What is the most under realized opportunity in real estate today?

147 Replies

@Amy Raye Rogers

Lively topic.

To re-state your audience are people who want to start in REI.

Your next question is what is the most under appreciated REI investment.

The underlying question is where “they” can do the best.

Here is how i address this question with people

1.   How much money or collateral at 65% do you have?

2.   What financing mechanism will you use?  Cash, sba 10%, sba 15%, conventional 25%, conventional 40%, etc

3.  The combination of the above two determines your investment limit.  This will narrow down your efforts to look for an investment

4.  Define failure.  Most of your friends and others will never invest not so much because of what they can gain, but because they don’t know what they might loose.  So how much can they lose that doesn’t cause: kids can’t go to college, have to sell their house, no more dinners out, etc   Determine their failure level or risk tolerance 

5. Their first investment should not be about how much they might gain. They will gain a ton of experience. They should only lose x amount. Pick an easy flip. SFH that needs some landscaping and some painting. Sell it for break even. Maybe take a loss on the commission. Not that SFH is the top investment. It is the easiest and most frequent type and they can relate to it.

Pick a non REI friend that is interested in REI. Give them the following two options

A. Greatest loss potential $10,000. Maybe breakeven. You will learn a lot about REI. Best thing is you will get started.

B. Have a great investment you might make $30,000. Can't tell you how much you might lose. You will learn a lot about REI. If you don't do this you will probably never get started in REI.

We all have our stories. Just like gamblers about their big win and not their loses. I've had issues on every deal I've done and love it. New REI folks just need to get started.

@Amy Raye Rogers

Purchasing 10-15%+ ROI single family deals in Metro Detroit.

Real estate is a gold mine investment vehicle if you do the basics correct, and have the correct mentality.

- deals will average out. Some will be better, some maybe not quite as great (at the beginning)

- buy the first to go buy the 2nd to be able to go buy the 3rd

- don't self sabotage deal #1 because ROI is only 11% year 1 and your goal was 12%. Who cares. Look at year number 5,10…year 1 didn't really matter.

- a few bucks here and there don’t matter, they aren’t worth your head space. You’re trying to make tens, hundreds of thousands of dollars, over the next 20-30 years; nickel and dime’ing a seller over a leaking faucet and spending hours on little things don’t matter, look big picture and go buy another house.

- save money, make money, go buy another property

- look at year 2,5,10,15,20,30 ROI on your biggerpockets calculator projection…makes year one seem not so important

We’ve seen dozens and dozens of successful investors and dozens that seem to fizzle out or never get started… these are some key mentality differences we’ve noticed and we have ourselves. I’m on door #7 purchased this year. Didn’t beat the seller up on inspection report or care about this little thing or that little thing, I’m trying to find door #8 which will make me more money than worrying about a little thing on door #7.

Year 1 cash on cash roi is just the icing on the cake. It’s all of the other things and years 2-30 that build wealth. Go buy more houses, don’t get hung up on the little things of deal #1

Find a decent deal, pull the trigger, and move on to the next one.

REI is amazing, let it work for you.

@Jack Orthman sounds like a bad realtor. Even if there’s nothing on the mls I always try and hit the area my investor or buyer is looking to see if I can find what they need. If not then I always have the wholesalers that I know that I can reach out to. Sounds like you’ve been talking to buyers agents instead of investors agents.

Originally posted by @James Ellis :

@Jack Orthman sounds like a bad realtor. Even if there’s nothing on the mls I always try and hit the area my investor or buyer is looking to see if I can find what they need. If not then I always have the wholesalers that I know that I can reach out to. Sounds like you’ve been talking to buyers agents instead of investors agents

I don't understand what you are trying to say. My guess is that you are saying that you are a professional realtor and you listen to what your investors and buyers want and then you look to find ONLY what your clients specifically ask you for.

If I am correct, then you only listen to exactly what your buyers request and you don't offer advice nor will you coach or mentor your clients in regards to better investments that will get your clients a better return.

Are you saying that if your client ask for a single family property that will get them a nice return and you have a 6-unit property for the same price, or close to the same price that will get your client 10 times the return that the single family will get them, then you will not tell your client about the 6-unit property because your client did not ask for a multi-unit property.

If I am correct, then this is the reason I get so frustrated and are you serious when you start out by saying I am a bad realtor, or was that like a joke?

Just to keep who I am clear, I am not a realtor and do not have an affiliation with any type business related to real estate. I am just a private single-person investor who writes at least one post every day telling BP members not to listen to real estate agents or brokers because in my entire 55+ years of investing I've met thousand of real estate brokers and investors and only ever met one broker who gave advice that made sense and he won an award from President Bush sometime just before 2001 when I met him.

Get this clear what this presidential award was for and I wrote about this in several posts.The award was for exactly what you do not do. The award was for his taking people like myself, mentoring them and making a significant number of people millionaires.

Would I rather have had you for my broker in 2001. In 2001, this broker, and his name was John Brizynski in Laguna Califnrnia, taught me the simple math that showed the difference between single family homes and multi-units. I had only $2.4 million at the time and I keep writing that I made $36.4 million by 2001, but that is not accurate because I really made that money by about 2017. So, if I do the math right, I made $36.4 million ($2.2 million of that goes to my ex-wife), but I am looking at the grand total. So, if I made $36.4 million in 17 years that comes out to $2,141,000 per year profit.

Now, I know many investors are going to say they don't have $2.4 million but the OP for this thread says he has $600,000. Then, divide my profit by 4 and the OP would have earned $9,100,000.

Now, someone just wrote a post stating that the market has changed and it is impossible to earn the same as in the past 10+ years and I did agree that the market has changed, but even though it has changed, if an investor wants to get filthy rich it is still 100% possible to turn $600,000 into $9.1 million in 17 years if you change your business model.

I never told investors to stay away from single family homes. I made $4.5 million by purchasing 28 homes at live auctions in Las Vegas between 2008 and 2010. Again, people are going to say if is difficult to duplicate that today and they don't have enough money to purchase 28 properties, but if people continue to listen to real estate investors who don't know poop from Shinola about how to find the best properties and if these people don't their business model then they cannot duplicate what I did.

HERE IS THE MOST IMPORTANT THING PEOPLE NEED TO GET IN THEIR HEAD!!! THERE ARE THOUSANDS OF PROPERTIES THAT WILL DUPLICATE WHAT I DID AND THESE PROPERTIES WILL FIT I NTO YOUR BUDGET. YOU ONLY HAVE TO LOOK FOR THEM, DON'T LET BROKERS TELL YOU THERE ARE NO PROPERTIES THAT WILL DUPLICATE WHAT I DID. If you listen to your brokers you fill find they brainwash you and destroy what is a good business because they don't have what fits your business model and they will not tell you the truth because they want to sell what they have available

I never tell investors not to purchase single family homes. There are some goldmines when you buy the right house at the right price, but your math for your business model needs to prove that the return on that house needs to earn you 50% to 100% on your money within 1 to 2 years. If you are purchasing a house that returns less and you have to wait a higher number of years to break even or earn less than 50% to 100% within 1 to 2 years then your real estate agent will tell you to buy the house. anyway, and if you want to listen to your real estate agent and that is the road you want to take, then buy with blindfolds, hope and pray to the god of your choice for good luck.

Again, I never tell investors to stay away from single family homes, but if you want to get filthy rich in a very short time then your business model has to be to make multi-units your investing's FIRST CHOICE. You need to, first, spend all your time looking for multi-unit properties and when some broker pushes what he has for sale and it is a single family property you should look at the single family and within less than 30 seconds or a minute you will have the ability to say to your broker,

"NO! I've been looking at multi-unit properties. I haven't found the exact one I want, but I know I can do better than the cashflow and return on this house and I've already seen a four-plex that will cashflow $1,000 per month and I can earn 200% on my money in 1, 10, or 15 years vs. a 10% on this single family house".

WHAT IS THE SECRET TO GET RICH. Your personal investments is exactly the same as my opening and running a plumbing business. Do I call other plumbers and ask them how to run my company. NO! Not one time in my entire life.

Your personal investments are exactly the same as your running a private business. If you want to earn average investments then call every Average Joe in town and ask for advice. If you want to be filthy rich with the same amount of investing capital you have then get the mindset that you are the boss in your company, the person responsible for making the right decisions, the captain of your ship and THE CAPTAIN IS NEVER WRONG and learn to not make decisions on-the-fly and don't make decisions base on nobody who gives you advice.

It should be obvious that getting advice from brokers and agents who are supposed to be watching your back is the reason so many investors do not get rich.

Stay away from every broker or agent who tells you that single family homes can earn the same profits as multi-units. Those brokers are insane, crazy and don't know the difference between investing in multi-units. I don' care how many years these brokers have been in business. They don't know, or they have been brainwashed with the business model and mindset to invest in single family properties.

Actually, I am impressed with the knowledge that real estate brokers and agents have in regards to real estate laws, how to do the paperwork, etc. and I am very ignorant when it comes to being a broker or an agent, but in my lifetime I met only two brokers who were good advisors. I mentioned John Brizsynsky, but I forgot to mention the Jewish family I met when I was 13-years old and this family was started with teaching me to invest in the stock market in 1965, when I was 15.

Originally posted by @Bob Wilson :

@Jack Orthman

If you invest 35k into a single family home, and earned $1,500/per month, would the 54k earned in 3years be a good ROI?

I this a trick question because I've never seen a house you can purchase with $35,000 and cashflow $1500 per month? 

The very first thing I preach is an investor has to look at an opportunity, do the math and then decide what the best thing is to do with your $35,000.

First glance at your question gets me excited and I think I have enough cash in my bank to purchase 82 of these deals.

82 xc $1500 per month = $123,000 per month x 12 months = $1,476,000 per year. That is a lot less than I earned with the $2.4 million I claim I started with in 2001 to mainly invest in multi-unit properties and I did invest in 10 homes in Idaho, 28 in Las Vegas and I own homes in California and Massachusetts. But...I sold most of my house.

If I invested the same $2.4 million into your $35,000 down per home I could have purchased 68 of your homes. 68 x $1500 per month = $102,000 per month cashflow x 12 months = $1,224,000 per year cashflow. When I sold my homes in Las Vegas last year I used the $3.5 million proceeds to pay every mortgage I had. So, my current cashflow after paying all my bills is $120,000 per month x 12 months = $1,440,000 or $20,000 per month more than your single family homes and I will not have to drive to 68 different properties to rent them, do inspections and change furnace filters, repair 68 AC systems and pay all the bills for 68 properties every month. 

If you look at very recent posts I stated that both my single family homes and multi-unit properties netted me $2,141,000 per year during a 17-year period and I don't have to travel to 82 different locations and pay all the separate bills every month and can save a lot of money by not having to deal with a property management company. 

I will say 'YES' to your deal, but even with your amazing numbers multi-units will beat your profit over a period of time.

I've never seen a property where I can put a down payment of $35,000 and clear $1500 per month after considering a mortgage, property taxes and other expenses. 

My guess is that a jewel like this may pop up maybe if the house is inherited and the balance on the mortgage is $35,000 and I've never seen a property obtained for $35,000 through a foreclosure from winning a bid at an auction, a tax auction.

Sorry! I made a mistake in the last post. My monthly cash flow is $105,000 per month and not $120,000 as stated.

That means if I used the same $2.4 million I had starting in 2001 to purchase homes for $35,000 with a $1500 per month cash flow, then in a 17-year period my current annual income would be 1,260,000 per year, not the $1,440,000 I stated in the previous post and almost exactly the same profit as if I invested in the homes that can be purchased with $35,000 and have a $1500 per month cash flow. 

For some reason the amount I posted was a guestimate and it bothered me, so I had to pull out my 2020 tax records to verify the correct amount.

Originally posted by @Terrell Garren :
Originally posted by @Jack Orthman:

Investing in multi-unit properties even as small as 4 units. It seems like millions and millions of investors have their heads buried in the sand and they have single family homes burned deep into their small brains.

Anyone know if there is an 'ignore' function on BP Forums? 

Very,very funny!

Originally posted by @Jane A. :

we have tern key cash flowing 4plx in Overland Park, KS, 6% CAP

If you would like, post the current cashflow, projected rent increases very and I wiill post my spread sheet. If you know what the Gross Multiplier is send that and we will look at the projected profits for 1, 5, 10, 20 and 30 years.

Apropos of nothing, the Spanish playwright Lope de Vega wrote some 1800 plays in the late 1500s and early 1600s. He boasted in his lifetime that at least 100 of these were composed in less than 24 hours. Of his body of work, 450 plays remain extant, and a full 80 are still generally considered worth the time to read today.

@Amy Raye Rogers - you'll likely get different answers from different people with different perspectives. I've invested primarily in multifamily for 18 years, but also have some single family. And some condos ;)

In my real estate dotage(I'm 47 and feel like I'm in my 20s, but as a real estate investor, I feel like I'm 80,) I prefer single family homes. When I was a real estate whippersnapper, I liked multifamily better. It's true that cap rates on multifamily properties in particular markets are generally higher than cap rates for single families- that cap rate spread is likely to persist forever. The buyer of a multifamily has to contend with tenant-tenant interactions, I believe that is the primary reason for the cap rate spread. In other words- you're paid to be a mediator and/or group psychologist. "The tenant plays his music too loudly? I'll talk to him." "Her dog barks too early? I'll talk to her." "They fight all the time and it irritates you so you're gonna stop paying rent? M'kay, my lawyer will be having a word with you shortly." After several years of this, it looks more like, "He slams his door every time he comes in? Jeez, I'm just gonna go buy a single family."

Of course management is supposed to handle this stuff. But newsflash- managers are people too. You have to invest in them, and they can get burnt out too. After 10 years of this, management may be ready for easier things also- and then you need to accommodate them, or bring someone else up who can handle the tenant-tenant interactions. 

Multifamily operators are paid to deal with this sort of thing. For some of them, it's worth it. For me? Life's too short. If I could do it all over- I'd have started with single family homes. I'm course-correcting now.




@Michael Plante

1. Plumbing - plumbing is the silent cash flow killer. Old galvanized drain lines and water lines will clog on the drain side and leak on the supply side.

2. Electrical - at least the circuit box but in a full gut knob and tube has to be replaced completely. At least for code around here.

3. Windows - old windows don’t keep in heat and… are particularly dangerous with chipping paint pre 1978

4. Space heaters have to go and replaced with forced air

5. Roof- you don’t have to replace it if it’s under 15 years and in good shape but… you have to budget for it

6. Any and all exterior drain systems. If you don’t address water leaking on your foundation you will pay the price and it won’t be pretty

When someone tells me they are cash flowing $500 a month and I see a t lock shingle roof I get a bit nauseated for the investor

@Amy Raye Rogers Right now I am doing some new development of commercial retail and commercial MF. May seem crazy because of the fluctuating cost of materials but the locations are in high demand for each and the projected returns are too good to pass up on the opportunity. For the retail space, we haven't even done any sort of advertising yet and already have national retailers wanting a space there. Development is more work than most people are willing to take on, which is why there are some great opportunities to be found.

Originally posted by @Michael Gansberg :

@Amy Raye Rogers - you'll likely get different answers from different people with different perspectives. I've invested primarily in multifamily for 18 years, but also have some single family. And some condos ;)

In my real estate dotage(I'm 47 and feel like I'm in my 20s, but as a real estate investor, I feel like I'm 80,) I prefer single family homes. When I was a real estate whippersnapper, I liked multifamily better. It's true that cap rates on multifamily properties in particular markets are generally higher than cap rates for single families- that cap rate spread is likely to persist forever. The buyer of a multifamily has to contend with tenant-tenant interactions, I believe that is the primary reason for the cap rate spread. In other words- you're paid to be a mediator and/or group psychologist. "The tenant plays his music too loudly? I'll talk to him." "Her dog barks too early? I'll talk to her." "They fight all the time and it irritates you so you're gonna stop paying rent? M'kay, my lawyer will be having a word with you shortly." After several years of this, it looks more like, "He slams his door every time he comes in? Jeez, I'm just gonna go buy a single family."

Of course management is supposed to handle this stuff. But newsflash- managers are people too. You have to invest in them, and they can get burnt out too. After 10 years of this, management may be ready for easier things also- and then you need to accommodate them, or bring someone else up who can handle the tenant-tenant interactions. 

Multifamily operators are paid to deal with this sort of thing. For some of them, it's worth it. For me? Life's too short. If I could do it all over- I'd have started with single family homes. I'm course-correcting now.




In our multi-unit properties, we have almost zero problems with tenant problems and almost zero problems with tenants complaining about each other. When we rent apartments we look for tenants who appear to be quiet and while people will say how do you know a quiet he new tenant and tell them we expect 5 things; keep the property safe, clean, quiet, pay the rent on time and don't burn the building down by using small pans with grease in them when cooking.

I also tell the new tenants that our tenants work for a living and express that after 9 pm if we can hear your television, radio, or people talking from outside your apartment then you are making too much noise and tenants will complain because they need sleep so they can go to work. Our apartment buildings are so quiet after about 5 pm I actually feel guilty and think I am too hard on the tenants and maybe they are scared to death to make any noise.

There are so many advantages for owning multi units vs. single family it will take a book to explain. One of the best benefits is we own about 140 apartment units within 8 miles of where we live and my wife personally goes to every building every day because she is Filipina and she loves to water the plants at every building. This gives her the ability to communicate with the tenants because they know she will be at their building every day and my wife gets to see damage tenants are causing and deal with many other maintenance issues.

You cannot inspect a significant number of single family homes every day, every month and sometimes we can't get into a single family home for a year. Then, we find that the tenants turned their home into a dog kennel, painted walls inside with nearly black colors, busted holes in walls, made holes is fire doors going into the garage to made a doggy door, destroyed the lawns, installed a satellite dish on the roof and destroyed the tile roof shingles, thrashed the yard with a dog that dug holes all over like the dog was a backhoe and the list goes on.

The cost to clean an apartment after a tenant moves is usually less than $1500 to $1800 even when the apartment is thrashed. The cost to clean a house when a tenant moves is $6,000 to $12,00 and one house in Idaho cost me $18,000 and I did all the work myself with one worker. 

The reason the cost to clean a single family home is more expensive is because the tenants have a larger yard, larger house, larger garage and they sometimes leave a large trailer load of trash. The single family homes are always larger than apartments and they take 3 to 3 days to paint compared to 1 day for an apartment. The larger homes require more flooring. Single family homes have larger yards that apartments and it sometimes takes a full day for 2 to 3 workers to trim trees and plants, remove dead trees and plants and repair the damage to the yards and sprinkler systems. 

Then, when you have vacancies you have to drive to each home for applicant viewing and when you own multi-units you save a lot of money and time when your vacancies are  in the same building. It is much easier to collect all the rents in one trip to 1 4+ unit property vs. collecting from single family homes. 

As stated before, we will never have our tenants pay through some type of internet system. We have deposit boxes at each building and my wife goes to each building at almost exactly 5 pm on the 5th of every month to collect the rents. She counts the checks and  immediately knocks on the tenants' door when a tenant's check is not inside the deposit. I personally like the immediate personal interaction.

If you want to compare single family homes with multi-unit properties, I wrote a few posts in the past few weeks where I said when I went to clean a few of my Las Vegas properties a few months ago I literally got tears in my eyes when I saw some of the damage the tenants did and that is not a joke. I am 71-years old, a workaholic and I seriously love the real estate business. I've been getting more emotional in my old age.

I seriously love to work and prefer to be climbing ups and down a stepladder painting ceilings and cleaning a a house because I know I make a lot of money and that is part of being in business. But... for some reason I literally got tears in my eyes when I walked  into two single family homes and saw doors literally busted in half, large holes in the walls in every room, walls that were paint a dark brown the color looked almost black, broken windows and broken glass sliding doors, stoves so filthy I have to decide whether it will be less expensive to purchase a new stove vs. cleaning it and carpets so filthy you have to wonder how any human could get them that way. 

You don't get these types of problems with rental units. Sure! some tenants bust a door in half and get the apartments filthy, but since apartments are always smaller the time and cost is very small compared to single family homes.

One of my companies has done very well buying raw land and taking it through the entitlement process with the local municipality to achieve the "highest and best use" of the land. We typically look for land in area where we can get the zoning we need for single family or townhome developments.  We then sell the land to my development company at around a 14% typically just barely over the one year mark so we only pay long term capital gains. Then we develop the land into a subdivision and sell it to one of many national track home builders for the remaining profit in the project. Although it's not a passive income investment structuring it this way gives our investors a really great 1 year return of 12-18% with a lower tax rate than taking it through the entire 2 year plus process of having to raise more funds to complete the actual development. There are a lot of moving parts to get the land through entitlement, but if you do your homework before closing on the purchase of the land it sure bears waiting 3-7 years for a multi-family property investment to mature in order to sell and cash out. However, we do also acquire passive income properties, as well. Not saying those aren't great investments, too. Just answering the question that Amy Rogers put out there in this thread. Land development is my answer. It's a hidden gem that if you have the experience to take it on has huge payoffs.

Buy struggling golf courses in dry environments (much of the southwest), shut it down due to financially not viable due to rising costs of water and declining golf interest, start syndication, develop the golf course with combination of retail and commercial.  Repeat

Not passive.  Can be very lucrative.  

Good luck

@Jack Orthman

Blackstone is buying SF in bulk because it’s easier than buying SMF in bulk. People want to live in houses more than small Multifamily.

They see the shortage of houses and the demand for rental houses so they go for what’s easier and faster. This is a long term play for them.

Small MF investors like us have more time and less capital to search for opportunities in the small Multifamily area than Blackrock, so we go for where the biggest opportunity with our buck is. Blackrock on the other hand have more capital and less time to make return on investments so buying many properties in bulk makes perfect sense regardless of them making less money compared to small Multifamily, hell, I’m sure they have invested billions in big Multifamily.

Everyone does what they can with they have.

Sfr vs multi, multis typically win by design as in are physically designed as investments (footprint). I would not think right or wrong or one vs the other but more of just different. I know of investors 10 years older than Jack, who bailed their apts for Dollar General NNN but kept their choice easy to manage SFRs. Its all good.

Good luck!

Originally posted by @Jim K. :

@Amy Raye Rogers

Amy, there is no BEST opportunity. There are a bunch of low-probability ways and a few high-probability ways. So many people use the idea that they haven't found the very best opportunity, the absolute right way, as an excuse to sit on the sidelines. It's really another form of analysis paralysis: "I don't know what the best way forward is, so I'll do NOTHING."

Americans especially seem to love to say things to themselves like, "You've got to be in the RIGHT place, at the RIGHT time, with the RIGHT idea..." No, that's a dream of unearned success, or often something successful people say well after the fact. My own father lived by the lazy man's mantra: "Work smarter, not harder..." It certainly didn't work, I paid to put him in the ground.

Hard work plays a part. Persistence plays a part. Careful planning plays a part. Luck plays a part. Control what you can control. Stop pretending you can control the rest.

Sure, you should study, critically examine what you learn, and wait for what looks like a good opportunity, but at some point you have to take a risk and make a move. In the beginning, especially, you have to be willing to fail and be willing to change direction. You have to submit to the learning curve and pay your dues. The people around you will likely feel free to share their doubts to the point where you realize that they actually NEED to share their doubts with other people in order to justify their own mediocrity to themselves. Or even worse, you might surround yourself with "yes-people" who would give you a thumbs-up every step of the way off a cliff.

And in the end, your right move is guaranteed not someone else's right move. Your financial and life goals are yours, not everyone's. Those who seem most certain are often those who know the least: "the best lack all conviction, while the worst are full of passionate intensity." Yet another doubt-filled reality you have to live with to get into this business.

Good luck!

Underutilized  ??  I dont see rental properties being underutilized I see them as fully utililized.

I think forest land in the right areas are very much underutilized and not something 99% of investors have a clue about.

Originally posted by @Dan Heuschele :

Buy struggling golf courses in dry environments (much of the southwest), shut it down due to financially not viable due to rising costs of water and declining golf interest, start syndication, develop the golf course with combination of retail and commercial.  Repeat

Not passive.  Can be very lucrative.  

Good luck

We have a project in ORegon  were the golf course next to us is doing exactly what your talking about.. Not because of lack of water plenty of water  Lack of revenue and highest and best use..  we will put 200 plus units on our property they are gunning for about 600 units.. its a 5 to 7 year play.

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