All Forum Posts by: Matt Lefebvre

COVID-19 has a far-reaching impact on the economy and is impacting the world of real estate. Going into the month of April, I've heard many landlords bracing for the worst in terms of their tenant's ability to pay rent.  Instead of gauging how rent collection has been going anecdotally, I decided to survey a variety of property owners and property managers to understand what rent collection has been like in the month of April.  I separate my results by "property manager" for when I surveyed a management company that oversees multiple owner's and "property owner" for any landlords who run their own management of their own building.  Here are the criteria I used and the questions I asked in my survey:

• Any property manager needed to manage a minimum of 100 units to ensure a good sample size
• Any property owner needed to own a minimum of 20 units to ensure a good sample size
• Only apartments were considered in this survey
• I called on April 6th asking how many tenants have paid IN FULL
• Only properties in New Hampshire were considered (I encourage people to do this in their own state! The results are interesting!)

Now for the numbers...

• Total number of units:  1,605
  
• Number of units managed by a third party:  1,376
• Number of units managed by the owner:  229
• Weighted average collected by a third party manager:  80.74%
• Weighted average collected by the owner:  86.03%
• Blended average collected:  81.50%

Most property managers surveyed reported either offering a $50 rent concession is rent was paid in full by the 5th of the month, or offered to waive late fees if someone lost their job or had their hours cut.  Many private owners offered no concessions at all but often stated that they would be flexible on collection and late fees for their tenants if they needed it. Many landlords (managers and owners) stated that they had much lower expectations for what percentage of rent they expected to collect in April and were pleasantly surprised by the results of their rent collection.  Almost everyone has stated that their biggest fear is May rent collection as that's the month where any money that tenants had saved up (assuming they have an extra month's worth of living expenses in their bank accounts) will be completely gone if they lost their job and the stimulus is not enough. 

Has anyone else done a survey like this?  I'd love to see other's findings controlling for similar variables above.  

Hi @Akil Kariym-Bey, going back a few years here so I don't have the scrap of paper I did my math on :)

The original poster here didn't give us the actual numbers that were supplied by the seller, so I performed my own estimates.  In my market (southern NH), the average ratio of gross income to operating expenses is about 50% (known in BiggerPockets terms as the "50% rule").  So if we have $75,240 in annual income, multiply that number by (1-0.45) 0.55 to get an estimated NOI of $41,382. Basically, I'm just assuming the expenses the owner is stating are not fully accurate and that there are additional "hidden" expenses here. The owner claims that the total annual expenses are $9,790 which seems so low that they must be missing a few line items.  For every property there are additional costs that everyone should budget for including:

R&M (repair and maintenace), CapEx (capital reserve for when you have to make major improvements), vacancy, and property management fees.  I'm assuming the owner of this property is not accounting for any of those and is only including their annual property tax bill and annual insurance bill as true operating expenses.  I might have been slightly conservative in my estimates, but typically I allocate 5% of EGI towards R&M, 5% towards CapEx, 8% towards management, and 5% towards vacancy.  That means that about 23% of your total annual income are estimated costs that you might be able to leave out when talking to most buyers but definitely should be budgeted for by every potential owner.  This would be an extra $17,305 of expenses.  

Don't take the owner's numbers at face-value.  Always check it against your own understanding of the numbers in the market.

Hi @Joe Cote, thanks for posting here on BiggerPockets! Great to see you taking steps on your real estate investing journey. Admittedly, its a tough market right now to be getting a solid property to BRRRR. While NH is cheaper than most places in Massachusetts, the prices are still high and finding the right deal can be tough. Make sure that when you're running your numbers, you're being conservative on the ARV of the properties you're acquiring. Rehab is always going to take longer and be more expensive than you first think, so budget an extra 10% to whatever you think its going to cost and tack on a few extra weeks for each step of the process (relocating current tenants if they're uncooperative, completing renovations, completing the refinance process).

Best of luck with your first investment and always happy to give my two cents on a property you're looking at if you have questions or need a second set of eyes!

@Nicole Varasteh you definitely need to find a different bank.  I've only had one bank blow up a loan before on the basis of lead paint inspections and abatement and I haven't worked with them since.

I echo @Joshua Tessier 's suggestion.  NBT Bank has been my go-to for multifamily loans recently.  Feel free to PM me and I'll send you over my loan officer's contact info.  I've also worked with Enterprise Bank, Northway Bank, and St. Mary's Bank successfully as well.  

@Perig Vennetier if you are looking to own real estate back home in the US but receive a very consistent amount of cash flow year over year, I'd encourage you to look more into the commercial side of real estate and purchase a NNN leased investment. This can be a very hands-off type of investment property in which either a building is leased to either a single commercial tenant or multiple commercial tenants, and the tenant is responsible for ALL operating expenses. Many large corporations lease real estate on 10YR, 15YR, 20YR, or longer leases, which locks in their rent payments at a fairly low rate and provides security for you as an investor to own a consistent piece of cash-flowing real estate.

There's a nice BP article put together by one of the members here: https://www.biggerpockets.com/... that hopefully gives you more insight about how this works.  

Hi @Christi Nicolet, congratulations on getting your license!  My primary business revolves around working with real estate investors with only a small percentage of my business being strictly residential (representing friends/family usually in buying or selling their primary residence) or a slightly larger percentage which is commercial (representing landlords in renting vacant commercial spaces).  Initially however, I cut my teeth by working on a high-producing residential real estate team.  At the time I joined them, they were selling about 60 houses a year and I ended up joining on and being the guy that went to all the showings, inspections, appraisals, appointments, etc. and learned as much as there was to learn about the process. 

Your main priority as a new agent should not be to learn specifically about real estate investing, but it should be to understand the process of a real estate transaction extremely well.  Having the investment knowledge is important as you continue to work with more investors, but priority number one should be learning how to be a good agent.  I'd encourage you to seek out a larger brokerage that offers strong training opportunities for new agents and try and find a mentor within that brokerage that works more frequently with real estate investors as a supplement to your knowledge.  To continue learning about real estate investing, I'd encourage you to attend local meet-ups to hear speakers, network with other investors and agents, and to get a more local look at real estate investing in your market.

Best of luck!  

@Eric Monkewicz pet deposits are NOT allowed in New Hampshire.  The following comes directly from the NH Department of Justice's website:

"New Hampshire's law on security deposits (RSA 540-A) defines a security deposit as any money that a tenant gives to his or her landlord other than the monthly rental payment. The name given to the payment - cleaning deposit, last month's rent in advance, etc. - does not matter. The amount is a "security deposit" if it is anything other than the monthly rent.  
In New Hampshire, a landlord who owns more than six units can ask for no more than one month's rent or $100, whichever is larger, as a security deposit. The landlord must keep security deposits in a special escrow account or post a bond with the local municipality to secure repayment."

This means that you cannot keep a pet deposit because in the eyes of the law, a pet deposit = a security deposit.  A security deposit cannot exceed one month's rent or $100... whichever is greater.  Just to make sure the part about "a landlord who owns more than six units" is clear, the website further clarifies the only exception to the above rule are the following three circumstances:

"RSA 540-A:5 defines the legal relationship between landlords and tenants so that both will be treated fairly. It applies to all tenants except:

• Tenants who rent a single family home from a landlord who owns no other property;
• Tenants under the age of 60 who live in a building with less than six apartments and whose landlord lives in the same building;
• Tenants renting business, vacation or recreational property (but the law may cover some mobile homes and mobile home spaces)."

So you would have to LIVE in the same building as the tenant for their to be any exception to the security deposit law (as long as its less than 6 units) and as long as you continue living in the building, you meet that criteria.  As soon as you move out, you no longer meet those exceptions. 

In a nutshell, charge a monthly pet rent because pet deposits are fees are not allowed in NH.  $50/mo/dog or something to that effect should cover you if you so choose to rent to tenants with pets.    

Welcome to BiggerPockets @Jonathan Killam!  I agree that much of the knowledge that is "sold" out there (through books or seminars) tends to be very salesy and motivational, rather than actionable content.  Much of the knowledge here on BiggerPockets is far more actionable and in line with what you are looking for to help get you involved in investing! 

As you grow a network of people you work with, BP can be a great resource for some of those connections, but also I'd encourage you to attend local meet-ups.  There are events that happen monthly in the Seacoast, Nashua, and Manchester here in New Hampshire.  I would encourage you to still grow your network of contractors as well even if you feel like your family has you covered in that area.  I'm good friends with (and family with at least one) contractor and I started getting estimates on a mainly cosmetic rehab project.  Every single estimate was coming in right around double what I had budgeted for.  After weeding through a lot of people, I finally started asking some other investors who these and how they keep their costs down... This connected me directly to some subs (flooring guy, painting guy, general contractor who specializes in apartment rehabs) that I've had to do a little management of, but has gotten my cost back within my budget.  Moral of that story, keep getting second opinions until you're satisfied that the price really is "the price".

Best of luck with your investing and feel free to reach out if you have any questions about the market! 

Hi @Liz Murphy!  Are you talking about an association management company (so they deal with maintenance, etc.) or a property management company (collect rent, process evictions, etc.) for a 137 unit complex of condos with one owner?  

Hi @Janice H. welcome to BiggerPockets! Happy to hear you've started looking around and trying to get your first investment under your belt. Unfortunately, the reality of the Northern MA / Southern NH is that SFH as rental properties are very difficult to make the numbers work. Home prices are very high (its nearly impossible to buy $100K or less homes here) and the cost of a mortgage is very close to what a home could rent for, so cash flow positive is off the table. Condos are a more viable strategy and there are some associations where the numbers work better on as rentals, but you might not find the "2%" rule even looking for that type of property. Numbers start penciling out a little better the more units you have under one roof.

Best of luck with your search and feel free to ask questions if you're ever looking for advice or analyses!