All Forum Posts by: Sam Booth

Hi @Adam D.

I have 1031 all my pricey San Diego rental properties, since 2015 and 1031 exchanged them for 7 apartment complexes and 109 front doors. I have basically traded in $50,000 cash flow for $160,000 cash flow and rising every day. Of course, love the cash flow, but more importantly, I am in the process of increasing the NOI dramatically, thereby increasing the value of the property exponentially. I have a 24 unit, 21 unit, 15 unit, two 12 units, 10 unit, 8 unit, and 7 little single family rental properties too.

I have done this on an $80,000 W2 earnings per year as a Catholic School Teacher.  In 3 to 4 years, I expect to 1031 exchange or refinance rinsing and repeating.   Ultimate goal to defer, defer, defer, defer, defer, and die with approximately 1000 front doors and 3 or 4 large apartment complexes, and $750,000 plus cash flow per year at death.  Then, my kid can inherit at a stepped up basis and then he can defer, defer, defer, defer, defer, and die and have about 5,000 front doors if he chooses to do so.  Also, when he inherits, if he keeps at least 50% debt and continues on this path, depreciation starts all over again for him too!!! 

Imagine if I reach even half my goals. WOW!! If I were you I would do the same. I have only invested together with my wife, mom, and dad on all of my deals but one. One deal, I took 2 of my friends along in an equity partnership on the 21 unit I mentioned above. So far, on that deal, after 12 months, we have replaced 15 out of 21 tenants with tenants paying $80.00-$100.00 a month more than the previous tenants and we have caught HUGE water and sewer waste, along with cut insurance costs by switching carriers etc... That one we only put $260,000 down and have already increased the NOI moving forward to $25,000-$27,000, increasing the value of the property $250,000-$270,000 after 12 months of ownership. The remarkable thing about it, is that we have not touched our reserves and only used our operating account to make ready those 15 units and other improvements. They were basic $1100-$1200 make readies when tenants moved out and a higher class tenant based moved in.

Now we have decided as a group to take some of our $60,000 in reserves off the table and start giving distributions as our operating account rises too after this repositioning is complete her in January-August of 2018.  We are expecting $36,000 cash flow minimum for the next 3 to 4 year period too, before refinancing and taking all of our money out tax free that we invested or 1031 exchanging $700,000 of equity with loan paydown into possibly a much larger 2.8 million dollar complex.  This complex a year ago we purchased for $900,000, we expect to pay down the loan to $550,000 and increase the value to about 1.2-1.3 million.  Not to mention the over $150,000 cash flow we expect to take in the next 4 years of ownership.

I love this stuff, when done right!!  Anybody that wants to talk shop, go to my profile and reach out to me.

What a country!! AMERICA!!!

Swanny

@Sam Booth Check your management contract to confirm all this is in writing and how you can terminate.

Then find a new PMC using below:

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator.

So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.

EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!

This also leads owners to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:

https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊