I looked at a 48 unit apartment complex yesterday. It is a short sale and the units have been vacant for about a year. The interiors are in decent condition, but could use a new fridge here and there.
My main questions are:
If I was able to buy it, should I furnish the interiors? This would get a higher rent but would cost money when I have to replace them and cause me to have to charge a higher security deposit.
When I collect rent, should I be absolutely strict about collecting the day it’s due and giving a notice if it’s not? I have noticed in my RV park that if I allow people to get behind on rent, they will do it on purpose, even though they still have money for cigarettes and beer. I think my solution is to do a “late fee,” if it’s not collected the day it’s due.
Without knowing the age, location, and reason for the vacancy…
No, you should not furnish the interiors, and you will not get enough more rent, and you will NOT get a higher security deposits.
Yes, you should have firm deadlines for payment of rent, and you should maintain late fees that actually discourage late payments. We charge $150 as a late fee, and up to $15/day every day after the due date. And yes, tenants will pay as late as you allow without a penalty.
Why would you allow smoking? Or dogs? If you do, you must allow it everywhere, and your market will get pretty tiny. You cannot mix smokers with non-smokers, and dog owners with the petless. They don’t mix. It’s all about noises and odors.
It’s like renting to Vietnamese families, who intend to cook rotten eggs in a rice cooker (forgive me if I’m describing this incorrectly), but once you allow ‘that’ you’ll drive off all the assimilated prospects who don’t engage is such nasty, odorous, cooking habits. This practice literally makes your building smell like a Hanoi slum.
There’s no such thing as only renting to ‘small’ dogs. Everyone’s dog is SMALL. And dogs get fatter as they get older, and eventually violate your size rules. Then what? Force your tenants to give “Fido” away, or send it to the pound? Fat chance.
If you’re renting exclusively to seniors, then you’ll allow one animal under 12lbs.
b. A hotel is a competitive business. Why do you think a competitor might be hesitant to pass out copies of his ‘financial statement’ which is what you’re asking for?
His operating numbers themselves are considered confidential, and would be held in confidence by a broker. And you show up, ask for “financials” which is short-hand for “financial statement” which is used to qualify for financing, which includes credit reports, cash on hand, and the rest. Of course, this owner is telling you to take a hike.
So, stop confusing terms, and referring to the “current operating numbers/data” you want to see, as “financials.”
BTW, who recommended you going directly to sellers to get their operating numbers? Shouldn’t you be contacting brokers at this point? They already have operating numbers ready to distribute. Otherwise, you can blow it, say the wrong things, and sound like a rank amateur, and still get the information you want from a broker, but you can NEVER do that with principals.
Once you’ve analyzed 100 operating data statements, learned the vocabulary, such as understanding the difference between “operating numbers” and “financials,” and can accurately guess operating numbers, and know market rents should be with a given project, then you can start pitching principals with your offers.
It is probable time to read and study everything you can about real estate. Buying direct from seller is potentially beneficial to you when your buying a single family home but when seller pays commissions your much better off using a brokerage when buying commercial property.
You have an uncanny desire to jump from zero to hero and the idea that somehow you could go from Redstar working RV Park Manager to Redstar Forbes top 400 Billionaires list member just won’t happen without 30 or 40 years in between, unless you of course start a business or create a product in high demand and are lucky enough like Bill Gates to have billions in stock 10 or 20 years later.
My parents mentored me, in fact I remember going to construction sites with my dad at 7 or 8 years old, he mentored me and taught me from a young age, but my parents did not buy me anything, they did not make me a manager of anything, they allowed me to make my own mistakes and they let me make or lose my own money.
I did a creative deal to own and control my first property a 7 unit run down non conforming property in a California beach community and my parents let me lose time and money in my first deal because they were not responsible for the decisions I made and wanted me to make my own mistakes. I did not really start to make any money for another year, although I bought and sold a few wholesale properties, did a fix and flip or two and managed to acquire a couple of rentals.
It was only after I realized I am not my parents, I really did not want to be my parents, I did not want to be Howard Hughes and I had better except the fact I am Gold River and I will always be Gold River and it was up to me as to whether I would dedicate the time, effort and resources to use my god given skills to make me the best I could be, nobody was going to do it for me as it was all up to me!
Yes it takes dedication, yes it’s not easy, and you will have to make investing a priority if your going to become successful but it can be done!
I think the first thing standing in my way is the answer to this question…
If I can find a private lender to lend me 85% of a property, and can also either owner finance or find another lender to lend me the remaining 15%, would this be using the property as collateral on two loans at once?
What is the way around this? I don’t have time to save up a 15% down payment on a $1,800,000 property.
I answered this in an email, yes you can have 1, 2, 3 or more trust deeds on a real property. Yes, you could try to find an investor to put 15, 20, 25 percent or more into a property and record the investor as a 2nd trust deed holder.
What your losing here is what do you do for an investor to make him or her invest in a property you find, especially when you have no money to put in it and have virtually no real estate investment or management experience. That is where your problem lies as someone with 15, 20 or 25 percent of the capital needed to buy a property will by pass you and buy the property directly themselves.
In order to convince someone to invest with you, you will need 10, 15, 20 or more years of experience and a reason someone wants to put cash with you to invest and that reason would be your expertise in rehabbing, turn around, repositioning or in managing increasing incomes.
I don’t know your age or to much about you but it takes time (Years) to build your reputation and expertise, it’s not handed out over night and even college graduates with an MBA do not get investors for real estate right out of college, they take jobs in the area of real estate they want to work in and build expertise as they progress in their careers.
There is no fast and dirty way to make it big in real estate without paying your dues in the beginning and building experience and expertise, there are no short cuts!