All Forum Posts by: Steve Milford

@Laura Yoerger

If the solar panels are leased, it creates a lien on title as a financed item.

Talk to a lawyer, but I don't think you can pass it on. If it was me, I would just accept it as lessoned learned and look at firing this PM. I looked to hire a PM so I could be hands off last year. All quotes I received was for rent lower than I wanted and in fine print, they were just messenger anyways. I chose to go with cozy.co, charge the rent I wanted and use a maintenance co for repairs as they come up. For any lessons learned like you have, then I will just increase rent next time around.

@Steve Emling I use Cozy and allow po box for money orders, and other. Rent is $50 cheaper per month if tenant uses Cozy > great training trigger, no complaints yet lol.

@Brian Jung These %'s are useful if you don't understand the numbers like the back of your hand, that's it, IMO. I look at it like this... Any property I acquire needs to cash flow positive as soon as possible, ideally day 1 after any rehab, so that's all I really care about even if I rent it a little below market rate. In year 1, if it cash flows a little, by year 2 or 3 it should be cash flowing more as I increase rent. The screening of the tenants and the management of property is a lot more important to me. I see many investors sit on the sidelines and miss out on good opportunities because they are more worried about a % than raw cash flow, even in this market.

Be aware, I know nothing of the Cincinnati market aside from what I quickly gathered from Zillow. My questions/statements are:

1) In what time frame did you flip those homes in Cincinnati?

2) If you want to pay cash for rentals initially, why reverse strategy and then leverage them? Why not just buy them leveraged in the first place? And then as you stock-pile cash, you can buy more leveraged. 

3) You want $10k per month in salary reserves? 

4) Can you find enough flips for the prices you want?

5) Why not find something here that you can flip or rent, and then take the appreciation with you when you are ready, or 1031 it when ready? 

Appreciation is roughly 6% in Portland area and 9% in SW Wash from MLS, and projected to be approx 7% in Cinn. As soon as I build my next 15-20% down, I will be buying here again. I understand that the price point may be a deciding factor toward Cinn.

6) Where is your risk tolerance at? 

Over time I have found my risk tolerance was pretty low, and no matter how much a part of me wanted it to be higher to invest, the battle inside my head kept going around and around. It took me a while to be OK with it, and that only really happened once I became a Realtor and built another income stream in addition to my W-2 position (I originally wanted to quit that W-2 position too). Then I built another income stream, and another. Now I am totally at peace with my risk tolerance, because I realized it forced me to diversify. Now I no longer ask others, "Is this the right time?" Now I ask investors I meet that are apprehensive, "Do you want to carry a note to me? Because I am ready to buy again!" (And I let the MLS do the work of finding my deals.) What does my W-2 job mean to me now? In addition to an income stream, it is health insurance for my family, and perceived "lender-stability". That's it - it is not who I am.

7) Is this analysis paralysis? 

IMO, you should know the numbers like the back of your hand and know your ratios for peace of mind. Waiting for what if, when, is just paralysis. I.e. All I really care about is that my is that my rent-to-debt service ratio to be 1.4-1.65. The price is only a factor as I build the next down payment amount.

@Faith Mukuru 1) I would advise you taking out the 3rd unit's rent for the first year. It is wrong to assume you will have that income just "to make numbers easier" even if you expect to rent after 1 year, because the number it projects is wrong. 2) A seller assist of $6,000 does not equal closing costs. They are 2 different things; yes, one sometimes covers another (especially a year ago, now less so). Get closing costs from your lender. 3) If you offer $287k, your purchase price is $287k-down = loan amount. The closing costs are an amount that you don't have to bring to table at closing. Not counting #3, with correct income you won't even break even for 3.5 years. My suggestion is put the correct numbers into the calculator, and then your answer will come to light.

Be aware, imo any deal is almost always a good deal in hindsight if I hold it long enough. Someone once told me, if the deal isn't a little crazy good in my favor, then I am not asking for enough. So I follow that, purchase with my financials in order, and purchase as if I needed a place to live. Imo, worse to get analysis paralysis waiting for the "right time'" because there is no such thing.

I offer service 7 days a week, but only allow same day appt requests with current clients and schedule family time. 100% prevents running around with my head cut off. Never had a client get cranky when I say, "Oh that time is not avail b/c it falls in my scheduled family time."

Chris Mason has it right. I offer my properties as if they are long-distance. To all applicants, 1st, credit check, income verification, and reference check. 2nd, no animals allowed which are restricted by insurance, as stated in advertisement. Pet deposit required. 3rd, renter pays all utilities, in advertisement. 4th, city ordinances must be obeyed, in advertisement. 5th, no partial payments allowed to gain entry, in advertisement. When my last unit came up for rent I received lots of stories. Everyone got the same answer, if your request meets the advertisement, sure and then I said, "Here is a link for credit application, income verification, and references." Result, few applicants. The fact that you have an application process and list req in advertisement will screen out many by itself. I had requests for many dogs and cats, weird roommate situations, far away co-signers though none filled out application.

@Justin Petrides Just to make sure I got it right? You are going to discount your price by half (of market rate)? If your doing it as a business, you need to offer that discount to everyone. In my real estate transactions I now require everyone to sign a contract so they know its all business, and I use contracted services for processes. The way I look at it, that way there is no confusion and expectations are spelled out. Now, for any friend or family that have signed there has been no issues. Before, I didn't require the contract and it was a hassle.

@Katie Huynh

Ok I took at look at this...here is my 2 cents, and my evaluation (a little differently).

Considering the area and going rents, a lesser decent rent at that property is about $1,800, minus (-) $272 per month for taxes, -$200 per month for minimum profit, - $83 per month for expected insurance = gives me a budget of $1,245 in loan + other costs to work with. 

I use standard costs for property management fees of 10%, vac 8%, cap repairs 8%. If I don't have those same costs, i.e. if mine are less, then it is just more profit in my pocket. To me it it is a cost of doing business.

Now let's look at the current price. Considering other homes sold recently in the area, ARV is $285k-$300k, so a price of $270k is already discounted from a Realtor/listing perspective.

I don't toss in repair and rental business costs, until the very end, because that just cuts into my profit. I call them "get up to speed" costs.

Break-even purchase price vs loan costs including PM, vac, and cap rate work out (for me) @ $240K with 25% down, @ $225k with 20% down, @ $210k with 15% down.

If I consider $5k for get up to speed costs (and that the roof is good), that still means I break even in 2 years +/-. 

Evaluation result (took me about an hour): Just looking at the numbers, it's a no-go if I cannot get it for $240K or less without using contractors to my advantage during the inspection phase. How could we make it better? Since I am Realtor, depending on the purchase price, I would use that income against my repair costs. Then I would break if I rented it the first month I owned it. And if I got a even higher rent, that would help too.