All Forum Posts by: Jim K.

Quote from @K S.:

Quote from @Peter Vekselman:

Quote from @K S.:

Herein lies the rub with me, you do consulting and you're an agent. Many of these comments are sellers of something. I'm just trying to be realistic with my actual experience. The reason why real estate has become unaffordable for the middle class is because we have too many consultants, books, seminars, videos, websites like this etc. It's almost no different than pumping up a stock. We probably don't need more resources

 Im confused.  Are you saying that a reason real estate has gone up in value is investors know too much.  and we need to dumb this industry down?  i dont understand...

 I never mentioned what needs to happen but yes, in the mid 2000s homes were affordable but now investing in a single family home has become a trillion dollar industry that started with the explosion of books, siminars, DVDs and websites and in effect we had small investors buy up homes but now even Blackrock, vanguard and wall street are all in playing the game like it's a stock which is partly to blame for the explosion in prices. Soon, homes will only be owned via generational wealth passed down from heirs and everyone else will rent from an institution who might have a monopoly on rent control. But maybe that problem is not as bad as I make it out to sound although I counted 8% of open door owned homes alone in one zip code I searched for. Opened up zillow and took all the listings and filtered open door. Makes you think that maybe resources aren't a problem.

LOL, owned via generational wealth and by professional handymen and contracting outfits who can bring aging properties back to functionality at a fraction of the cost of the hands-off out-of-area investor.

In the land of the blind, the one-eyed man is king.

I'd sell the duplex, Jillian. Sell the thing and get out of aging buildings. My wife and I make money on them, but it's a niche. I bought the duplex I live in when we were already in the life -- I had done multiple renovations and lipsticks flips on properties and apartments myself, had more my basic stock of tools in place, had my library of how-to books, had a few friends in the business I could ask for advice when needed.

My over-under duplex was built between 1923 and 1927 for a local heiress, so I know exactly what it's like to live in a 100-year-old duplex. It still has a few problems, but I think I'm managing them. The boiler from the only major renovation the duplex ever went through, in 1945, and still works, but I already have the money in my capex fund to change it in an instant and the name of the guy who will change it in my cell phone. It took me three years of all my spare time to renovate the top apartment to a hardened rentable condition and the bottom apartment to a livable, owner-occupied condition. There were twenty-some windows per apartment and I had to change out at least thirty of them upstairs and downstairs. All the upstairs cast-iron drainage has been replaced. Every switch, outlet, and light fixture upstairs has been replaced. I had to brace and rebuild part of the upstairs balcony floor before I waterproofed and tiled it. I had to remediate the absestos adhesive under the resilient flooring in the kitchen and large pantry before I ripped all the luan plywood up and the 3/4 oak flooring underneath it with plywood over the diagonal planks, then cement board, then tile. I had to refinish the oak floors in the rest of the upstairs. The apartment upstairs is 1760 ft2. In the 1950s, they hosted a wedding up there in the open-plan combined sunroom, living room, and dining room. You can imagine how much fun the floor work and painting was.

The wiring of the both kitchens and bathroom has been fully replaced. I had to cover the box gutters and hang new gutters. I had to re-side a part of the building. I had to replace an exterior retaining wall and drainage and put in a slab for a shed out back that does double duty as drainage protection for my electrical boxes below in the basement. There are three new screw jacks in that basement as well. The duplex is solid now, but there's still more to be done.

The cost to do all this would have been prohibitive to anyone other than a capable general residential handyman. Even the time investment for the learning necessary to pull this off would not have made sense if I were someone else, let alone a full-time working single mother. And lastly, anyone else could never have really been sure that they could turn this old duplex into anything other than a full-on money pit. The former owner very obviously gave up and sold me the property for $45K after he'd had ten windows replaced, the roof redone, repointed two sides of this structure, and had a Section 8 voucher tenant shatter her leg on the poorly maintained external stairs and move out on him in the middle of the night.

I just don't think staying in that duplex and entering this niche makes a lot of sense for you. I certainly couldn't have turned myself into the handyman I needed to be for our business without my wife's committed and constant financial and personal support (I had a part-time W2 job and she had both full-time and part-time jobs during the renovation) -- absolutely no way.

Quote from @K S.:

Ain't that the truth. A monkey could have made money in Pittsburgh if it bought in 2012. I knew next to nothing and I certainly did.

Another piece of the truth is that some people are simply eminently unsuited to investing in mutual funds. We got to six figures in VTSAX before we realized we would go mental with the total lack of control over our investments. I just don't think it's possible for me to got to a website and check my net worth every day or week for the next thirty years, and voting for (to pick a hypothetical example out of the blue) any spray-tanned clown with an improbable bouffant coiffure who promised to make the stock market go up.

Quote from @Scott Trench:

What is "success"? What is an "above average lifestyle"? 

Who's happier? The investors making $1M per year, with a huge team, 1,000s of units, and a pile of investors? Or the investor with a paid off house hack, single paid off renal, small 401(k) and after-tax brokerage account? 

Both may be happy. Both may be unhappy. One might jetset around the world, become instafamous. OR, they might feel levered to their eyeballs, swamped with problems, and sick to the pit of their stomach that they can't meet the expectations they set for their thousands of investors who trusted them. 

The other might be completely content, walking their dog through the park at 2:00 PM on Tuesday at age 35, with the neighbors wondering what they heck they do all day, achieving fitness goals, and mastering meditation. Or they might be bored out of their minds, and can't stand the fact that they didn't pursue their maximum potential. 

There's no right answer in this business. But, I will say, that for me personally, the "Small and Mighty" portfolio is really attractive. There is a growing appeal to declaring that whatever "enough" is from this business, that I have achieved it. Ignoring the math and simply focusing on deleveraging and creating increasing amounts of freedom. 

As @Jim K. mentioned, this industry is dominated by investors with 10 or fewer properties. 60% of single family rentals are owned by investors with 1 or 2 properties outside of their primary. To declare that these folks are not a "success" when many of them may have created hundreds of thousands of dollars in wealth, or drive $10,000+ in cash flow from their properties, as part of a complete portfolio is too simplistic. 

But, to acknowledge the truth of your post - there are also many investors who, starry eyed, want to become mega-millionaires, and can't or won't see the implications, risk, and secrets behind the social media success of many influencers. And there are also those who just compulsively can't stop trying to double the penny, who will never stop doubling down, and therefore ultimately go bust in the relentless pursuit of billions. 

RE is a nuanced game. There are 17M+ investors. A lot more than 5% will call it "successful" for them. But yes, likely less than 5% of them will go on to purchase more than 10 properties, and of that cohort, some fraction will not actually achieve the wealth and freedom that they seek. 

Thanks so much for chiming in here, Scott.

I think this is why it galls it so much when I say what I think are very reasonable things about not taking suicidal risks in this business and approaching what must be done with the right methodical mindset, and random BP posters accuse me of killing people's dreams.

I own more than 10 units. I'm very much in the five percent. I'm the last guy to discourage anyone from putting their money in real estate.

But if you're going to go into this thing, you go in it to win it, and only the hand of God should have the power to make you lie down and die. For the hundredth time in my posts:

“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 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 and comes up short again and again, because there is no effort without error or shortcoming, but who knows the 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 he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.”

Theodore Roosevelt, 1910

Quote from @James Hamling:

So the ugly truth is the most successful approach in REI today is either the get-rich-slow program, or start selling the "secrets to success" and apparently it doesn't have to actually result in any real success to sell.

It just has to push the right psychological buttons.

I still remember the 3-day seminar I went to with a friend. Beforehand, I told him flat-out, "Believe nothing you hear. They're trying to rip you off." The presenter of this seminar actually had to put up a disclaimer on his slide projector that included the statement, "In real estate investing, most people make nothing." every hour of the seminar or so.

My friend spent the first day joking about my paranoia.

By the third day he was ready to mortgage his house if I went half-in with him to buy this program's Diamond level coaching. With absolutely no exaggeration, I literally saw this man's brain washed right in front of me.

We're not friends anymore.

@Peter Vekselman

"Success being defined by someone being able to live above average lifestyle strictly based upon their earnings in real estate."

With respect and having read your profile, I really don't think that's the right working definition of success in REI. I wish this industry would move away from that sort of definition. It implies a transition from a job as an employee to a life of ease as an investor.

How many times in these forums do we get people who state they hate their jobs and they want to get into real estate as a way to quit and do something else? Then these same people put some kind of timeline on their success, two years, three years to quitting, etc. The more we encourage this mindset, the more we tend to market REI as a form of get-rich-quick alternative investing, right up there with pyramid confidence schemes like MLM and cryptocurrency.

@Scott Trench has the numbers on this, but I think the majority of private rental property investors max out at three properties, with only a few having five or more, and a vanishingly small minority in the more-than-twenty range.

I remember this one kid, a few years ago, insisting here in the forums that he was ready to run multiple strings of BRRRRs in different cities right after graduating college. He'd never done a single renovation in his life, but oh yeah, he was READY. Give him a few hundred thou and he'd give it all back to you plus 10% in three years or less.

Then there's the other part of it: what's an above-average lifestyle? Being able to live in a suburban McMansion and drive a Lambo, middle-class heaven in America? Looking for love in the club with bottle service or making it rain on strippers every Friday and Saturday night? The second you use the phrase "above-average lifestyle" you're trawling for takers with a below-average IQ.

Why do we never define REI success in any sort of terms that are meaningful to people of any substance and intelligence? Financial security for your retirement. A nest egg to pass on to your children. The basis of a philanthropic grant to make the world better as you see fit. Oh no, it's always an Instagram-ready lifestyle and a car that practically has your prescription for boner pills writ large fender-to-fender on both sides.

@Michael Smythe

I continue to believe that there is an audience out there that is willing to listen to some hard truths and make well-considered, decisive choices about real estate investing. The problem is that it's so much easier to court the much larger feebleminded and weak-willed audience of habitual losers who will eat up any get-rich-quick bullcrap about real estate that you properly package for them, eat it up all day long and clamor for more.

@Matthew Irish-Jones

I still think these are the smartest basic points brought up in many a day in these forums. But apparently, no one wants to listen to sanity. Everyone wants to BRRRR a string of crapshacks in the high hood and remote manage it from a yacht in the Keys between the tarpons they reel in.

More money for us, I guess, but still, disappointing.

@Matthew Irish-Jones

I've never seen you claim to be a great investor. I am pretty sure, however, that you are not a broke investor who wonders how he lost all his money on sham assets.

Quote from @Marcus Auerbach:

YES!! 100%.

We have seen an influx of poor OOS investors looking at Milwaukee as if this would be a candy store and there were no local investors..

The worst part for the local community is that OOS investors are often times totally detached from the comunity, they literally could not care less. And not seening the condition in person makes it so much easier to be ignorant and just force the PM to do things that they would never suggest. Neglected exteriors, garbage outside, dead trees, broken driveways, DNS citations... and our local media picks up on it and they give landlords a bad name, which shapes public opinion and is starting to impact policy.. NOT GOOD!

But not all OOS are like that. We only work with OOS investors who are willing to fly to MKE and spend a couple days here, understand what a 60 or 100 year old property needs and are willing to actually do it and invest in the condition of their assets (which is long term 100% in their own best interest!)

Sadly, many budding OOS investors really do think that professional property managers, like some sort of demigods of real estate investing, will be able to circumvent the laws of nature and make them the big bucks in the ghetto.

Every time I hear a landlord complain about the rise of tenant unions and eviction moratoriums and the tons on tons of bad press we landlords get I feel like screaming at them: "HOW DO YOU THINK WE GOT HERE???" It certainly didn't all happen by accident.