5/24/2021 Monday
Branden email:
-Ask a lot of questions and you will get a lot of answers. Hope something here is helpful. Probably worth a sit down chat sometime to go over all the tools and guides in my Google Drive folder that I will happily share with you. I tried not to make the responses too long, but I get carried away sometimes.
-I have been slowly building a google drive folder full of tools and guides that I have found helpful and/or built along the way. I don’t really have any formal education or apprentice work for any of the process (finance side and renovation side). Everything has been mostly learn by doing (with YouTube and Bigger Pockets as a guide), trial by fire kind of progress. Keep that in mind for any advice or information I might give.
-My worst managed houses are the ones farthest from my house and/or my shop. I also like scouting for new properties off market, and my favorite way to do that is on dog walks or bike rides. Find the houses that are being neglected, try and talk to the owners (you can look up mailing addresses for vacant houses through county appraisal usually). Also talk to the neighbors (especially ones with well kept exteriors).Neighborhoods with houses between 80k and 150k are my preference these days, but my starting projects were in worse areas. I want to be in properties that I feel like are worth keeping in good shape, and ones that I would be fine living in myself. School districts do have an effect on tenants that have kids (less total renters to choose from). In the end, it’s more about a good deal than it is area or price range. Just be open to a good deal when you see one.
-Tenant screening is a work in progress for me, but I think I have a good process down that I tried for the first time most recently on 47th st. Just created a Google Form that collected basic contact info, and then asked a series of qualifier questions (credit, background, income) to weed out easy no’s, and also asked a few open-ended more personal life questions. It helps sort more serious people from ones that don’t care as much, or can help spot flags from horrible grammar (kind of like when spotting phishing/ scam emails etc). There are a few scams out there for rental and sale copy listings.After all of that, the form also sorts every applicant into a google sheet that I use to schedule showings based on my favorite picks. If you show it to everyone who asks, you will get ghosted about 70% of the time. Open house only, is another solution/ option ( a little tricker during peak covid).
-To make all my projects work financially to this point, we have had to house hack a few of them, and we have always had roommates. Best bang for your buck is to buy a multi unit (4 or less), live in 1 of the 4 units and get a primary residence loan, and basically wipe out your personal living costs. It will be a little different doing everything cash, and will make getting them done much faster, especially if you aren’t trying to live there too.
-In regards to sweat equity and DIY work, I wish I had found a way to pay myself in a more lender friendly way. In the future I plan on having 2 separate companies; one to hold all the properties and handle their management, and another to do my wood crafts, handyman work, and then invoice the property holding company for my labor. I have some pretty neat ideas on some long term property management scaling solutions for making it easier to self manage instead of hiring a property manager, but something we can talk about another time.
-My pricing rule of thumb is: Offer Price= (After Renovation Value (ARV) - Estimated Renovation) x 75% or 80%. Basic idea is to recover all/ most cash investment and let tenants pay off mortgage. If I can get off market deals, especially some unique owner carry options, it may be worth paying more. Right now I do regular handyman work for a few elderly neighbors, and unofficially have been building up a down payment with first right to buy their family homes when they are ready to move to more assisted living (invoice them for $20/hr, take $5/hr now, and $15/hr is ledgered to be down payment or payoff when house is sold). Always a debate back and forth 15 yr vs 30 yr. Right now I like having extra cash flow with the 30 yr to start building long term repair funds for each house, and I can always make extra payments towards principal to bridge some of that early payoff advantage. You may not need cash flow now, but if an emergency happens, it is nice to have the flexibility of lowest monthly payments to get by.
-Early on I built a renovation tool that calculates CCR, and walks through the entire renovation process with estimating tools. I will share that with the rest of the drive folder.I like to get a minimum of $200/mth in cash flow. Right now here is how I calculate what rent I “want” to get: Rent= fixed costs (based on 80% LTV @current rates, even if I don’t get a loan for the full 80%, .1% goes to me for managing currently)+.1% properties market value for short term repairs and maintenance + same amount for CapX. I don’t include vacancy rates, even though I probably should. That is about as advanced as I get, so not much knowledge on medium and long term cash flow analysis.
-The only houses I can think of that I will forever avoid are the ones with driveways right off main streets, otherwise I can’t think of specific things I avoid. Actually flood insurance sucks, so avoid flood plains like the plague.
-Haven’t looked at Investable, but I have used realtors before, as well as a couple houses from a wholesaler. I actually have my own licence off and on that I use for my own projects or friends and family purchases, I mainly wanted it to have access to MLS and to look at on market houses without bothering a realtor. Plus if I buy a property I can get buyers commission side (still have to split some with a broker). There are also advantages to not having an active license, like pursuing off market deals. A friend of mine just started her own brokerage, so we are discussing what set up makes most sense. I might be able to accomplish the tool access part as an office administrator type license, and maybe still get referral commissions, but that is work in progress.
-I keep all my own books through Google sheets and drive, with occasional back ups to a hard drive. I will share those files on the drive too. I do use MileIQ for mileage tracking. SwiftScan for uploading receipts to my google drive, and then I link them to my accounting ledger entries (easy look up for warranty and return exchange processing). I process rent payments through PayPal, Venmo, and Cash App (my roommate at Wilbur pays cash, and Austin’s “rent” I pull from his Joann rent payment, probably not the most IRS friendly shortcut). County appraiser sight for basic price information and owner look up. YouTube (worth having premium) and Bigger Pockets are full of tools and information, and are mixed in with some of my own tools.
-One final reminder that I have done all this by the seat of my pants, but sometimes that is the best way to learn. Happy to help throughout the process, and maybe look into some partner projects in the future. If you want me to share some files in Google Drive, tell me which email to send the links. We can also find some time to go over some of the stuff in person, especially to go through some of the accounting and renovation estimator tools.