All Forum Posts by: Corey Conklin

@Jim K. This is exactly why I have gotten fed up with real estate podcasts, forums, etc. It's all a bunch of sales guys trying to sell you "financial freedom" by spending $2,000 on their seminar. Or how easy it is to make a million dollars in 90 days starting from scratch. It's ludicrous.

When I bought my second rental property I was called by my agent about a week before closing and said he had an odd request from the seller. The seller (an older, recently widowed man) asked to stay in the house for 3 days after closing since he needed the money to pay for his next home.

My first thought was, absolutely not! I knew that would make it easy on him to leave any trash or belongings he didn't want behind for me to handle. My agent said that he would help (which he never did), my brother (who was a partner at the time) said what harm can this old man do? We were getting an pretty good deal on the house so I thought, Ok I'll help this gentleman out hoping he would do right by me for being decent.

Fast forward to the day I get the house. I open the door to trash left everywhere, food left out, furniture that was left behind, a garage completely full of old junk. I knew I shouldn't have done this and I was kicking myself.

But that's not even the worst part. I came back a few days later to start the renovation on the house and started emptying the house, my brother was there to help. After about 30 minutes I hear a loud yell from my brother with a handful of cuss words, so I run to where he was at. On my way there I was meet with a pissed off black cat hissing at me! The old man left a black cat trapped inside the house that my brother let loose when he opened a cabinet door! Since it was in a small town there is no such thing as animal control so I had to figure out what to do. Anytime we would get near the cat he would hiss and try to attack us. This cat had all of its claws and was able to climb up door frames and walls, it was wild!

It took us a few days before we could get it out of the house as it refused to leave but we were finally able to get it to leave the house on it's own. While all of this was going down we also found a litter of kittens hidden in a box in his overgrown back yard that we had to figure out what to do with as well.

Needless to say, don't be an idiot like me and let a seller stay in the home after you close or you may get attacked by a pissed off cat!

Quote from @Marcus R.:

Lots of good thoughts and great points on both sides.

In its literal definition I think a primary house is an asset.  

But for the sake of this argument, I view it as more of a tool.  Could be good or bad depending on how its used. No different than a car - Could be a mode of transportation, a weapon, a hobby, a status symbol, a family heirloom, etc...

A primary house when used correctly could be a wealth generator, safe place, home business, community gathering place or it could be a financial drag, a source of stress, etc...

Depends on the user and how it's used

I agree with you on your take.

I like to break down assets into 2 different categories. Let's call them class 1 and class 2 assets.

Class 1 assets are those that provide income without you needing to work i.e. rental properties, stocks, bonds, etc. This is what you see a lot of investors focus on, Robert K. especially.

Class 2 assets are tools/instruments that allow you to maximize your income. A hammer is an asset to a carpenter but a liability to a lawyer. A car is an asset to a delivery driver but becomes a liability when you start collecting them.

I see investors only want to invest in class 1 assets because it means little to no work for them. For experienced investors they get the luxury to do this sort of thing. For myself and many other up and coming investors we also need to focus on and make smart choices on our class 2 assets. I see a lot of people want to bash on class 2 assets because they have to actually work to make it an asset. It may mean work but to think you don't have to work hard on your way to becoming rich is a lie that needs to stop being sold. 

Quote from @Ben Lin:

RK suggested you buy your primary with cash like his rich dad. I would rather rent and build wealth until I can buy a primary with cash. Renting also makes you hungrier to build wealth. When I was young I didn’t care where I was living I just wanted to build wealth as fast as I could. Owning a primary with a high mortgage will definitely slow down your financial goals. 

I would argue renting can be cash flow. Just calculate how much is your holding cost of your primary, buy a rental that produces the same amount, and lastly rent something cheaper than your rental income 😁. 

You bring up a point that almost everyone overlooked. Whether you rent or you buy it's critical that you don't strap yourself with a large mortgage or rent payment. The focus should be on acquiring real assets and not keeping up with the Joneses.

It’s simple to understand that a personal house is a liability. It takes money from your pocket. But just as you mention, so does rent. They are both liabilities. Now it’s up to the individual to come up with the best option for their situation. Sometimes ownership makes sense, sometimes it makes sense to rent. There are a lot of factors to consider.

Here’s how I look at it. If I buy a house, I am responsible to fix anything that goes wrong. If the roof leaks, AC quits working, sewer line needs replaced, etc. I’m financially on the hook to pay for the repairs. Not only that but I am on the hook to find the contractors to come out and get the work done, which in today’s world is a massive headache itself. When you rent, you don’t have to pay for these expenses and you don’t have to line up the contractors.

The upside to buying is you are paying off a mortgage and hopefully gaining appreciation while you live in the house. That alone makes a lot of sense.

I know many people that have very busy lives and don’t want to spend time or money maintaining a house. If that’s the case renting is the way to go.

Time spent at your personal residence is probably the most important factor in my opinion. Will you be at the house for the next 25 years? Or do you move every 2-3 years? If you are going to be there for a few decades, it’s any easy decision, buy the house. If you will be moving around a lot, rent.

Robert’s book is a great, but everyone needs to take his advice and apply it to your own unique situation. I’ve always found it ironic that he bashes on the education system (rightfully so) yet gives advice to people in a 1 size fits all manner, just like the education system.

It's great to see you are eager to become successful, now you need to put in the work.

I would suggest finding different ways to bring value to those people you wish to become or would like to have as a mentor. Do they need you to bird dog properties? Do it. Help with managing their properties? Figure it out. Paint their properties, mow, pick up trash, etc.? Put your boots on and get after it.

It doesn't matter what it is they need, find a way to get in front of them and help them solve their problems. You are young enough now that your energy and time are a huge asset. Now go leverage it and go get what you want!

I'd also vote to keep the house. You have an asset that is fully paid off with a majority of your high cost Cap Ex projects recently completed (roof, HVAC, water heater). This makes for an overall less risky asset compared to a property with a mortgage and without these repairs. It's a great foundation to build your wealth.

You have started a great list and it covers most of the work needed to get a property rent ready.

I have always figured 2 man hours per year for turnover labor on a standard 2-3 bedroom home. So in your case it would be 4 man hours of labor on an average house. Anything above this would be charged to the tenant. 

You will need to use your judgement on the time it takes to get a property ready. If it's a light turnover you can get it knocked out in a day depending if you are doing it yourself or you are outsourcing different trades (handyman, cleaners, landscapers, etc.) But you may also consider if you want to do any repairs above and beyond the normal wear and tear. Maybe you want to update different parts of the house. Make sure to take all of it into consideration.

It's also smart to come up with a process when you do your turnover work to stay efficient. I always do a room by room walk through and come up with a scope of work. Within the scope of work I determine if it was tenant damage, normal wear and tear, or something I want to upgrade on the house. Once that is figured I get the materials and tools necessary to get the work done or you can hire the right people to get the work done. Document anything that you will charge to the tenant with photo documentation.

Quote from @Bob S.:

Realtors IMO provide zero value. I do more work than them. I have done about 500, yes 500 deals in my market never using an agent, all off market cash. Even when I have purchased my personal property properties, I do all the work. I find them, they show up not knowing anything about the property. 

I am currently looking for a new place in S FL, well guess who found 8 out of the 10 I am going to see tomorrow! As an investor, PM co is priceless I tell everyone never buy a rental without a team in place. Do not try and self-manage, it will not end well. Do you know how to evict, how to deal when the tenant falls behind? PM feels are meaningless. I read horror stories daily on BP . Real estate is just about numbers, so know your numbers. its not rocket science. 

Good luck 

 I've had the same issues with agents as well. They only care about getting the transaction done and paid out with as little work as possible. I haven't done as many deals as you but I have found every single one of my deals, the agent only set up the showing and some paperwork and got paid a commission. I know there are good agents out there but they are really hard to find.

I actually self manage my properties as I have a background in construction project management so it's fairly similar. There are way more headaches managing properties than there are in any other part of RE investing. That's why I've always thought, why would anyone manage properties for pennies while other services get paid very well? It doesn't seem like a sustainable model in my opinion.

Quote from @Mike Dymski:

Deal flow is real estate investing; so, a good agent is a necessity (absent direct marketing).  We have to buy right and add value to absorb the inefficiency of 3rd party management over the life cycle of the investment.  Otherwise, precise execution is required and that will not happen with other parties involved.

 It seems like you strategize your investing around the inefficiencies of less than adequate PM companies. This is a very common way I see investors deal with the same problem. 

Do you think that you would pay a premium for a good PM company that can actually be an asset to your investing, rather than a liability that needs to be managed as such?

It seems to me that good PM companies are truly hard to find as they are compensated so little for handling majority of the headaches that come along with RE investing. I don't know many people that are lining up to get paid low wages to handle that kind of work. 

Quote from @Bill B.:

Cut your pm payback time in half as 90% of sales are split among two different realtors. Cut it even further as the realtor doesn’t get to keep it all. Cut it even further as almost every pm has a placement fee. Suddenly you’re at 1 year, maybe 2. And since you’ll be signing at least a 1 year contract with the pm it seems pretty even. Especially when you hold th property for 10-20 years and suddenly the pm makes 10x as much as the realtor. 

But are you saying you’re going to go looking for a bad pm if you find a good realtor or a bad realtor if you find a good pm? That’s sounds kind of dumb.

Ps. While I would never hire a solo realtor to be my “PM”. My PM happens to have several realtors along with their Hoa, repair, placement, advertising, and billing people. And I’m happy to say they hire great realtors who are focused on investment properties and making you happy as you’re going to be with their company for 10+ years. Not a couple months like a regular realtor. 

The way you broke it up you are comparing apples and oranges. The actual property manager doesn't get paid all of they PM fee that the company charges to manage the property either. I was looking at it from a macro level on what is paid for the different services on a single deal.

I didn't think I implied that I would hire a bad pm or agent. I wanted to compare a good agent and a good PM. I thought it was pretty clear in the title of the post.

It sounds like your PM got into different services that are more profitable than property management which I have seen done a lot.