All Forum Posts by: Dave G.

@Patrick Flanagan First off, congrats on your first deal. I don't think one is necessarily better over the other. There are quantitative and qualitative considerations for each investor that goes into what they invest in. For me, I only have single family properties, but not because I prefer them necessarily. They were the deals I found and could structure as a cash offer. This was the purchase level at which I was comfortable for the investment objective I was pursuing. Offering cash gave me the competitive advantage against other offers. So for me, and I suspect a lot of "small time" investors, it was based on our personal financial resources and investing objective. 

Now if I had a lot of capital that I needed to deploy, strictly speaking multi is the way to go when you do the numbers. Even a 4-plex that you're buying has an economy of scale aspect versus a SFR in that there is only one roof to replace. And you are able to transact one acquisition for 4 units. And, as you mentioned, if you have one vacancy, you are still at 75% of full revenue versus 0% with an SFR. These are big advantages that I, as an SFR investor, don't not enjoy. Advantages for the SFR investor - depending on your market, there are a lot more SFR investment opportunities than there are MF opportunities to choose from. And when you sell an SFR, you have a bigger buyers market to sell to since you can sell to investors and owner-occupant. Multi-fam only sells to investors, of which there are a lot fewer.

I am at a point in my life where I am not really in acquisition mode anymore. Plus I think the prices are a little crazy now. But if I was going to continue buying, it would absolutely be what you're doing, looking a small multi-unit properties from 4-plexes on up. I would be doing a 1031 with my SFRs.

Some obvious things that I would caution you on as a landlord. Be sure you have sufficient cash flow and cash reserves to handle maintenance issues. When I was a young man like you (assumed by your pic), I had 3 rentals by the time I was 23 years old. There was no internet and no BP at this time in the early 1990s to learn from. I had poor cash flow and no reserves. Maint issues crushed me and I had to dump all three properties. If I had done better math with cash flow and had a few thou at least in reserves, this would not have happened. I learned an expensive lesson. Please don't let this happen to you. 

Best of luck to you,
Dave

@Hunter Vigneault I was wondering the same question about @Michael Feeley using Opendoor. I am not fully versed in how Opendoor works, but from what I know it sounds like the Carvana of real estate. People that use the service pay a big premium for convenience and time. 

@Ubaldo M Gomez at what point in my response did I accuse all people in IL are dangerous? Did you not read the part that I am in Chicago on business frequently and have family there? Do you think I would do that if all those people were dangerous? 

Somebody posted a question asking for thoughts and opinions and I offered mine. That what we do on Bigger Pockets. We share ideas, thoughts and experiences on this real estate business platform. And nothing says we all have to agree. So how about you keep your imaginative rants off of BP and limit them to your Twitter account.

@Julian Broyles As you explore teaming with folks, I would advise you to steer clear of folks like Mr. Gomez. A 50+ year old man challenged with both reading comprehension and composition skills. And someone who gets angry simply by a post that disagrees with his opinion. I wonder how such a sensitive person would manage a difficult tenant or challenging contractor situation. 

Absolutely sell it.

You attempted to help, but circumstances have not evolved as anticipated. This is not your fault, nor is it your problem. 

Time to move on.

If this is your personal residence, or you have lived there in 2 of the last 5 years, you will not owe capital gains. 

You've provided incomplete information regarding your question, but I would not keep a negative cash flow property hoping for higher sales proceeds at some point in the future. That's a high risk move to me.

@Julian Broyles are you asking this question as an investor or as someone that wants to move back home? The answers may be very different.

I too, am a transplant from Chicago, two decades before you. But I am there frequently on business and to see family. I grew up in the suburbs but have also spent a lot of time downtown.

Personally, I would never own rental property in IL (especially Chicago). It's a cesspool of a state, in terms of unfriendly business environment, corrupt government leadership and extreme fiscal mismanagement. And it's on a downward spiral. Recent legislation has passed at the state level that mirrors the mentality in Chicago leadership that has made that city increasingly more unsafe each year. 

Be very calculated if you are looking to move back. Or, if it's only an investment consideration, I would look elsewhere. I put IL in the same category as CA and NY in terms of would I ever own property or earn any kind of income there. Bottom of the barrel. 

Good luck to you.
Dave

@Gregory Schwartz this is a great topic you bring up and you've portrayed it in mathematically useful terms. I believe the >95% to <100% occupancy range is optimum. I agree with the supposition that 100% occupancy reflects leaving some money on the table. And agree with the qualitative considerations you've mentioned as they start to change the equation on case by case circumstances. 

I tell my prop managers to charge full market rent when placing a tenant and slightly less than market rent increases on renewal so as to not drive the departure of a good tenant. Of course this is in the red-hot Phoenix market so myself as the owner is in a position of strength right now. A different market may be a totally different story (Chicago? NYC?).  

Cheers,
Dave

@Luke Carl I think you need to re-read my post. I did not say that the properties would not book. These properties are booked solid. But when you get winter weather and the property becomes temporarily inaccessible to some or all of your customers, it will result in lost revenue, period.

@Brett Milde you need to calculate diminished rental income into your biz case due to seasonality and a market limited to 4x4 customers part of the year. I have been a customer of a VRBO cabin with a curved & inclined driveway with 5" of snow on it. It was not plowed or treated in any way. No way a car could have made it up to the cabin. My F250 4x4 made it ok. There was no communication from the owner that this condition existed, and could have easily resulted in an angry customer/bad review/cancelled rental. And this was over Xmas so it would have been big bucks ($400/night). So if you buy a STR like this you need to be vocal and clear on it in the listing and real-time. I have a friend who has and STR like this and has had to cancel bookings due to weather. And you don't want people to have an accident (slide into a tree or off an edge) on your property either. That could lead to bad things with insurance claims or even injuries.

Bottom line: Would I invest in a STR property like this? Absolutely, but you need to go in eyes wide open, run the numbers correctly and stay on top of it with winter weather managing the situation wisely with your customers.

@Jack Barkow My CPA charged me $600 for my state/federal filing last year and I have 6 rentals. He's done my taxes for 10 years and I believe he does a good job. I am able to send him inquiries during the year regarding questions I have, and he's advised me a couple times how to handle written correspondence from the IRS. He has never charged me for the additional contacts I've had with him. But I am also sensitive to not bother him much outside of the tax prep knowing that his time is not free. I might only send him one or two email questions during the year, and usually they are not hard ones.

That being said, markets can be very different for professional services and doing business in a state like IL probably costs more than in my state in terms of regulations, compliance and taxes. Should that account for 100% more than what I pay....not sure. If it was me I might shop around a bit to either validate the cost or consider making a change.