All Forum Posts by: Travis Lloyd

Get your permanent financing (or at least 10 year fixed rate) financing in line. 10 years should be more than enough to see you through fluctuations in the market. Once you have that fixed, you know what you need to maintain.

There is something of an inverse relationship between interest rates and rentals. Rates go down, SFH purchases go up, and rentals ease. Rates to up, SFH purchases go down, rentals increase.

Run your model and 60, 70, and 80% vacancies. Can you cover expenses and financing? Find the break-even point. If it is not in the low-mid 60s, consider increasing your cash in the deal to reduce financing costs accordingly.

People that lost millions in 08 did not do so on large multis. They did so on spec houses, SFH, mcmansions, etc. And even if they did, had they been able to pay financing costs to "weather the storm" they would be sitting pretty right now.

Hey Lesley, great to see another investor in the area! Fairfield is a great market right now, and rentals are going strong too. I spend a lot of time looking in Fairfield (own one flip now, closing on a second early August). Concerning a duplex in Fairfield, you are correct that everything is expensive, and while you could look in a less expensive area - they will come with a) higher taxes b) lower rents and one could make the argument for c) more difficult tenants, though c) is not necessarily true.

I think for our area, Fairfield offers a very steady equity build, as tenants are traditionally more long-term, and pay great rents. If you were going to house hack for a few years, it would be a great place to do so.

With that said, I wouldn't rule out Black Rock (certain areas). And I would absolutely avoid anything in a flood zone.

Lawyers are awesome - they spend their time dreaming up nightmares that the rest of us never have to face, and then planning to counter or mitigate those nightmares, all while we sleep peacefully. God bless lawyers (the ones on my side at least!).

I cannot say that an LLC has saved my a$$(ets). I can say that I've known someone for whom an LLC did NOT save him - because a really good attorney proved that he had pierced the corporate veil himself by commingling LLC funds with personal, and thus his personal funds were not harbored. Still kept his other assets though - so perhaps that was a saving via LLC?

Hold on, you're overseas, "self-managing" a SFH rental that is taking in a rent that you're happy with. Then the market in the area goes up and you want to raise it? Lets look at it this way: when the market drops, are you going to lower the rent to your then-current tenant? If you have found a tenant who pays on time AND takes good care of the place - all while you are out of the country, I would say stop looking at the 'other side of the fence'.

Lets say you hire a management company, and they charge their monthly fee, plus they are going to charge you 1 month's rent commission for finding a new tenant. Calculate how many months at the new rent it would take to break even given the monthly fee plus the commission? Then add in a vacancy rate - because you don't know the new tenant and how reliable they will be (maybe that is half a month's rent? One month?). Then subtract some touch up painting and minor repairs that the maintenance company is going to insist you do in order to get that market rent.

By the time you break even - rents could drop. Your fancy new high-paying tenant leaves to get a better deal, and you're back looking for a tenant at the old rate. Some things are worth gambling on, but you can't put a price on a good tenant who takes the stress off of you while you're not even in the same state, let alone the same country.

Just my 2 cents.

Of course you CAN do it, the question is do you WANT to? It is age discrimination, so the risk is a lawsuit. You could say no white / black / green people too, and the risk is the same. The question comes back to how willing to face a lawsuit are you over 2 years of age? I just rented to a 19 year old full-time working night-school student who is so much more responsible than their age, and I chose them over a 30 year old who just didn't feel right. 4 months in so far, but not a single problem. One of my better tenants.

Almost bought a house with one of these. After talking with some people from the town, they had a permanent easement for the line, and it restricted any future expansion due to its proximity to the home. I walked away because I was worried about resale. Remember that everything that we as investors hear as a potential problem, home-owners hear as a MAJOR red flag! Keep looking

We bill rubs at 90%, as a general rule. Some states have laws restricting RUBS from being income generating for landlords, so to be on the safe side we simply bill at 90% per property. Now collections? Well that goes along with the collection rate of rent. So actual comes in closer to 80%.

Agree on a price and get her to sign a contract. Once you start poking around its amazing how fast word will spread. Include a title search in the contract. Explain to her that title searches are standard, and necessary given her situation. She will be fine

NYC in terms of valuation is no different than any other area in the world... when you're talking about the MATH that goes into those valuations. You still calculate a CAP rate, and cost per door, and NOI in the same formulas as any other place.

BUT? There is a difference. There is a big difference. In NYC there are factors that come into play that do not come into play in most other areas, things that you need to figure out and plan for, but have no spot in any of the "RE Analyzer" programs and excel sheets you will find readily available. As soon as I say this, there are going to be people chiming in that they have encountered similar situations, and I'm sure that's true! It is the COMBINATION of all of these additional factors that create the perfect storm that is NYC real estate. Navigate it well, and it can be a lot of fun!

I will preface the list below by saying that I have never even been involved in 2/3/4 unit properties in the city - so perhaps they are more akin to other places. My experience is in repositioning over a dozen properties in 4 of the boroughs (Manhattan, Bronx, Brooklyn, and Queens - sorry SI!) with 16 units minimum to over 100 units, both 100% res and mix use. So the following is a list from my experience, that you need to a) plan for and b) understand how to deal with if you're going to get into RE in the city.

Tenants (non rent controlled / stabilized): there is a massive shortage of affordable housing in the city, and a shortage in homeless beds as well. So when you visit the housing court to evict a tenant, there is a bench reserved for representatives from affordable housing agencies from across the city right in the court room. There will usually be at least 3 sitting there all day, and often more. These representatives are there for one reason - to keep people from being evicted. They have funding, but simply no place to actually place the evicted tenant. So as the case winds through the court, and just before the judge grants the eviction, one of these lovely representatives will stand up and offer to pay the past due balance - usually paying up to $5-6k per person, if the judge will dismiss the eviction case. And just in the blink of an eye, the judge slams the gavel and you have your non-paying tenant back. You can start the process again, but its going to end the same way. The only people that make any money in this madhouse are the lawyers. For this reason, if you want to legally evict in the city, you need to let their balance get to $10k or higher before beginning the process.

Rent Stabilized / Rent Controlled: the rules of converting one of these apartments to market rate are ridiculous, and take decades. This is because these units have two rents: legal rent and actual rent. Every year the legal rent can increase by a tiny percentage (plus there are tax incentives that MAY allow you increase in larger increments), but that is something that you as a landlord have to stay on top of. If the previous owner failed to properly increase the legal rent every year, you do not get to show up and claim all of those lost years of increases - you start with the LAST legal rent (could be from 20 years ago) and you get to increase it 1-3% if you can convince the tenant to sign a new lease. Good luck with that. How did we deal with these tenants? Simple. We paid them. Forget everything you have ever heard about cash for keys. If the buy-out amount had 4 zeros, my company was happy. Yes, 4 zeros, not 4 figures. And these were paid in cash. Actual cash. We regularly went into 5 zero territory -  but then we would use certified bank checks. I'd rather not specify amounts here, but it makes great bar stories talking about walking around the bronx at 2 in the afternoon with 60k in my messenger bag.

City Agencies: Like getting your buildings inspected? Bring cash. Lots of it. I have had inspectors count steps on their way up a building, only to stop a few steps from the top and say "union regs say I am not required to go past X number of steps if I don't want to". I asked - "then how do I get the top floor inspected?" to which he said that I could request another inspection (wait another month) and perhaps that inspector won't mind the walk. And 311? If you're tenant thinks its too cold in their apartment, they call 311. A DOB/HPD inspector will happily arrive within a day and write the building a violation. These violations add up quickly, specifically as you are in the process of turning the property. You can expect to pay thousands each month to the city in violations, plus the additional time/expense of remedying each one and getting it inspected (see above).

AEP: NYC rolled out a program implemented by HPD targeting the 200 worst buildings in the city, based on violations. My group purchased 6 of those properties. But the list is updated every year - so there are always 200 on the list. If you are lucky enough to make it into this "exclusive club", expect to be earning $30,000 a month in penalties until you are able to get enough violations removed to come off the list. This means removing 100% of C violations (mold, fire safety, mechanical), 80% of B violations (vermin, loose fixtures, broken tiles, smaller stuff), and 80% of A violations (really stupid items like a light bulb out).

There are more - so many more. I love working in NYC and would do it again in a heartbeat, but it takes a lot out of you. Vacating a building in washington heights until 4 in the morning? Ya, been there. Guns / knives held at me? Absolutely. But it is quite a rush.

Enough about me - tell me of other cities that have SO many things that you need to account for during your repositioning? I'm sure they are out there, as I said. I just think NYC has a particular blend of ridiculous things to keep it special.

Hey there, great question. The answer is that it depends on the "bank". Most bank owned properties are not actually bank owned, but rather bank serviced. Banks have sold off the bad debt to investors, and the bank charges these investors fees to 'service' the portfolio - which includes acting as fiduciary and selling the property. They are often NOT negotiation friendly because the investors actually holding the note have their own (often misguided) criteria for returns.

As far as the contracts go - just send the same contract you normally use. Most banks, after accepting your offer, are going to send you a completely new contract for you to sign negating your contract, but utilizing the same terms. So I wouldn't put too much time into the initial contract, because all they look at are the price, inspection terms, closing terms, and any additional costs to them in the contract. Sometimes they don't even read past the price - I have had many banks accept an offer only to send me a contract that did not have the inspections I listed. And when I point this out - they say "you had inspections? what?" They hardly bother to read the contracts, because they know that it will go straight to the shredder. You will end up closing with their contract and their lengthy addendum.