All Forum Posts by: Jason V.

Can we back up a second and talk about making cash offers over asking price for MLS properties?

What the heck is going on in Miami to make that something investors want to do? 

I really am curious, not critical - I guess if the numbers work, they work, but that sounds like a nightmare situation to me.

 The most important question in my mind is: what are you going to do for financing if you can't make a deal with your friend?

What I Learned About Life by Becoming a Landlord

Anyone else catch this on Popular Mechanics? Anyone personally know, or know of, the Author: Tom Chiarella?

I'm trying to figure out if the Midtown Plaza in Downtown Rochester he's talking about is the Western NY Rochester, just out of curiosity. 

Thoughts on the article?

This is the part that would worry me the most - when you put in what I would consider to be 'real' expenses (not the first 3 years after a full rehab numbers) and drop rents to what I would think would be realistic for any one of the recessions that could happen in the next couple of years....all of a sudden you're staring down the barrel of multi-million dollar triplexes that are bleeding money, and likely in a market that could make them tough to exit from at what you expect right now. If you can bear the losses month to month, and you have longer term loans, you'll be fine. Where a lot of people got in trouble before the recession was doing this with ARMs or commercial loans that are going to come due at a time when no one wants to re-up your loan, or is going to make you put cash in (that you won't have due to being cash flow negative) in order to meet their equity threshold. 

Is this going to happen here? Probably not, but my crystal ball is no better than anyone else's (and a lot worse than many on this site.) I also wouldn't worry too much about  having some 'dead' equity right now either - that might actually be the breathing room needed later.

And tof beat the dead horse some more: your expenses now are pretty much zero, which is what we would all expect. But you're talking 'A' properties in an 'A' area (at least one of which is a Historic property!) Think about how much your rehabs cost, then think about how much of that will be recurring to keep your AA properties at market conditions (so you can keep getting 'A' rates.) That 1%-3% of value for Cap.Ex. and modernization is a rule of thumb for a reason. Modernization doesn't come up a lot on here because it's an expense mostly associated with 'A+' properties (which most of us don't have.) And if your tax assessments lag, does that mean you'll be paying taxes on $2.5 million of value whend it's not worth that anymore?

Look bud, No one is telling you these aren't good properties, that they're bad deals, or that you did anything 'wrong' - most of us would be very happy  (myself included) to add those 4 properties to our portfolio. (I think - we still don't have enough information to know for sure.) But lots of smart, experienced, successful investors (myself excluded from that one) and a licensed agent with an MBA are all suggesting you need to take a hard look at your numbers, and prepare yourself for a lot higher expenses. It's not out of malice or spite - this is a community that wants to see people succeed. The realest risk probably isn't even to you: it's to all the brand new folks who don't have the advantages you had, and who are starting out in a completely different market than you did - and if they try to copy your example, it could go very, very badly for them.

I truly hope these properties are everything you think theyou are, and that they serve you well. Good luck!

 Are you just in the Plymouth market Joe? I feel like I remember you being all over the place. 

What percentage of rent are you paying? Are you doing percent of monthly rent, or collected rent?

Sounds like you have a great PM, but a lot of folks have had nothing but negative experiences.

@Mindy Jensen - Just take @Darrin Carey's post and make it the only answer to the FAQ. He hit that one out of the park: all the information, clear, and concise. I was trying to say some of the same things, just much more poorly. Great answer Darrin!

@Rohan J. - I currently live and invest in a County with one of the highest property tax rates in the country. It just requires a bit of a mental shift (and getting over the fact that even if you owned the property outright, you'd still pay several hundred, if not thousand, dollars a month to the government, which would otherwise be in your pocket.)

If the numbers work, they work. If you don't like the thought of so much of your monthly 'mortgage' payment going to taxes, well, you're in good company. One thing to keep in mind is that your 'mortgage' payment might not change much in a lower tax area, but the percentage of it that is taxes will be much lower (meaning you'll wind up with the same cashflow, but likely have a higher return due to increased equity buildup.) 

That's why nobody likes all you snooty Californians @Chris Mason :-P

But seriously, the state of California has over $400 Billion dollars in debt obligations currently, and is projecting a potential $2 Billion dollar budget deficit for this year. How confident are you that the property tax (and all of the other state tax) situation isn't going to change when that bill comes due? Especially when politicians cotton on to the exact situation you just described, with a bunch of foreign interests stashing money in the RE market? (often as more of a security play, or hedge against inflation, than actual 'investment') And with the current political climate, a lot of major cities run the risk of losing their Federal funding - which would further exacerbate the problem. I'm not saying I know what's going to happen, or even have an opinion on the policy. I'm just curious if you have concerns as an intelligent investor. 

@Account Closed - No sweat there buddy, maybe you should take it as a compliment that your deals are so good that people have a hard time believing they're real! :-)

For the record, if you had just told me you're a VP with Wells Fargo and run a website that charges people $2,000 to join a "group" in their area also looking to invest, it probably would have saved a lot of time. The more I look into you (and 'Income Properties Portfolio') the more I would be turned off as a potential student/investor. 

You and your partners could be the most upfront, honest, stand-up, legitimate company in the world - but nothing in this post, your website, or the public records for Goldschneider Property, LLC have made me anything other than more concerned. Take it as friendly advice that you may want to work on your marketing or message :-)

Good luck!

I'm really not trying to be a jerk here bud, but as someone who hasn't been around BP for all that long, you should understand that there are a lot of folks who come on the forums with posts like this (which are, frankly, a little hard to believe, especially with your claimed expense ratios, funky spreadsheet, and 'every deal is a grand slam' numbers, without talking purchase prices, etc.) You may just be the next Real Estate Superstar and be running a giant REIT in a couple of months - I really have no idea, but I think other folks on the forums should be a little cautious before using your examples for their own investment strategy.

I'm familiar with how to do a cash-out refi, but I'm curious who your lender is that you're able to do HELOCs on properties you're not occupying. I'd definitely be interested in working with them. Same thing about any lender who's willing to do traditional mortgages on uninhabitable properties. And BRRRR is a great strategy - it's getting the first one rolling that can be tough, especially if you bought your first property in 2007, right before the market took a nosedive. How'd you finance your first property? If you've got a lender that'll work on stuff like that, I'd love to get their contact info, if you're willing to share. Were you able to refi to get your cash out of the first right before the crash? Because that would've put you in an awesome situation: sitting on cash to spend when the sky was falling all around the mortgage industry. I wish I could've done exactly that - but hindsight is 20/20 and all that.

You say it's a 7 million dollar portfolio, or roughly $538k per unit, meaning one of your triplexes is worth ~1.6 million (which is probably about right) and it's in Cambridge which has a property tax rate of $7.82 per $1,000 - your taxes on that Triplex should be more than twice what you have shown on your spreadsheet. So either your spreadsheet is wrong, your tax assessment is wrong (and you're going to spend another $7,000 a year on that property in taxes) or you're overestimating the value of your property. My guess is that your tax assessment hasn't caught up yet, and your tax bill is going to wind up being closer to $15,000 than the $5,000 you're showing (but hey, not really my market - that's just how I'd evaluate it if I were going to buy it.)

Like I said - this may all very well be 100% true and accurate, but when you slide in that "I'm working on something bigger and looking for investors" line a couple of posts in, the alarm bells start going off in my head. So forgive my skepticism, if it's misplaced - but there have been a lot of posts on BP lately about new people getting suckered on deals that had a setup very similar to this one. And I would much rather risk offending someone than watch other folks get played on their first "deal."

Not to be the downer of the group, but your numbers show you're running ~10% 'total' expenses on 3 out of 4 properties, and ~20% on the other. (And if I had to guess, it looks like some of your 'hard' costs are estimates/rounded numbers?) 

If you were to ask around on BP for what a typical expense ratio is for small multifamily properties, averaged out over longer periods of time over a wide range of markets, you'd probably get answers ranging from 45%-50% (including everything you've shown here, plus all of the big killers you're not.) Discount self management, and you're still realistically looking at 35%-40%, and if I know the markets you invest in at all, I'd wager it'll be on the higher end (older properties? Expensive areas with expensive contractors?)

Even at the higher expense ratios you're still doing well, but I'd also be curious about what your returns are looking like - how did you finance the extensive renovation work? For that matter, how were you able to get bank loans on uninhabitable properties? Did you buy them with cash or hard money, use cash or hard money to rehab them, and then refinance to get your cash back out? Or did you go the traditional money down, roll in the rehab route? 

I mean, hey, if you were able to do all this on bank money, and are at a good point to be doing all of your own maintenance and management, and don't have a ton of cash tied up into it, more power to you! Your calculated cashflow is a good living for doing nothing more than managing and maintaining 13 units in A areas. Congrats! 

But if you're not sitting flush, I would be starting to look at your numbers a little more conservatively (i.e. how any potential buyer or lender would evaluate the same properties - which will be closer to 50% expense ratio) and probably setting aside a fair amount of that 'cashflow' for future expenses, and to be able to show liquidity, just in case you wanted to refinance, or go buy another property. 

Great job!