All Forum Posts by: Daniel Haberkost

@Marian Smith you make several good points here which is indicative of the overarching moral. There is no right or wrong answer because this isn’t a simple dichotomy.

Whether or not self managing vs hiring a property manager is best for someone is entirely dependent on their situation, goals and skill set.

I’m not sure why so many people on BP want to act as if everything is binary (“multi family is better than single” “invest for cash flow or appreciation” etc). These are complex issues that are entirely dependent on the specific context. Most arguments FOR one side can also be turned into arguments AGAINST that point of view. Very few things are black and white.

I have my tenants set up everything in their name but I have a separate "landlord account" where I'm notified and everything is immediately transferred to my name if service is stopped due to nonpayment. I would call your local utility company and see if you can have something similar set up. 

Prior to having the landlord account, I did have issue with a tenant not paying the water bill but thankfully by the time I received a letter letting me know he had already handled it. 

@Yaamu Camara Sounds like you've started the due diligence process! What part of town are they in?

I'm from just outside of Cleveland and being that you're investing from out of state the biggest piece of advice I can give is to be careful of the area, make sure you have someone on the ground who knows the city. It can be quite tempting when on paper you can buy a duplex for next to nothing and it looks like it cash flows like crazy but there are numerous areas on the east side that I would stay away from entirely. As a corollary, make sure you have a solid property manager as well! Do you have people who are local who are helping you?

One more thought, a lot of the construction there is from the first half of the 20th century, budget for fairly high cap ex & repairs/maintenance when running your numbers.  

@Brandon Reed it's funny because I've only been in the real estate investing world for several years yet I've already seen quite a few new investors come and go. A lot of people I met when I was just getting started stopped coming to meetups and never bought anything. 

People hear a podcast or read a book about somebody who made a fortune and quit their job and they suddenly want to get in. They start reading books, listening to BiggerPockets and attending local meetups with lots of enthusiasm. They ask everyone whether they should wholesale, BRRRR, house hack, etc with no clear direction or goal other than "financial independence". Then, after 3-4 months most of them disappear. They realize this takes time/effort/capital and become discouraged. I'd say that not having a clear goal in mind, coupled with giving up too early, are two of the biggest mistakes I see new investors make. If you don't know where you're trying to go it's hard to decide which strategy/asset class to pursue and once you have decided you have to be relentless in your pursuit and expect to get rejected over and over again. Having a background in sales is so helpful.

The other mistake I see, often in new investors, is severe over-leveraging with marginal disposal income/savings. Real estate requires a lot of capital, period. It doesn't have to be your capital necessarily but if your broke that needs to be addressed first. This is especially relevant now as so many landlords are struggling with the moratoriums on evictions and a reduction in rental income. You need access to liquid capital somewhere and many new investors don't realize it. This has been especially true over the last few years as the bull market made everyone's properties appreciate with very low vacancy and strong rents but "the tide has gone out" as they say so many people are likely to lost their properties. 

@Alyxandria Welch I started by house hacking, it’s an easy way to begin investing and when you don’t have monthly housing expense it’s so much easier to save capital for future projects. How far along are you in the learning process?

As far as finding a mentor, I would recommend your local RE meetups for that. Don’t go around asking for a mentor, find an investor who needs help in their business and fill the need for them. That’s how I found mine!

@Account Closed 

"Acronyms sell books and monthly membership fees. Responsible leverage builds generational wealth"

I couldn't' agree with that more.

@Justin Hui What's your long term goal? Why do you want to invest in real estate? Knowing what you're looking to accomplish makes it much easier to decide how to start. 

@Joe M. For me it doesn’t make me rethink RE investing- it simply reinforces principles I already believed were important such as.

1.) Vetting your tenants properly. If your tenants are at all decent people and you have any rapport with them they won’t prefer to live in your house rent free (and they’ll realize the eviction moratorium won’t last forever). I had one tenant who was potentially going to have trouble paying so she contacted me weeks ahead of time and we talked through solutions. Now this probably isn’t applicable to people who have dozens and dozens of units but most BP members are small time landlords like myself. If you screen your tenants thoroughly then government intervention is less of an issue.

2.) Avoiding ultra-liberal markets. This doesn’t need much explanation- see Seattle

3.) Keep proper reserves. If you have proper cash reserves on hand then short term hardships like this don’t really matter in the long run.

As time goes on laws will continually become more and more tenant friendly and I don’t believe there is anything we can do about it. But real estate offers such attractive returns I just budget that reality into my planning.

If you're a buy and hold investor who is in it for the long-term and you capitalize your business properly/buy undervalued assets, the ups and downs of the market shouldn't matter much. I'm actually somewhat disappointed that prices have not dropped at all where I am, they've actually continued to increase and things are rapidly heating back up now that businesses are reopening. 

To the original point, as long as I can avoid vacancy and my tenants pay I'm not worried about the short term changes in my properties' values.

You make quite a few great points here Matt. Personally, this has taught & or reinforced the following for me (unsurprisingly, some are very similar to yours). 

1.) Reserves are essential! Early this year I kept looking at cash I had set aside thinking it was excessive and that I should have more of it invested. When COVID hit several of my income streams dried up and having that cash has made the whole experience easier. I haven't had to tap into it yet, but it's helped me to sleep at night! And now that I've adapted to our current situation I can deploy (some) of it when the right deal comes along. 

2.) Don't let your expenses creep up with your income. Much like my first example, I had begun to allow some of my expenses to needlessly increase. When the lock down hit I corrected that immediately and will keep it that way. 

3.) Nobody knows the future/Each recession is different. You touched on the toxicity of constant consumption of social media/news and this goes hand in had with that. If you pay too much attention to these news (I use that term generously) sources you'll frequently hear people trying to predict when/how the market will crash/what the recession will be like and it's easy to start to buy into it. Outside of the medical world, nobody had a clue this was coming and I doubt anyone thought a scenario could occur that caused retail/restaurants to be shutdown nationwide. Sure, we can generalize that the market will cycle up and down but to try and get specific is just ridiculous. 

 4.) The overarching principles do not change. Before corona I capitalized my business conservatively and was looking for undervalued real estate, in growing parts of town that cash flows from day 1. Since corona hit I'm capitalizing my business conservatively and looking for undervalued real estate, in growing parts of town, that will cash flow from day 1. About a month ago there was a trending BP article titled "Dave Ramsey looks like a genius right now" which I found to be especially irritating. If you thought Dave Ramsey was a genius 6 months ago then you likely should still think that way and vice versa. The principles of investing don't change because of a recession. 

These are the main items that COVID has brought to the forefront of my mind! Times like these really just take us back to the basics.