All Forum Posts by: Ronald Perich

OK, alleged felon.

I bought a nine-unit complex a few months back and it came with some interesting residents. Many of them are good people who put up with an inattentive owner. The previous owner was in her eighties and just didn't have it in her to keep the place going.

Anyway, her idea of screening got the same amount of attention. She just "knew" if someone was a good fit. Unfortunately, she got it wrong with a few of them. I have had to threaten evictions three times in two months. Eventually, I convinced one of my residents that they were better off seeking a different place to call home.

They did a midnight move, leaving couches, chairs, bedding, uneaten food, etc all over the place. Turns out, I probably did a good thing for my own safety. Read the link below to see why.

Suspect climbs tree to avoid police following armed robbery

This guy was a real Eddie Haskell in person. He knew what to say and when to say it. He was very innocent looking and used it to his advantage with the previous owner. She was even "helping them out" before I showed up. 

Look, I don't want to be mean. But you cannot jeopardize your safety, the safety of your other residents, and your investment. People, do your screening!

Be safe my friends. 

@James Syed, don't be tempted by the one-armed bandits while in Vegas! Stick to Black Jack. 

You may be making a mistake. Be ready to move out immediately, but you should give notice. Otherwise you are really burning bridges. He probably won't give you a great recommendation, but he can't say you didn't give notice if you do. He might tell you to leave immediately, but then it's his decision and you can say you took the higher road.

@Kathy Henleyis correct that insurance is not as difficult to find as you think, but make sure you get on it early in the process. Underwriting these properties can be a little more time consuming than a traditional SFH.

@AJ Hernandez, we could use a bit more information about the specifics of the property if we are to give you a more-informed suggestion.

Are any of the units vacant? 

How did you arrive at the $325K for renovations? 

The income you mentioned, $170K per year, is that after all expenses? What about after the debt service of the rehab loan?

$50K will get you $200K of loans. But you'll need to keep some in reserve to help when problems arise (and they will arise). 

You can do it alone if you want to take the time necessary to create the value. Or you could try to partner with others, creating value for both you and them. Either way is going to take time, but partnering will generally get you more properties more quickly. But you are personally making less cash flow on each property.

But let's say you go it on your own. There's a four-unit in Glendale listed for $184,500 (just listed today). You pick it up for $180K. Average rent is $625 in the area. Figure 50% expenses. So you have $1250 a month to work with. Your mortgage is about $1K per month. You only have $250/m cash flow on your $45K investment. Not a great return. 

Go to a different market and make $500/m cash flow. After five years you'd have enough to repeat the buy. Now you're making $1000/m in cash flow. 

Repeat after another 2.5 years. Now you're up to $1500/m. 18 months later, do it again. $2000/m. Then 13 months later and 8 months later.

129 months into this (about 12 years), you are making $3K/m in cash flow from your single investment. And that's only if you don't receive any increases in rent. And only if you don't continue contributing your own money. You could knock that time down significantly if you contribute yourself.

Just reinvest all of your cash flow to buy more when you first start out. And keep saving for the next one at the same time. Maybe thrown in a wholesale or two along the way. Four a year could net you an extra $20K for your next purchase.

And they'll take off with copper, wire, windows, whatever else they can take.

@Joshua RogersUnfortunately we live in the land of Chicago-style politics, governors who retire in jail, and the Land of Lincoln's pension obligations. Our property taxes are higher than just about every municipality in Missouri. But one thing to look at is if the taxes are reduced for senior exemptions

@Anthony GaydenI was thinking the same thing. Make sure you have $200-500K in reserves. There has to be a ton of deferred maintenance and CapEx needed.

@Orlando Roche, you are correct about penny wise but pound foolish. Just found out that the precious owner did put a new AC unit in about 7 years back but didn't change the inside coil. It's out and needs replacement. You can at least double the cost than if it was just all done at once.

Cheap isn't always cheaper in the long run.

I'm buying a bunch of vinyl today. Great deal on it through this weekend. $1.99 sq/ft for 5.5mm floating, waterproof.