What is your biggest problem you face right now as a REI?

Rental Property Investor · Denver, CO · Member since 2018 · 183 posts · 172 votes

Hello Bigger Pockets Community:)

What's everyone's biggest frustration/problem you face right now as a real estate investor?

For myself, it would be deal flow. My partners and I will look at 100 deals and about 5-8 of those will fit our invest criteria. The more deals we have to analyze the better.

I'd love to hear your answer.

My biggest problem I face right now as a REI is..............

7 Reply

945 views

Most Popular Reply

Nathan GesnerBusiness Member

Moderator

Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

Funds to purchase. I can find deals regularly, even in my difficult market. But getting the funds together takes time because I'm not willing to over-leverage and borrow my way to success.

The truth is, I could sacrifice more of my personal time or family and work more to get the funds. However, my family is more important to me than an accelerated business plan.

We can't have everything.

The DIY Landlord Book4.7247 Reviews

Website View Page

38 Reply

See this reply in the discussion

142 Replies

Jump to latestLatest

Sort by

Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
7y
Originally posted by @Nathan Gesner:

Funds to purchase. I can find deals regularly, even in my difficult market. But getting the funds together takes time because I'm not willing to over-leverage and borrow my way to success.
The truth is, I could sacrifice more of my personal time or family and work more to get the funds. However, my family is more important to me than an accelerated business plan.
We can't have everything.
I’m not trying to criticize but I don’t understand. Your problem is you can’t get funds but you don’t want to borrow the funds? Normally the issue for someone that doesn’t have the funds is they can’t get the funds
What other way is there other than to borrow if you're trying to grow in this business?
I’m on board with more tome with family. I’ve cut back a LOT (which cost me in lost deals, less efficient operations, etc) but it’s worth it. Playing with my kids is great.
0 Reply
Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
7y
Originally posted by @Dennis M.:
Easy to find good cash flowing deals . The funding is the issue for me .
Maybe you can find a partner? It seems for most people, the problem is finding deals. Funding is easier.
Do you mean the 70%-80% lender money you’re having problems finding? Or are you able to get the loan but not come up with the down payment? I know guys that are able to come up with most or all their down payment money in addition to their bank financing
0 Reply
Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
7y
Originally posted by @Juan Vargas:

Finding value add multifamily properties where the broker hasn't added the "value add component" into the whisper price. The whole point in buying a value add is to "add value", not to pay premium for it and STILL have to inject more capital into it.
I think that describes a deal I’m closing on shortly to a T. It’s being pitched as a value add deal. It’s a mess. But it’s priced as if it’s fixed/stabilized. 110 units near galleria. I’m paying way more than I would have 2 years ago. Hell, maybe even a year ago. It’s jist the best of a bunch of crappy deals out there
2 Reply
Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
Originally posted by @Cody L.:

Originally posted by @Dennis M.:
Easy to find good cash flowing deals . The funding is the issue for me .
Maybe you can find a partner? It seems for most people, the problem is finding deals. Funding is easier.
Do you mean the 70%-80% lender money you’re having problems finding? Or are you able to get the loan but not come up with the down payment? I know guys that are able to come up with most or all their down payment money in addition to their bank financing
Well it’s the fact my idea of a deal isn’t exactly what a bank thinks is a deal or perhaps even a hml . I look for distressed apartment houses under 50k and also I am not at a point where I want to be over leveraged
0 Reply
James MasottiPro Member
Rental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes
7y
I'm in the group of folks where deal flow is the issue, but seeing as I haven't changed my business at all to address this is, the real issue in my REI is the need to be less lazy about addressing my problems. The deals are out there I just don't have the right systems and processes in place to find them and take them down.
I also need to find better property management or start my own. A prospect I'm not excited about either.
Podcast Guest on Show #312
1 Reply
Joel D.
Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 6 posts · 2 votes
7y
@Matthew Baltzell my biggest problem that I face right now as a REI is figuring out how to go from 2 buildings that cash flow nicely, to 10 deals, then 20 deals, etc. It's that next step that everyone says after that it really opens up. Cheers!
0 Reply
Marc Rutzen
Real Estate Broker · Chicago, IL · Member since 2018 · 16 posts · 13 votes
7y
@Matthew Baltzell we’ve got a somewhat unique problem: We think we’ve developed a good algorithm to identify undervalued off-market deals, but we don’t have anyone on staff to look at these properties in the field. Makes it really hard to determine how well it’s working, especially when they’re outside Chicago where we’re based. Maybe it’s the same problem actually... we have to look at too many deals before finding the right one (in this case the right algorithm) too!
2 Reply
Matthew Baltzell
OP
Rental Property Investor · Denver, CO · Member since 2018 · 183 posts · 172 votes
7y
@James Masotti What type of properties are you looking to acquire and what is your criteria?
0 Reply
Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y
@Cody L. you didn't understand my post. What I said is that I don't want to "over-leverage" or "borrow my way to success".
Too many people over-extend to make a deal work. They want to buy property with 3% down or 100% financing. I would buy 100 properties tomorrow if I had the money but I'm going to pass on deals until I've saved up the necessary 20% and invest a little slower and wiser.
Make sense?
The DIY Landlord Book4.7247 Reviews
Website View Page
4 Reply
James MasottiPro Member
Rental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes
7y
Originally posted by @Matthew Baltzell:

@James Masotti What type of properties are you looking to acquire and what is your criteria?
Single Family Rentals in Wilmington, Delaware is my primary focus. We're completing our first flip this week though and after the sale clears will likely start ramping up a bit more there to take advantage of the current market dynamic...only further exaggerating the problem since now I have to source another type of property all together :-)
As for criteria...I need to be all in for not more than 75% ARV and have DSCR better than 1.2. Property must also be in the the neighborhoods I prefer. On occasion we'll go a bit higher for a property that will appraise for more but doesn't necessarily have higher rents. As such we have to park some cash in those to lock in the equity...which is part of the reason for looking to possible do some more flips.
For the flips...again looking in specific towns in the greater Wilmington area as well as Camden/Gloucester/Burlington Counties in South Jersey. ARV's typically would be in the $275k-$400k range. 3-4 bedroom houses Looking to clear at least $30,000 or 20% gross profit before paying realtor, whichever is more. Not easy to find...lots of people out there working on $15-20k margin per deal...but we're not looking to do crazy volume at this point so I think we can manage to find a few a year to start off with through MLS and a few wholesalers
Podcast Guest on Show #312
0 Reply
Tony Wood
Member since 2018 · 4 posts · 3 votes
7y
@Matthew Baltzell right now I'd say getting access to MLS to do market research.
0 Reply
Lenny Grimes
Rental Property Investor · Lansing, MI · Member since 2017 · 6 posts · 5 votes
7y
@Matthew Baltzell, my biggest frustration is capital! I am a bit conservative type of investor and not want to be over leveraged
1 Reply
JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
7y
My biggest problem is lack of inventory in my market. A few years ago my biggest problem was lack of resources (capital & time) to take advantage of the mess of deals available. But everything ebbs and flows. Soon it will be back to a plethora of deals again. You just have to give it enough time. Or change your strategy if what you want isn't coming back.
Podcast Guest on Show #243
Skyline Properties
View Page
6 Reply
Nicholas Varro
Naples, FL · Member since 2018 · 6 posts · 2 votes
7y
The numbers just aren’t working especially on duplexes via realtor.com. Renters are in place and the current seller is making great cash flow. Their sale price is to high for cash flow as a new buyer. My question is- as interest rates increase, the price of homes for sale should decrease so would you hold out for a while before investing?
1 Reply
Brian Ellis
Rental Property Investor · South shore, MA · Member since 2017 · 1k+ posts · 1k+ votes
7y
Making the best use of my time..
Figuring out what tasks are important and what tasks aren't.
Im very limited on the time I can spend on REI. I get maybe 16 hours a week where I get to renovate, network, find tenants, etc.
The rest of my time is spent at my full time job working in a family manufacturing business, and taking care of my personal life.
5 Reply
John CasmonPro Member
Cincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes
7y
Originally posted by @Joel D.:
@Matthew Baltzell my biggest problem that I face right now as a REI is figuring out how to go from 2 buildings that cash flow nicely, to 10 deals, then 20 deals, etc. It's that next step that everyone says after that it really opens up. Cheers!
Consider shifting your perspective. What if you focused on the number of units or cash-flow you want instead of the number of deals? Doing 20 deals of 5 units each is fine, but it would be easier to do one deal of 100 units.
0 Reply
Juan Vargas
Investor · Houston, TX · Member since 2015 · 233 posts · 188 votes
7y
Originally posted by @Cody L.:

Originally posted by @Juan Vargas:
Finding value add multifamily properties where the broker hasn't added the "value add component" into the whisper price. The whole point in buying a value add is to "add value", not to pay premium for it and STILL have to inject more capital into it.
I think that describes a deal I’m closing on shortly to a T. It’s being pitched as a value add deal. It’s a mess. But it’s priced as if it’s fixed/stabilized. 110 units near galleria. I’m paying way more than I would have 2 years ago. Hell, maybe even a year ago. It’s jist the best of a bunch of crappy deals out there
You're right, could be the best out of several not so good deals. And we can't necessarily blame the brokers for pricing them like that either. If guys keep coming in and paying for the value up front, they're gonna keep pricing them that way.
1 Reply
Roger Hefner
Yuma, AZ · Member since 2015 · 140 posts · 137 votes
7y
@Matthew Baltzell i have found flipping is too much work. Renting is ok. Finding my niche was the hardest to find. But now I figured out what i am great at life is good. I buy cash low turn around double price and carry notes. Being debt free takes off alot of the pressure I still drive my 2001 F250 with 225k miles. But always have cash. Make REI fun. Jobs suck..
4 Reply
Matt P.
Investor · Columbus, OH · Member since 2015 · 625 posts · 601 votes
7y
@Matthew Baltzell Time. If I had more time the sky would be the limit. Between putting in at least 40 hours a week at a desk job, self manageing my units and looking at new deals I am pretty busy. When I don't have a massive rehab project going on it gets easier but still never enough time lol.
1 Reply
Jonathan Twombly
Rental Property Investor · Brooklyn, NY · Member since 2014 · 722 posts · 1k+ votes
7y
Originally posted by @Cody L.:

Originally posted by @Juan Vargas:
Finding value add multifamily properties where the broker hasn't added the "value add component" into the whisper price. The whole point in buying a value add is to "add value", not to pay premium for it and STILL have to inject more capital into it.
I think that describes a deal I’m closing on shortly to a T. It’s being pitched as a value add deal. It’s a mess. But it’s priced as if it’s fixed/stabilized. 110 units near galleria. I’m paying way more than I would have 2 years ago. Hell, maybe even a year ago. It’s jist the best of a bunch of crappy deals out there
The definition of "value add" has changed since I started in this business in 2011, all because of where we are in the market cycle. Back then, "value add" meant you were buying a deal that already cash-flowed at the current price, but it was below the intrinsic value of the deal if you invested the capital to maximize the value of the asset. The classic case was buying an 80% occupied deal in a 95% occupancy market. You got the deal at a bargain just by paying the current cap rate times the NOI at 80%, but you knew there was another 15% occupancy there that was not being used, and all you needed to do was put in capital or improve operations or both.
Now, "value add" means you have to pay the after-renovation stabilized asset price now, but then you still have to take all the risk of doing the rehab and retenanting. In other words, in the old days, you bought at a discount to inherent value, but you could run as-is and still make money. Now, you are paying for the future value and you won't make the return you need unless you add the risk of rehab into the deal.

Which you may or may not be able to execute on before either the economy trends downwards or the property market does the same.
9 Reply
Account Closed
Investor · Surprise, AZ · Member since 2018 · 156 posts · 110 votes
7y
@Dennis M., but everybody says if you have a good deal the money will find you?...
0 Reply
Emily Auert
Rental Property Investor · Scarborough, ME · Member since 2018 · 17 posts · 5 votes
7y
Two major issues as I'm getting back into REI here in Vermont - 1. Hard Money Lenders - I literally cannot find one who lends in VT - if you know of some please send them my way. (I can get creative with my own cash and financing with rehab loans, etc... but this leads me to problem 2. Our inventory - we are a tiny state, however we have a very healthy RE market especially in and around the Burlington, VT area (we were very much unaffected by the bubble burst in 2008/9) and many of the other "Cities". Unless you go in with cash you have a very small chance of getting a deal even for severely depressed properties. In Burlington you are hard pressed to get into even a duplex for under $400k.
Emily
0 Reply
Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
7y
Convincing the 5 specific old vet landlords I've built relationships with over the years to get off the fence and sell. No rush, really, just hope they don't all decide to retire at the same time. That'd be 48 units!
In this business I've found that deals come in waves, like @jd Martin described. Tons of deals one year, then a desert full of crickets. My goal would be 3 a year and I'd get 19, (then go 3 years without). Just keep the relationships up, add value, continue networking, etc.
The years that turned out massive, I had to get creative and was glad I was able to match seller financing or MLOs to sellers it was a fit for. Then I was still prepared for bank or commercial financing when needed.
For those of you with more deals than money, Id suggest you make that hay while the sun is shining. Some years are rainy or drought-filled. Get creative within your own comfort limits.
6 Reply
Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
7y
Originally posted by @Jonathan Twombly:
Originally posted by @Cody L.:

Originally posted by @Juan Vargas:
Finding value add multifamily properties where the broker hasn't added the "value add component" into the whisper price. The whole point in buying a value add is to "add value", not to pay premium for it and STILL have to inject more capital into it.
I think that describes a deal I’m closing on shortly to a T. It’s being pitched as a value add deal. It’s a mess. But it’s priced as if it’s fixed/stabilized. 110 units near galleria. I’m paying way more than I would have 2 years ago. Hell, maybe even a year ago. It’s jist the best of a bunch of crappy deals out there
The definition of "value add" has changed since I started in this business in 2011, all because of where we are in the market cycle. Back then, "value add" meant you were buying a deal that already cash-flowed at the current price, but it was below the intrinsic value of the deal if you invested the capital to maximize the value of the asset. The classic case was buying an 80% occupied deal in a 95% occupancy market. You got the deal at a bargain just by paying the current cap rate times the NOI at 80%, but you knew there was another 15% occupancy there that was not being used, and all you needed to do was put in capital or improve operations or both.
Now, "value add" means you have to pay the after-renovation stabilized asset price now, but then you still have to take all the risk of doing the rehab and retenanting. In other words, in the old days, you bought at a discount to inherent value, but you could run as-is and still make money. Now, you are paying for the future value and you won't make the return you need unless you add the risk of rehab into the deal.

Which you may or may not be able to execute on before either the economy trends downwards or the property market does the same.
Not just that, but from what I've seen of buyers, the definition of "value add" has changed. I get people asking for 'value add' deals. I suggest some I bought recently that are in okay shape, but there is some meat on the bone to upgrade the property and profit. But they'll say stuff like "Wow, I saw there was some soffit damage, and a pothole in the driveway. Can you get that fixed prior to close?"

I normally say "Dude, you're not looking for a value add deal. Got find some fixed up clean turnkey deal" *click*
(not that there is something wrong with wanting a fixed up turnkey deal. I'm buying more and more of those lately. But when you're going to brokers as a 'value add' buyer, and go and inspect the building with a fine tooth comb for errors, you're not REALLY a value add buyer)
1 Reply
Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
7y
Originally posted by @Dennis M.:

Originally posted by @Cody L.:
Originally posted by @Dennis M.:
Easy to find good cash flowing deals . The funding is the issue for me .
Maybe you can find a partner? It seems for most people, the problem is finding deals. Funding is easier.
Do you mean the 70%-80% lender money you’re having problems finding? Or are you able to get the loan but not come up with the down payment? I know guys that are able to come up with most or all their down payment money in addition to their bank financing
Well it’s the fact my idea of a deal isn’t exactly what a bank thinks is a deal or perhaps even a hml . I look for distressed apartment houses under 50k and also I am not at a point where I want to be over leveraged
Not being over leveraged is a worthwhile goal. But if you're looking to grow in this business, it's hard to do so any other way. Leverage is what separates RE from everything else. I now own $60m in RE and gobs of units. No way I could have done that by trying to save up the cash flow of my first deal to buy another little deal, rinse wash, repeat. I'm not saying that leveraged growth should be the goal. But if growth is the goal, you'll have to accept that leverage will be a big part of it (to the point where it's pretty much tied. The more leverage, the more/faster growth)
2 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.