All Forum Posts by: Steven Gesis

Currently the owner is out of state and country most of the time. The rent is under market, the owner pays for utilities, and a hefty management fee. I plan to either sub meter all utilities individually or just have the tenants start paying. I will also be managing the property myself to save the management fee and run the property more efficiently. With a slight increase in rent, tenants paying utilities, and me managing, it will be a 10% cap property in no time. I currently have a 75% LTV option given by a few different local lenders. The property is one of the only "C class" properties left in the area. It is located is a rapidly growing suburb of north dallas that was once a small county community when the property was built.

QUESTIONS: 1. The property currently has window unit A/Cs. On a property this size (12 units), what is the typical cost to add Central heat and air to the building? I believe this will greatly increase curb appeal, tenant experience, and overall value of the property.

2. In textbook value add properties- what can I expect as far as a refinance in the future? I have the option to finance 50-75K of rehab money into the loan to start. I hope after 1-2 years to refinance the loan to pull out some of my initial investment.

3. Those who have initiated tenant paying their own utilities: what works best as far a time frame and rolling out this process?

I have Construction experience as I own a construction company that does roofing, remodeling, and I do some flips. I have a few years of management experience and feel confident I can easily add this property to my portfolio.

Thanks in advance for any input!

Congrats!

Upgrade units, make them better than any other unit in the area, raise rents substantially, maybe you will not have 1000 renters, but you will find 12 that will be willing to pay a premium to live in a better condition, I LOVE VALUE ADD (if you can find it) - seems like you found it. Sounds like you have the right experience to tackle this.

Utilities - all my buildings are metered individually for min. electric - water, we have a monthly standard fee and mostly No Gas (also the buildings with Gas Service are metered to the tenant)

You can also consider upgrading the through the wall untis to a nice new white sleeve and a new unit if necessary - it will change the look and feel - complete removal will require as you know substantially more exterior work - again have done this also on a building it came out ok, I improvised and infilled with Hardie board on exterior, insulated, etc and painted exterior (red brick color) - it was less expensive than doing a ton of masonry.

As you know you will need to bring some additional services to meet your HVAC need, it may outweigh the return. Perhaps a simple upgrade of all the sleeves and some in-unit amenities may be a better ROI (example: USB Outlets in all areas)

Here is a sample of a 40 Unit Building I am in the process of flipping over - meaning purchased this asset in a C area - average rent is $425/unit for a 500 sq. ft. apartment, with new renovations new rate $649/unit. -Existing tenants on month to month have an option to move to a new premium unit and sign a termed lease.

New Flooring
USB Outlets
New Bathroom
New Common Area
Quality Vertical Blinds (Uniform look from exterior)
New Concrete Driveway and Parking Area
Garages Available
New Tile Tub Surround
New Light Schedule
New AC Wall Unit Sleeves
New Outlets and Switches
All New Door Hardware
New Kitchen Sink and Faucet
Much More......

Common Area: BEFORE & AFTER

BEFORE & AFTER UNIT

Hope this helps - much luck with your investment

5 Votes

Originally posted by @Tone Church:

@Steven Gesis - I am not sure. From what I understand, at least in the state of NY, the seller is not required to disclose this, it is the buyer's and the buyer's agent's responsibility to check whether or not it is in a flood zone.

Interesting, it looks like the bank found this issue on your behalf - should you consider paying a smaller commission to the agent if they failed to complete the due diligence on your behalf as the buyer?

1 Vote

Originally posted by @Weston Harding:

Wow! It is amazing to see all these great New Years Goals for 2018!

@James Flores Would love if you came to one of our meet ups we have a lot of BP members come to talk and connect on mile stones just like yours. It takes just one deal to get started and then the ball starts rolling from there!

@Joe Vastola How is the Atlanta market? I am started to explore the ST. Louis market a little myself.

@Izabella W. Thanks! and totally agree, it is so important to surround yourself with a team of people to help you gain more knowledge and experience. You wont be able to master every aspect of real estate but get the right group of people together and you can! My team specializes in the multi family market and we are top 1%, if you need any help my team and my contacts are available to help!!

@Andy Much Are you going condo route or thinking of getting a 2 flat?

@Sergiu Ionita Great goal man! Best of luck!

@Steven Gesis Wow man, way to go! Awesome goal, are you're investments in the Cleveland market?

@John Warren 33 more units, you can do it John! Are you looking at larger commercial buildings or smaller multi family buildings? Are you only looking in those 2 markets? We have a lot of off market properties as well as can keep you in the loop on to help you're goal!

Thanks, hard work can get you anywhere :) - 16 hours/day 6 days/week - non stop you can meet any goal you set your sight on. Yes, all my investing is in my hyperlocal region, however this year I will be doing some more far-reaching investments, as I preach to out of state buyers, I would like to practice what I preach!

1 Vote

Chicago, Illinois

Originally posted by @Abby Paulson:

A fellow investor recently said to me, "I want a 60 year old renter because they're stuck in their ways and I want them to be stuck in my home."

If this is the target renter, you'd have to have single-story homes without stairs, which is certainly something to think about before buying. With the 60+ population growing as baby boomers get older, this could be a fairly good strategy at first thought.

Curious to learn what others think of this concept. Please share!

Equal housing opportunity - however, once someone told me many years ago when I was looking at large multifamily in a low-income neighborhood, if you redo the building you should also market as a 65+ - because they stuck in their ways, because they wont ruin your place - I don't know never tried, I just concentrate on being thorough with whom we are placing, if you are patient and disciplined you can be rewarded by simply being diligent.

1 Vote

Originally posted by @Yuriy Skripnichenko:

How did this weather affect your properties? Or why does anyone like winter?

Besides all the snow that we are getting this year (here in Philly we had 5 snow storms and super low temperatures, 25-year low).

I got my first maintenance request on January 3rd. Broken sewage pipe in the basement. Flooded with …you know what.

January 5th my second maintenance request came in for “no hot water in the bathroom sink”. Frozen pipe in the crawl space in the basement.

January 7th two more: frozen pipe and as a result broken washing machine valve leaking all over the laundry room. Which is above another crawl space. In addition, different building tenant reported “no water in the kitchen sink”. Same issue.

So 4 brakes in one week. Not easy to find a plumber willing to work in this temperatures and conditions.

Moral of the story: always have reserve account for this type of expense AND make sure that the pipes in your crawl space are insulates as well as the walls and floors to avoid similar brakes.

My friends ask: aren’t you sick of all your tenant’s issues and “crap” you have to deal with? And the answer is no. It is part of the business that I have to deal with.

Anyone have other stories to add?

Its part of the business - it sucks getting plumbers to commit in tough weather. Have a new multifamily building 40 units just acquired, just ramping up to gut and renovate the whole thing and turn over all the existing tenants, have blow outs daily this past storm, (4) days in a row - lucky for me, I have a large team in place to be able to quickly address and mitigate the ossue, but I remeber the days when we were jsut scaling and getting moving and these problems seem detreimental, now its regauylr business, it all has a solution, not always cheap, bnut you grow from it, you learn from it and you build an empire with the knowledge.

1 Vote

Originally posted by @Dave Mosher:

When analyzing a deal, how much cash flow per unit do you aim for? I am specifically thinking not just after expenses, vacancies, amd repairs but also after any mortgage. Does this differ for you if you are analyzing a multi family vs. a single family? Thanks,

-Dave

Dave big difference between multifamily (40+ Units) - versus single family - Whats important to you SFR or Multi? Whats your strategy? How much do you want to make and how much are interested in putting in. Input = Output, in this case, our two variables will be asset class and location - then you can drill down from that point. Many more factors go into this equation, but the point is it just depends on the deal and whatI need to see in that deal for it to make sense, and how much heavy lifting will be required, is the juice worth the squeeze :)

1 Vote

Originally posted by @Account Closed:

Hi BPers,

I'm in the processing of hiring my cleaner for my first property. Does your house cleaner normally give you an invoice after every clean? Probably for your records, it would make sense to have invoices for all of the cleanings. But if your cleaner is going to clean every week (just an example), it just seems excessive for the cleaner to be preparing so many invoices. What kind of set up do you have to pay your cleaner?

Thanks a bunch!

Helen, keep it simple have them invoice you once or twice a month. Yes, you want the invoice for your records, in-fact you want every invoice of every activity for your record, the better and cleaner your books, the simpler and faster you can keep scaling and growing. You need a SYSTEM (Save your self-time energy and money) - just have a standardized invoice submission policy for every task no matter if cleaning or etc.

This has another interesting component, I always think if the "cleaner" expects you to pay every time and you take the time and effort to make complete the transaction, would not be justified to ask the "cleaner" for a small administrative commitment from them, as that is there business and they should treat it as such. Everyone wins, everyone grows professionally.

0 Votes

Originally posted by @Mary Ann Casey:

Thank goodness for BiggerPockets! Hoping you can help me with an issue I have on a tenant-damaged rental property.

The property is in Indianapolis IN and managed by a Property Management company; I live in California. The PM screens and selects tenants, manages the property and it's tenants, performs any evictions, etc. I receive a monthly owner statement.

The property manager recently evicted the tenants at this Indianapolis property for non-payment of rent. The tenants were there less than a year. I received an estimate yesterday for the damages to the place and work needed to get it ready to rent again, $14,400. Yikes! He's going to get 2 more estimates.

The property manager explained to me that the place was trashed by the tenants. When he went to the property after the tenants moved out, he put the key in the front door and it caved in (the top two hinges were either taken off or busted). He also said there are 4 broken windows, all interior doors have been removed and a couple of them were nailed to the wall to cover the busted windows, and a couch was half way out another window. The new carpet that was installed last year was unsalvagable, all the blinds are damaged, there are holes in the wall that require re-sheetrocking, lights are damaged, etc.

The property manager says there's really no recourse we can pursue from the tenants that would be worth our while. I questioned this, from a back-rent-payment and a damages-payment perspective, and he discouraged my taking any action. He said he thinks drugs/meth was involved, and we're not likely to ever see a dime of restitution from the tenants since they have no money.

What are our rights as landlords in this case? What process do you think I should follow to get a resolution on this issue?

Thank you BP community!

Wow, sorry to hear about that. In Ohio you would need to pursue this post-eviction and get a second cause judgment, send it to collections, try to garnish wages. Have had this happen to me and yes, also some managed homes, it's almost inevitable (physics) - in my world, this is an extremely rare situation, but this situation can and has existed. Personally, I have had tenants move-out and take the furnace, the toilet, hot water tank, A/C and appliances with them, and we vetted them and checked them up and down, even had this happen many years ago to a shorter term tenant placed by an insurance company because their personal property burnt down. Its just wild what kind of stories come from situations. Beyond the basic vetting, personally and professionally I require the background, multiple month coverages, high credit score and in many cases just as a contingency plan a co-signer. If the people responsible were the only ones on your management agreement, you have to pursue them. Even the best of the best teams, PM, operators, hotels, trailer parks - have this occurrence in some capacity or another. The next big question is how do you overcome and strengthen your borders, for this not to happen again.

2 Votes

Originally posted by @Tone Church:

I am under contract for a two-family property in New York State. My deposit check has already been cashed and the appraisal was just performed for my FHA loan. I got a note from my lender today letting me know that the property is in a 100-year flood zone and I need flood insurance. This is the first time I am hearing about this.

I got a quote on a policy from my insurance agent and it will cost me $3,300 per year, or $275/month, which eats substantially into my rental profits. Any advice anyone?

How was this not disclosed at the sale, does the current owner? not have flood insurance? I am fairly certain in Ohio on disclosure form owner must define if it is a flood zone.

I have been once pleasantly surprised by this situation, the owner had owned the property outright, they were not aware they were in a flood zone, when I attempted to purchase using financing, the lender sent us a notice with this similar mandate, needless to say, we did not pursue the transaction further as the insurance premium was absurd.

Conclusion, if you pay cash, you won't have to buy the flood insurance :)

1 Vote

Originally posted by @Omid A.:

Hey BP,

I've yet to post any of my projects on here and they happen to be my favorite type of posts to see from other members so I figured I'd share one. This is a flip in Tigard, Oregon (suburb of Portland) that just officially closed today. I bought it in August for $262,000.00, put about $60-65k into it (still need to tally up the final numbers) and sold for $410,000.00. At the time of purchasing this property, I was running a little low on capital so I funded 100% of purchase price plus most of the rehab costs so my holding costs are slightly higher than usual.

Unfortunately, this is one I don't have the before photos for but we did new windows, garage doors, fencing, refinished the hardwoods throughout, completely updated the kitchen and both full bathrooms, all new doors and millwork, all new fixtures, new carpet, new furnace & water heater, and the list goes on. The project took about 8 weeks from start to finish so it was a relatively quick one.

The deal was brought to me by a wholesaler in the area and he made out nice with a 5-figure assignment fee as well. :)

Awesome! Congrats! Love Success stories, thanks for sharing. Its always fun to see what others are doing and where try to find the common denominator in every market. You did a nice job with the home and finish selections, the backyard living space looks awesome. Most important you have nice photos (Also very important)!

0 Votes

All Forum Posts by: Steven Gesis

Steven Gesis has started 30 posts and replied 866 times.

Post: 12 unit value add deal - looking to make some changes

Post: Surprise! I need $3,300/yr flood insurance.

Post: What are you’re Real Estate goals for the New Year? Mine are...

Post: Targeting the 60+ Year-Old Renter - Good Idea, Bad Idea?

Post: How did this weather affect your properties?

Post: What is your goal for monthly cash flow after mortgage?

Post: Do your cleaners issue you an invoice?

Post: Tenant Causes $14k Damage to IN Rental Property

Post: Surprise! I need $3,300/yr flood insurance.

Post: SOLD! $45,000 profit to start the New Year.