note; I do not see an expansion tank in either photo. May be there but I can not spot it. I believe that expansion tanks are now required for new installs; not sure about old installations.

@Vishal P. - Not an HVAC guy but familiar enough to provide some input. This unit pictured is in all likelihood a gas fired, hot water boiler. I can make out the fuel line and over pressure valve (silver thing close to the wall that looks like a bell). I do not see a circulation pump but there has to be one. 

I can also see a shutoff valve in the off closed position on the pipe (the HOT side I think) by the wall next to the fire extinguisher. There should be at least two others on the cool water return and the cold water intake lines so the boiler can be isolated without draining the system or building.

Not sure what the 4 things (3 white and 1 brown) are mounted along the top of the boiler; possibly zone controls for different parts of the building but then I would expect more piping coming off of them.

This boiler is not ancient but far from new / modern. At a rough guess, after 2000 but before 2010 so middle aged to getting on in years. Probably serviceable but almost certainly not high efficiency.

Looks like a fairly straight forward installation with good clearances and access.

Tim,

Firstly, LLC is NOT about protecting the asset that is in the LLC. It is about protecting you personally and any other assets you may have. IF you own a property personally, the law suit will name you and as such has access to any equity you have in your personal home and any other assets you personally own. So I am very much in favor of putting one in place.

Secondly, yes an LLC will provide a certain degree of anonymity if that is something you are concerned about. Having said that, if you are at the property regularly and deal with the tenant directly, they will likely figure things out.

Fairly certain (happy to be corrected) that the LLC has to list who the managing member is and I'm not sure the lawyer will want to take on that responsibility as that means they have to sign all documents.

Landlord insurance is with respect to the property insured; typically ~$1,000,000. The umbrella policy is something to cover any liability beyond the base policy (e.g. they win $1,250,000 so umbrella policy cover the additional $250,000). IF you only have one property, there is not much additional value in having separate polices. The value comes in when you have multiple properties. Each property has a base policy (e.g. $1,000,000) and the LLC (or you personally) has an umbrella policy of $1,000,000. Effectively, you have a $2,000,000 on each property. It would take multiple losses of over $1,000,000 at the same time to 'use up' the umbrella policy (at which point I would be asking different questions ;).

Just my 2-cents, get proper legal / insurance advice.

Oren

@Joe Scaparra - I think you answered your own question with respect to the 50% rule / guild. By excluding management and vacancy, the expenses are going to come in well below 50%. 

That your vacancy is so stable is WONDERFUL but not all properties have that attribute. Vacancy is a normal aspect of being a property owner. You are in a high demand market so 'get away' with it. Hope it never happens to you but Imagine 10 years from now that the market changes, as all market do, and demand decreases and tenants roll over more often resulting in needing to turn the unit every year or two. The unit may be down for weeks or months depending on how dated it is and what upgrades you put in. Also with lower demand, you may be waiting on suitable applicants rather then having your pick.

Similarly, the PM services are needed for all properties. You have chosen to self manage which is fine but are also NOT paying yourself for this service. Remote owners or even those who simply can not / do not want to do these services is also a normal aspect of property ownership. In 10 years you want to take an extended vacation of several months. You could try leaning on a friend but then run the risk, even with the best of intentions, that they don't do things right or unfortunately have an accident. At some point you need to engage a professional company to cover while you are away. If this was part of your budget, no problem but if it is not, you take a big hit to the cash flow.

Add these costs back in and you are very near 50%.

As any number of other BP members will tell you, the long term average all-in costs will trend towards 50%.

@Anthony Dooley while I agree with you in principle and always get a kick out of sellers asking to be paid for value they have not created, if there is enough value add and you are confident that you can actually capture the value add, that becomes the justification for 'over paying' on existing performance. With a cash flow negative property you have to do some kind of forward projection or the property will likely continue to deteriorate to the point that even free does not work.

@Aaron Howell - I would think of this more along the following lines; If you are confident in your assumptions of rent and any remodeling that needs to be done, what would the property be worth at market rates of today. Don't forget that you are likely to have a period of higher vacancy as you increase rent and turn over the tenant base. What will be your NOI coming out the other end in 6M? 12M? 24M? or what ever. How much do you need to put into the property, even if it is just cosmetic? Add in a big buffer as there are always surprises. You can now calculate the POTENTIAL returns (CAP, COC, etc.) and so figure out what your top price is. Any lower price is to your benefit

In term of financing; hard money is likely the only way to go (if that).

Good luck,

Oren

Another firm (who I used) is Sleggs, Danzinger & Gill Co., LPA (SDGLEGAL.NET); ask for Robert Danzinger or Steven Gill as I have worked with both.

As with other firms in this field, they will do it on % / contingency but also on an hourly basis. If the appeal is based on a recent arms length transaction, it is actually less expensive to pay hourly

A conditional offer is just that. Nothing is firm until the party holding the condition (option) waives it.

The question becomes, is the seller willing to 'tie up' their property until the condition is waived. In part this depends on what the Sellers needs and if they think they can get another offer that will close sooner; are they more interested in certainty, price or what ever.

Another idea would be to buy the option; e.g. some $, non-refundable at price X.

Good luck.

As you said, this is an emotional decision and there is no 'right' answer except the one you come up with for yourself. Having said that there are a couple of approaches that may help you;

The strictly analytical approach would be to look at ROI; what is the return of each of your options. Loan repayment reduces debt service and allows for further / faster other loan reduction. Investment creates new income streams which can be used to repay debt. This approach is all analytical and depends on the interest rates you are currently paying and the interest on loan options. You want to use the lowest cost debt option for the highest available return.

Another approach would be to first consider your comfort / tolerance for debt. If you did invest and / or  did take on more debt for education; will you be able to sleep at night. Investing will increase your risk. For most people, additional debt causes some stress. If things go sideways for whatever reason, will you be able to deal with it? Understanding how these decisions affect you can go a long way towards making a decision.

For me, I believe that education is the best investment you can make in yourself and so would either pay down past student debt or pre-pay new education debt based on the interest rates of the two.