All Forum Posts by: Marcus Auerbach

Hi Zoe, welcome good for you to start early, time is the most important ingredient with investing. It's really tough to start investing when you are 60 and realize in 30 years you'll be 90 (if you are lucky). 

Now to the bad news: it is REALLY hard to be a 20yo real estate agent and make a living wage, let alone generate cash for a down payment. It's not that you would not have the skills, but most clients want to work with someone who is at least their own age. So you are fighting an uphill battle. 

Look for downhill. One thing you should always look for in life and as an investor is to use your "unfair advantages". Things that you can do or have access to that not everyone does. Not my idea, this is from RichDad, but really good advice.

I would suggest to do that on the side and think about a W2 job. It can be in the real estate industry, property management, construction, lending etc.

You can't find new construction in Milwaukee under $500k for a single family, most are now 550 to 650. I have built in the past and I do not understand how anyone can build a house for 250k that will last.

As an agent I focus on high end relocation clients and many are positively surprised by the build quality compared to the south. They always ask me who are the ****** builders and at first I did not know how to respond, because even the economy builder here are building quality that lasts (just fewer features). I have heard comments that homes in TX or GA need a major rehab after 10 years, builders use MDF for trim, pressboard under siding instead of OSB sheeting etc 

As an investor we buy 1960s homes, they have good bones and are worth an update.

Geoff knows his stuff. If you are interested in industrial RE in Milwaukee/Wisconsin he's a great guy to talk to

I am not aware of any issues with using third-party screening services. Technically it's up to $25 and not to exceed your actual cost of the credit report. 

We use Zillow applications to pre-select and run a full background check on mysmartmove only with the final candidate. The applicant needs a credit card to complete the process and they charge more than $25.

A lot of landlords in Milwaukee do the same. I am on the board of the RPA (Rental Property Association of Wisconsin, a non-profit) and typically hear if things like this are an issue from our members or attorneys. There is some legislative push-back on "junk-fees", but every example I have seen was IMO truly a rip-off.

Agree with Rebecca. I also use Verette, and we have good experience with Gadish, Accurate or IHN.

For quick math, if the walls are cinder block and the bowing is below 3/4" you can budget about $100 per linear foot of simple wall (no plumbing in the way).

Brick walls are tricky - common on the Milwaukees east side. May have to replace with concrete. And if cinderblock, anything you can see bowing with the naked eye usually requires excavation, think roughly of 10k per wall.

Definitely something the select should pay for. Your lender will probably require it, otherwise you can escrow. 

Don, I agree with your list being dangerous, but none of the top five are what I would call mainstream strategies. I believe only a relatively small amount of people attempt liens and notes in the first place.

By volume, the most dangerous are OOS BRRRR and OOS flips, especially in cheap and very cheap neighborhoods - well below the median price. The allure of fat cash flow (at least on paper) and the low barrier of entry (down payment) never stop attracting new investors. And most regret it.

I'll make the opposite case: it is VERY hard to screw up when buying i.e. a duplex in good condition in a desirable neighborhood and either self-manages or hire a quality PM to manage.

To any new investor who is reading this: 

In real estate cost and risk have an inverse relationship. Low risk investments sell at a premium, that's the whole idea of cap rates. The higher the risk, the higher the cap rate, the lower the price.

My advice to anyone who is getting started: buy something safe. You don't need to make all your money on your first deal. But if you tank the first one, there will never be a portfolio..

@Eric Bilderback - there was a time when I felt I really should "gratuate" into MF, but I never did and stuck with nicer SF in the suburbs. Any MF of the quality and size (50 up) I would have been interested in would have been cash flow negative for the next 5 years or so, even with 30% down. SF investing supports my lifestyle goals better than MF, because it is a lot more passive and I can focus on my other businesses.

Which brings me to the next point. The time to scale quickly with REI is over. But 2025 offers other opportunities that did not exist 10 or even 5 years ago - think AI and online businesses. This is where you generate cash and you can then invest it in RE - or something else.

Most of the guru content was written a decade ago and it just does not apply the same way it did back then. So don't beat yourself up, it's not you, it's the market.

Like someone else said very well, invest inopportunities, not in a particularasset or strategy.

@Nate McCarthy the odds of disputes arising are considerable. I have seen too many partnerships go bad (almost all, just a matter when), that's why in 15 years I have never partnered.

Simplify the structure as much as possible, have clear roles and responsibilities that are not overlapping (meaning only one person is allowed to make certain decisions) and a clearly defined exit plan.

The Midwest is going to benefit, no doubt. Away from the coast, no hurricanes, fires, floods - we don't even have snowstorms anymore.

People can deny climate change all they want or blame it on sun cycles, and frankly, it does not even matter, the reality is that insurance cost will force the issue.

You can try to rebuild and you can put houses on stilts in flood areas, or fortify them against high winds and fires, but that makes it expensive. And it's not only the homes, you also have to fortify your grocery stores, schools and anything else. Keep your automobiles safe.. This is one of the things that sound a lot easier than they are actually done.

The crazy thing I learned about these CA fires is that the heat radiation is hot enough (1500-2000F) that it will ignite your furniture through the windows. Wood ignites at 700F, fabric a lot sooner. So yes, you can have solid concrete walls, it's still going to burn down.

I have read that worst case up to 80 million Americans will relocate in the next three decades. That seems extreme to me, but even if is only 10% of that, that's more than our States entire population, the implications are supermassive. That would mean entire metro areas would become ghost towns and entire new metro areas would have to be built. For reference, we currently build 1 million homes per year just to keep up with current demand. Now we have to build how many millions extra? And it's not only homes, it's all the infrastructure a city needs.

On the insurance issue, I think this may be the end of national carriers. I am going to see if I can switch to a local Wisconsin insurance that reflects our local risk level in their premiums.

Many of the homes in the Pacific Palisades are 3-5 million, but when you look on Google Street View, most are very modest homes from the 1960s (there are some $20m ultra luxury mansions too), so a lot is the land value, the home replacement value on a 1600sqft may be what - 500k at the most? Most people are not rich there, look at the cars. I am not sure what the means for insurance payouts, replacement value and property value are VERY different - does anyone know?

There are lots of listings currently under contract, I guess the buyers are not going to show up for closing next week.. 

And also rents! I see two high end homes for rent, 50k, 70k, 210k per month.. I guess not anymore.

We work with a lot of OOS investors and showings, inspections, and lending can all be done remote very easily. 

What you can't do remote is get a sense for the neighborhood and asset quality. That's why we require clients to spend a couple days with us in Milwaukee up front, so we can get on the same page and determine an asset quality.

Hint: the hood looks much better on a spreadsheet than up close in person.