All Forum Posts by: Chris Kennedy

Given that it sounds like you're a little strapped for cash on this deal, maybe your best bet would be to assign the contract to a cash investor for a fee. Seems like you have it under contract for $30K. Maybe you can find someone who will pay $35-$40k for the property? Pocket the cash and use it toward down payment on the next one. Good luck!

@Anthony Chin Welcome to the site!

I'm active in Fort Lauderdale also, along with my associate @Miguel Maria . We have our own brokerage, and an investment company as well. So between us and our team we handle anything from wholesaling to fix and flip to commercial deals.

I'm always happy to meet new folks active in the business, so feel free to hit me up with questions, or if you're looking for a reference to a local professional you need (inspector, lender, appraiser, etc).

Best of luck and keep us posted on your progress! 

@Isaac Abeyta I just made the commitment this year to go ahead and get the designation. I took the first course earlier his month, classroom course in Fort Myers. I was very impressed and believe it was worth every penny.

Some of the reasons: excellent material taught by active professionals that really know what theyre talking about, the inspiration of meeting others active in many different aspects of the business, great spreadsheets for property analysis, access to some powerful software for analyzing markets for investment potential.

My goal is to complete the curriculum this year, and I can't wait for the next course. Well worth the money. And compared to what you would pay for similar courses in a college program, it's a bargain in my opinion.

@Account Closed I see what you're getting at - basically should you invest in a lower value area for high cash flow, or a nicer area with lower cash flow?

When we started out we looked almost exclusively at cash flow, and we took properties in almost any location. While it worked okay for us, I now prefer the approach of purchasing in better locations, even if cash flow will be slightly less each month. There are two reasons for this: 1) I find that the management is much less time consuming on a property in a better location (tenants are better qualified financially, and generally have better job stability). 2) When you buy right in a good neighborhood, there is usually more room to increase rents by renovating a property. You can appeal to potential renters who have extra discretionary income and are willing to pay top dollar for a renovated property. 

Having said that, you should definitely look closely at all of your operating expenses since there is much more than just a mortgage payment to handle when you operate a rental property. Make sure the rent will cover not only mortgage payment, but also insurance, taxes, management, ongoing expected repairs, etc. After all that, if the investment is good, you should still be putting money in your pocket. If you're not, then keep looking until you find one that works. The last thing you want is to have to come out of pocket every month to hold the rental property. 

Hope that was helpful and good luck - this is the best business on the planet!

@Drey Taylor We had a tenant fall asleep with a pot of grease on the stove in one of our properties, and burned the entire kitchen down along with causing significant smoke damage to the rest of the property. Thankfully nobody was injured.

Long story short, the tenant had a renters insurance policy in place. Her insurance company sent out a fire inspector and determined the cause of fire was the tenant's negligence, and they ended up paying for the damages. So to answer your question, insurance companies will typically send out a third party inspector to determine cause of damages to see which party is culpable. We received the payout in about 30 days and were able to rehab the unit and get it rented again promptly.

From my understanding of the situation, if the tenant did not have the renter's policy in place, our own landlord policy would most likely have covered it, but they could also have pursued the tenant to collect those damages. The whole process would have been much longer, and much more unpleasant for all parties involved. For about $100 per year, this tenant saved herself a ton of money and trouble.

Renter's insurance is now mandatory on all our rental properties, and I tell this story to all prospective tenants which clearly paints a picture of why it's a good idea! 

@Duriel Taylor if your duplex is owned free and clear then the simplest way to get the capital for the next down payment is a cash out refi. Plenty of lenders, including your regular big banks will do this if the property is in good shape and you have decent credit. 

If you can't do that, then wholesaling is a great option. So is getting your RE license and brokering some deals! 

I see you're local, so feel free to hit me up if you have any other questions. Good luck!

@Zachary Phelan if you want the best bang for your buck then I would use yellow letters over postcards, the response rate is MUCH higher, and you should be able to get some seller appointments quickly. Consistency is key. I would aim for at least a one year campaign if you really want to get the calls coming in - people trust the name they see in their mailbox every month over the one off mailer. 

I swear by @Michael Quarles services, so check them out. Once you make some deals, reinvest and branch out into other direct mail pieces - postcards and professional letters. Good luck!

@Diem Tran 

Replacing 4 roofs versus one roof will most likely cost you more, even if the same total area. It's just more labor intensive for the contractor.

Having separate small houses like that can work out nicely in a B+ or A neighborhood since adding the private fences, and perhaps a private patio/bbq area for the residents could really add value. However, my general opinion on that type of property is that it's more costly to run and more difficult to manage than a standard 6 unit building with everything under one roof. If it's in a questionable area where job growth and median income are low, then there's probably not a lot of room to really increase rents based on making the properties much nicer.

Regarding reserves for replacement of the roof - you are correct, that is not a line item included when calculating NOI. However, you of course should take it into consideration from the perspective of your cash flow, and figure your cash flow analysis with the reserve number included. When making your offer, deduct the cost of the roof and explain to the seller why you are doing so.

Is the property concrete block or wood frame construction? 

@Diem Tran I agree with quite a lot of what @Jeremy Tillotson had to say - you need to allow for vacancy (5% for well run MF properties in Miami right now), judge how much major repair needs to be done, and make sure you're including all operating expenses.

Having said that, if the location is anywhere decent in Miami, then an 8% cap rate is right on the mark. You only see true 10%+ cap in pretty rough areas. Cap rates vary greatly depending on which market you are in, so you can't really compare what one investor is getting somewhere up north or in the mid-west with what's available in Miami. So, you're right on the money about 8% cap being the norm here.

That being said, my gut reaction is that $420K for 6 units is on the high side, but again I would need to know location within Miami. $18K for a new roof on that size building is probably also a little high. We just got a first quote for a new roof on a 2 story 10 unit and it came in at $16K. 

Regarding income - most average neighborhoods in Miami you should be able to get $950-$1000/mo for 2 bedrooms, $800/mo for 1 bed, $600/mo for studio. That should give you $4800 or so gross monthly if you bring the building into good operating condition. 

Finally - what's the deal with 4 buildings on one lot? Are they all on one parcel? As in owned by one owner, taxed together as one property? If he is selling you just one building, will the land be subdivided so that it has its own parcel number and separate title? I need more info there, but that raises a red flag for me as something to research thoroughly. 

I'm local, so feel free to hit me up for more info or if you'd like a second opinion on anything. Best of luck!

Lisa,

I work in the area and would be happy to meet up with you. Send me a PM and we can go from there.

Thanks!