Panel in Print
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LINDA LIBERATORE Courses: Knowing Your Lease, Buy-and-Hold Strategies With any multi-unit property, it’s vitally important to the success of your investment that you keep a good calendar. Honestly, that is
true for single-family rentals as well, but the issue is magnified in a multifamily investment. I see so many investors who cannot figure out why they are not cash-flowing on these fantastic mul- tifamily properties any better than they are. After all, the units are all full, the tenants are paying market rents, and the financing is advantageous. So where is the money? I’ll tell you: It’s slipping away because the property managers are not keeping a good, reliable calendar. Here are just a few things that failing to keep that calendar and, by extension, failing to track workflow on projects, can cause in terms of monetary losses:
Panel in Print: Multifamily Madness ultifamily real estate can get complicated, in large part because the term covers so many different types of prop-
• Major property damage • Huge maintenance bills • Lawsuits and litigation • Entire months lost while a unit sits vacant
Investing in multifamily prop- erties can be difficult if you have an interest in relatively smaller Courses: Marketing on a Tight Budget, Inbound Marketing, The Importance of Finding Money
In my opinion, probably the biggest perk of accepting these subsidies is the fact that a substantial part of the rent money you are owed will show up reliably and on time each and every month. The portion of rent that the government will pay is dependent on a few different factors, but is usually between 40 percent and 70 percent of the total. The move also opens you up to a whole new market of potential tenants, and, contrary to popular belief, you can screen these tenants just as you would any other applicant. When you’re considering accepting Section 8 in a duplex, triplex, or quadplex, you must consider two important factors: First, how will a housing-authority-determined rental rate affect your cash flow? Once you are approved for the pro- gram, your local housing authority will look at your property and set a monthly rental rate. They will also determine if and when that rate increases. If your investment strategy relies on being able to raise rents on a regular basis or being able to charge retail rental rates in all of your units, then Section 8 may not be for you. Second, how will you deal with maintenance and damage issues? Many (but not all) Section 8 programs do require tenants to address damages that they, themselves, inflicted on a property. However, many of these programs do not permit you to collect a security deposit for damages that might not fall un- der the tenant’s responsibility. Can your budget accommodate this type of maintenance without the safety net of a security deposit? If not, then again, Section 8 may not be right for your multifamily property.
erty and investment strategies. In this month’s “Panel in Print,” our Think Realty coaches discuss their experiences in multi- family investing and what they learned while doing those deals.
The root of the problem, in a lot of cases, is simply that things are not getting done in terms of preventative mainte- nance and fast responses to unpredictable problems. For example, say that you own a single-family rental (SFR). You do your own property management and you do pretty well, although you are always forgetting to replace the filters on the HVAC unit and just about every winter the pipes freeze at least once. But still, you’re doing pretty well with it in terms of cash flow. You want to expand, so you buy a triplex, and suddenly, things go off the rails. Not only are you stressed out by all the maintenance calls (now you’re answering to four households instead of one), but it seems like everyone’s heat is constantly going out and you’re singlehandedly keeping the local plumber in business with all these burst pipes. What’s going on? Well, you magnified your properties by four, and you mag- nified your organizational issues (not remembering to replace filters, failing to get your tenants to leave the faucets dripping when temperatures fall) fourfold as well. It sounds too simple to be true, but those issues can and should be automated. You can do a lot with a basic calendar app, and even more with some cloud-based spreadsheets and a workflow chart. Take a few hours to put calendar reminders in place for things like air filters and automate some text alerts to send out next time the weather gets bad. It may not solve all your problems overnight, but it definitely will save you significant time and trouble! •
properties, such as those between three and twelve units. I was recently considering an investment in an eight-unit property in my hometown of Atlanta, Georgia, and I found it very difficult to get good, expert insight on that property from local inves- tors, agents, or even appraisers. The problem is simple: These properties usually tend to cash flow pretty well because of their size, but there are not always a lot of properties that are com- parable to them in any given area. As a result, it’s hard to get a firm grasp on the after-repair value because there are not a lot of points for comparison. I was really torn because I really liked the numbers on the property and had a good feeling about it. However, good feel- ings alone are not enough! I finally spent a little time looking at local building trends, demographic and household income shifts, economic movements, and even the local bus routes and plans for future transit expansion in the area, before I made a decision. This type of property can create a bit of extra work early in the process, but I’ve always found that a solid invest- ment in a multifamily unit of this size is a reliable vehicle if you’re willing to do the due diligence necessary up front.
Courses: Hard Money Lenders, Executing the Wholesale Deal, Building Your Dream Team, Navigating Wholesale Paperwork, Finding Wholesale Deals, Finding Buyers, Wholesaling
I think that one of the things a lot of landlords of both single- and multifamily properties end up considering at one point or another is whether they should start accept- ing Section 8 housing subsidies. Section 8 is a program for low-income tenants who have qualified for a municipal gov- ernment’s Housing Voucher Program. Every city’s standards are based on the average income, average housing price, etc. The program helps these individuals afford local housing by paying a portion of the rent.
10 | think realty magazine :: march 2018
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