All Forum Posts by: Jim K.

Over the last decade or so, my wife and I have put together a nice little rental portfolio, we've really grown as landlords and property managers, and we have a nice little life that's just getting nicer. Net rental income has almost completely replaced what we used to make in our jobs. We can see the finish line, when we call it quits, sell and put out money into more stable assets, retire to a nice sunny place far from Pittsburgh, and enjoy our lives.

Our one regret is that we didn't have children. It just wasn't in the cards for us. In the beginning, we didn't really know what we were missing, but later, as the assets started to grow in place, we both realized that if we did have children, and we left them what we had, we would more or less be inviting destruction and misery on their heads in most cases. Raising kids when rich is a hard, thankless job, and most rich parents fail miserably at it. I can only imagine in stark terror the mistakes I would have made as a young man if I had had the money to make them.

For those of you who have met with some success and have children, what's the end plan? I know there are some guys here who stay up nights figuring out how to pass generational wealth to their children successfully, looking at you, @Steve Vaughan.

What are the rest of you doing?

What's missing from much of this discussion is a real understanding of what the property is, ten acres in the heart of upstate New York Finger Lakes wine country, the desirability of that property as a vacation property on the one hand and the value of it as a vineyard on the other, and how local government (especially Yates County) is systematically trying to fight against the encroachment of moneyed OOS vacation-home buyers/STR operators in the area.

This is not some bland normal place where normal people live and operate. Finger Lakes wine country is a world unto itself.

Quote from @Yael Fuerst:

I'm looking to refinance my existing investment property to purchase one in Pittsburgh for the purpose of short term rental am crazy to do it in the current market situation with Airbnb being what it is ? 

 I think it's not the best idea to do long-distance Airbnb in the City of Pittsburgh proper right now.  Crazy, no. But regulation right now could go either way.

Quote from @Prabhakar Jey:

Thank you all for the valuable information provided. I had to rescind the offer as this is my first investment property and I don't have any experience/enough knowledge of potential damage and fix required.

The moisture was initially identified by the pest inspection company, which was done as part of the sale process and the owner didn't see it coming. So not sure how long the issue was there. The builder says it is fixed (the builder patched the roof, replaced a tile, dried the walls using fan), but the leak detection test still identified elevated moisture levels in the walls and they couldn't pinpoint the source of the leak (There was no leaks in the pipes)

So now someone else gets this solid opportunity, while you continue to search a more limited pool of opportunities than that someone else. I'm not trying to second-guess your decision, I'm not in your shoes. However, down the road in your property ownership, you will most certainly need to be able to deal with structurally imperfect properties and it would be best to start learning somewhere. This leak was really quite a minor issue from a technical standpoint.

Which, in turn, is the thing about this thread that I found troublesome. A number of comments enthusiastically endorsed cutting out large pieces of drywall just to start assessing this problem. Really?

It's 2024, people. A lighted inspection camera/borescope costs fifty bucks. Your starting point in assessing something like this is not to chop out four square feet of drywall. The Drywall Hack from Way Back is past its expiration date.

Drill some small, easily patched holes and take a look down the stud bays of the wall in question (they will typically not be wider than 15 inches) before you start in on the major wall surgeries.

@Michael Snider-Held

Ace, I feel for you. I grew up in Horseheads, south of you.

It's 10 acres with a view of Keuka Lake, and from your description of how this has gone down, I'll bet it's Yates County. The heart of the heart of wine country. I don't think the people running the local show give a tinker's damn about you, and probably more than one local multimillionaire muckety-muck wants your land to grow wine on it.

If I were you, I would let go. Don't tell me your parents didn't know the score before they passed, that there was no fighting fair with land like this and the vultures who want at it. They wouldn't want this for you, who would? This is an inheritance, not a millstone around your neck. If you do fight to keep it, and go down (which you most certainly will), the term, "an unpitied sacrifice in a contemptible struggle" comes to mind.

Sell it, use the money to set your net worth on an increasing trajectory, turn that inheritance into something positive.

I'm sorry to be giving you this advice.

The best investment classes are cash-for-gold places, online gambling, and escort services. What is this baloney? Real estate is not even in the legal top ten.

@Alecia Loveless

One thing I'd like to add to the discussion is that the drawbacks to having a tenant like this in an 8-unit usually far outweigh the advantages of getting rid of them quickly and effectively. When someone like this gets a notice on their door, disappears, and then you renovate and rent the unit afterwards, the whole process really encourages the others to choose the right as you give them to see the right.

Quote from @Jeremiah Phipps:

Quote from @Jim K.:

@Sarah Ali

These are words I have learned to live by, and I offer them to you with my best wishes for your future actions.

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

Theodore Roosevelt

That's such a polite way of saying, you do you? I Do me and we'll see who gets the finish line first LOL!!!

Wow. That's not at all what I'm about when talking to people who are asking for help, Jeremiah.

I'm trying to tell the OP that ultimately, the critics are just critics, and when you're out there doing things and they're not, they don't matter.

I'm trying to tell the OP that failure is a lot more useful than not trying.

I've met a LOT of people who don't try because they're terrified of failure.

@Sarah Ali

These are words I have learned to live by, and I offer them to you with my best wishes for your future actions.

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

Theodore Roosevelt

Quote from @Sarah Ali:

Quote from @Dan H.:

I do not view you as too old, but I question your timing.   RE performed outstanding from 2011 to 2021.   Appreciation was great, cash flow was great, few areas had cracked down on STRs, etc.  

interest rates have more than doubled since the end of 2021.   Prices have not fallen due to low inventory due to how many owners have loans far below current rates. Low supply leads to rising prices.   So we have all time high in RE prices and interest rates near highest in many years.  Combined this leads to high cost of leveraged purchases. 

In virtually all large city markets it is currently cheaper to rent than to own.  This implies in those markets the average residential investment purchase is cash flow negative. 

In addition, active residential RE is not passive even if using a PM.   It requires more effort/work to be successful than most non experienced investors realize.  

Normally this may be where I suggest passive RE options such as a limited partner in a syndication, but in the last couple of years many syndications are struggling.. So similar to golden era of active RE having possibly passed due to higher interest rates, I fear it may also be true for syndications (I am in one syndication that I fear an equity loss which would be my first time if this comes to pass).  

Note RE has been an outstanding investment in recent times, but it will not always be the best investment option.   In the case of the OP, they would be entering a tough RE market with virtually no knowledge including no understanding of the effort required and the risks. 

I recommend people enter RE at this time only if it is a passion and they are extremely motivated and hard working.  These people can succeed even in a tough RE market.  There will be many people who entered RE in 2023 that fail in large part because they did not have a good understanding of the underwriting, thought RE investing was more passive than it is, expected interest rates to drop in the short term, and/or over leveraged.  

RE investing was easy a couple years ago.  The cash flow was far better due to lower interest rates and the RE appreciation was outstanding.  It is different today.  

By the way I have not purchased since Dec 2021 (purchased $4m that month) because we do mostly BRRRR (and no flips) and my underwriting shows after refinancing that I would be large negative cash flow.

Good luck

 I know, I missed the bus... If RE is no longer a good option, do you have any other suggestions? 

Hey Sarah, if you're going to give up THAT easily, when random strangers on the interwebs just have to quote a few stats and numbers at you to make you fold up your tent and wander off into the night...well, the first thing you need to work on is telling anyone who doubts your resolve to go eat their dinner out of a dumpster.