All Forum Posts by: Justin S.

I'm rushing to close on a strip mall by the end of this year, and have done a couple needed remodels as well in the past 45 days. 2014 has been good to me, so a good opportunity to reinvest and make sure 2015 is set up nicely. I did manage to replace a few of my tools with good Black Friday specials, and picked up and bought outright a new iPhone 6, but can't think of anything else I need.

Had a pretty solid year, and could use some write-offs. What are your favorite things to load up on at the end of the year?

@Andrew Carter All of the above. My portfolio is very spread out between houses, apartments, and commercial, so I am familiar with everything.

@Andrew Carter Add me to your list also.

2015 Goals: Increase cash flow. Given the changes in the market, and things getting more difficult, I will have to play it by ear on exactly how I do that. It might be SF, or MF, or commercial or a bit of each. 

Will continue buying until interest rates or property values no longer work with my formulas, and then will sit back. Can't be as aggressive as I used to, because I don't have as much free time, but still feel there is value out there.

You will not be held responsible. Do not transfer them into their name. It's just like rent, when it comes to getting kicked out or losing heat/electricity, they will magically find money to pay the bills.

I would call the tenant and let them know, so that they know you are aware of the situation, but do NOT transfer into your name, as you'll never recover that amount.

I did my best to fix everything as fast as possible. Cost me an arm and a leg, and made for the worst month in my real estate career, but what can you do? The properties that had finished basements, I immediately sent a company to suction all the water, then bought many dehumidifiers, and dried everything out. One of my basement apartments had a bunch of water, and we actually had to move the tenant into another building. It was a mess to say the least, but it's over now, and we're back on track.

The other thing I did was do my best to find out where the water came in at each property, and sent out a waterproofing company in order to remedy as much as possible in case this happens again.

Same thing happened in Iowa about 45 days ago. Almost 9 inches of rain in 48 hours caused water in 4 of my properties that have never seen water before as long as I have owned them. It made July a very rough and expensive month, but you have to do the right thing and get the properties fixed up and help the tenants wherever possible. The last thing you want is to end up with mold damage and a potentially unsafe house. 

There's ways to fight the gas bill, like installing electric baseboard heat, but then you're investing 800 - 1000/unit and you usually end up making the tenants mad and sometimes they leave.

I own 30 units here in Cedar Rapids/Marion and the trash is usually included in the water bill for residential houses. If it's a true commercial multi-plex, you'll probably need a dumpster that will run you $40 - $50/month. I don't do any low inome housing, but I would definitely agree that you're going to need a much bigger repair budget than 10%. I usually use 12 - 14% for multi-families built in the 60s, and this seems to be accurate. Keep in mind, you've got three of everything, and they're all inside of a property that is 120 years old.

Rents are nowhere near 550+ for 2 bedrooms in a 3plex, especially in low income areas.

I don't think the 50% rule is that big of a deal on a property like this, because the property is so "cheap", but given you're extremely low cash flow, and the age of the property, I wouldn't be remotely interested in a property like this.

I think 10% vacancy is probably fine, if the units are in good shape. Even when you do have to evict people, you'll get to keep their deposit, and hopefully re-rent the unit quickly if it's nice. If the units are not very desirable, then I would increase the vacancy rate accordingly.

-Justin-