All Forum Posts by: Joseph M.

@Maxwell Milholland I think it really depends . Most people buy rental property with the goal of building up cash flow $100 or $200 a door per month . I agree with Jay it could make sense in certain situations if you are buying in an area with rent growth or has high historic appreciation . As rents go up you won’t be negative $200 a month for too long . Of course this is a more speculative play than buying something that cash flows . I can definitely see it being dangerous though having too many negative cash flow properties . Really depend on how much other income you have and how stable that income is . Buying negative cash flow and betting on appreciation did hurt a lot of people last crash .

@Steve K. , yeah that does make a lot of sense. I was one that suggested a license. I probably wouldn't recommend that to someone that doesn't have savings and has a lot of expenses to pay and family to support but I'm assuming the OP lives at home and doesn't have high overhead/expenses. 

People spend a lot of time and money trying to learn how to wholesale , but it seems to make more sense just to get a license in my opinion, opens up opportunities and the license costs relatively little time and money to obtain. 

@Charmayne Addison , I probably should have been more clear , I don't have any affiliation with the company  and I do not live in Cleveland or own any investments there. It sounds like you do know this area quite well so perhaps you might be one of the investors that James is talking about that would succeed with these properties. I have heard about East Cleveland and it does sound like a neglected area unfortunately. I do hope things can turn around. 

If you can purchase early in a neighborhood that shows the early signs of gentrification you can make quite a bit of money. I've seen this in L.A , but wasn't in a position to buy when prices were actually affordable.  There are now several "hot and hip" neighborhoods that used to be considered gang neighborhoods that people would avoid. All of Downtown L.A pretty much used to be viewed as undesirable to live in, but now it's a very hip and expensive place to live. I've noticed the same thing happening in other downtown areas. People appreciate the architecture and walkability of these older neighborhoods that were established before cars became popular.

Best of luck in your investing. 

@Charmayne Addison , the grading of neighborhoods and properties A,B C, D,F  is something widely used in the industry. 

There is a trend of people wanting to live in urban areas but these properties where  the $10,000 properties are aren't those types of neighborhoods at least today. You aren't going to be able to buy a house for $10,000 and then flip it for $200,000 or something if the local neighborhood doesn't support those prices. Although it sometimes seems like gentrification happens overnight , it never does. It usually takes decades. 

I think James Wise is just sharing what he has experienced actually working in these neighborhoods. If you spend enough time on Biggerpockets you will hear a lot of the same stories about lower end rental property. 

Actually the founder of Biggerpockets , Joshua Dorkin I remember when he was on the podcast several times he shared his experience of investing in lower end rentals and it wasn't a good experience. 

Like James Wise mentions they can be good investments for the right person. A local hands on type of owner that knows the neighborhoods. I think it is good that James is being upfront and sharing his experiences as it could help many investors avoid losing money.

No doubt there is more risk in these neighborhoods versus A/B . This is why the properties are priced so low. 

Originally posted by @Account Closed:

@Joseph M.   I am not sure where the money will go.  I just know it is going.  The Russians are leaving the very high end market.  That is not as much of a concern for most people on Biggerpockets.  Chinese investors are leaving the $200,000-$400,000 price range in North Texas.  That is having more of an impact.  As I have mentioned before some subdivisions in North Texas have 20+% homes owned by Chinese investors.

While this issue has been covered in the media, I noticed it before that.  It started here about two months ago when the average time on market was less that 30 days and the prices of listings started going down.  That is always a red flag.  So I decided to look up the sellers and all the players pushing the prices down were Chinese investors.  It has continued ever since.  Some of their listings say "Priced for quick sell".  Considering they do not have mortgages to be behind on, there is something else driving the change.

In Greece, I was talking about real estate.  I would ABSOLUTELY suggest finding a reputable Greek company to partner with.

 Oh ok I see what you mean. Since all real estate is local of course if one owns property in that area it would be a concern especially if you were looking to sell at the same time as the investors.  With Greece what type of cap rates are you looking at? Or is it more an appreciation type play? 

@Account Closed , yeah that is good you are upfront. 

Yeah with smaller properties it can make sense to self manage if one has a relatively small amount of units. I know most of the syndicators or larger investment firms look for large buildings because after a certain number of units you can have professional in house management just dedicated to the building. 

I know some longtime landlords in L.A with smaller buildings and they'll have a resident manager that handles most of the stuff so cost is low versus hiring professional property management ...but these are buildings with long term tenants so turnover is low. There is also rent control here in L.A which gives them an incentive to stay. They have their buildings paid off though so it's some nice income. 

I always thought it was kind of interesting they didn't scale up..but I guess they never needed to or had a desire to build some kind of big real estate empire. And these multi families today in L.A are selling for over $300,000 per unit these days so if they ever do decide to sell they'll be looking at a big payday ,they might be planning to leave them to their children not sure. 

It is pretty amazing how even one smaller building in a certain area that experiences big appreciation and rent growth can create generational wealth for families. 

@Ken Maddis, it may have been that one.. it seemed that it inflated the prices of local businesses in the area. A lot of small businesses seem to ask a lot more than the business is actually worth though.. and it's not like real estate where the sales prices are public. I imagine most small businesses do sell for quite a bit less than asking price. 

@Jay Hinrichs , yeah I agree , low end rentals can be profitable but likely have to be local like you said. Things can look great on paper, but a lot can go wrong and often does. For many that grew up and lived more a middle class lifestyle they probably can't imagine some of the scenarios that often occur in low income areas. 

I do have to hand it to brokers like James Wise that does show the ugly side of lower end rentals , trashed properties , evictions etc . I've seen some of his Youtube videos and they are pretty good . He's also in the management business of course so it's to his benefit to be upfront and set expectations versus painting a rosy picture like everything is going to be totally passive and turnkey ..just sit back and collect the check...and on the path to financial independence. 

@Nancy Zhao , it doesn't seem to have affected the U.S economy at least , we are seeing 4.1% GDP growth. 

https://www.forbes.com/sites/randybrown/2018/08/14...

For the housing market it doesn't seem there has been a large slowdown either. 

Dow almost to 26,000 today a year ago it was under 22,000. Where are the signs of the large slowdown here in the U.S?

@Christian Hutchinson , Yeah I remember there was a VISA program for those that bought a property over $500,000 I don't know if that is still around or not. I spent some time working in  Florida a few years back and there were many Venezuelans  and South Americans buying businesses there.  Venezuelans were eager to get their money out of course and considering how much worse the situation is they were smart to. You would need to have a certain number of employees for the visa. 

The Patel motel/hotel network is really interesting , I remember reading about it years ago. They started out more in the motel business but now they also own higher end locations like Hiltons etc.  Here is an article from a couple years ago. 

https://commercialobserver.com/2016/11/powerful-pa...