All Forum Posts by: John Barrett

@Vince Gethings If possible ask for the rent roll for the last three years as this will give you some context for how the property has performed over time. I would also use a site like niche.com to find out specifics on the city itself. In your analysis you can look at the large MSA to get a sense of how the overall economy in the area is performing. At the end of the day it really just comes down to how you feel about the area and how you expect it to perform over time. I would be more conservative on my estimates which it sounds like you are and understand you may need to be flexible on the sale. Best of luck to you.

We have pulled some equity out of properties that have seen significant run up in values and done a couple of 1031 exchanges to trade up into larger multifamily properties.  Currently planning on holding a larger cash position until prices start to adjust to the higher interest rate environment.  Cap rates are still really low and it doesn't make sense to move forward with the vast majority of listings. I am not interested in following the dumb money chasing every so called deal.

My opinion is that there will always be deals you just have to be positioned well to capture them.  Trading 1 for 2-4 seems reasonable but I wouldn't be feeling you have to make move.  

Best of luck.
 

@Deven Wolfe, while everyone's investment strategy differ, but I would not be looking at a property that has negative cashflow unless you are planning to house hack the property.  Properties are starting to sit on the market longer and it appears that the market is starting to turn.  As such, I would advise to wait and find a property that cash flows.

Best of luck.

@Kyle Gillespie this was s the thing I always hated about listening to investment “experts” they never would tell you what to do in a specific situation. I actually understand now why they never tell people what to do. No one knows your investing criteria. What return you are looking for, the level of risk you are comfortable with or the other parts of your financial life or lIfe goals. For me, I want to make a double digit return on my money and I look for properties that I can increase the NOI through upgrading the property or management. I generally look for properties that are 1975 or newer unless there is a very compelling reason. Hopefully this was somewhat helpful for you.

@Matthew Baltzell Finding / identifying which opportunities make sense to move forward with. That is besides the normal issues of over priced “value adds” and the difficulty of finding and scheduling contractors. We have our strategy and formula figure out for the most part but given the lack of inventory it’s hard to stay focused on the properties that move you closer to the goal.

@Daniel O.

While Seattle is pretty crazy with regards to laws restricting how landlords manage their rentals, I haven't found King County as a whole to be too bad.  I think there are opportunities for good rentals within King County but outside of Seattle city limits.  Additionally, if you are able to become really good at navigating the new tenant laws this could be a competitive advantage for you.

With regards to Section 8, I would just caution you to really look at the values they will pay in whatever zip code your property would be located in.  In my experience I have not found the rates they pay to be above market value.  In most cases they seem to be roughly $50 - 100 under market value.  Also be sure to look at what other requirements there are as sometimes the values need to include W/S/G depending on what agency you are working with.

Best of luck

Hi Kyle,

Keith & Theo have given you some really good advice. You will need actual financials to determine at what price this property makes sense to move forward with.

I have seen this property listed on loopnet for quite some time and it appears the owner is having trouble selling it.  My personal opinion is the list price is too high for the property based on the current rents.  I do not know the Quincy market but it appears that rents overall are lower than other areas.  Knowing where this building fits in the larger market will guide you on what rents could be possible in your area and what level of improvements would be needed to command those higher rents.  

The age of the property is another factor to really look at.  May of the systems will likely need some maintenance if not complete upgrades.  Since the property was built in 1950 that means it likely has galvanized pipes.  I would recommend having those inspected as re-piping a building will greatly impact your expenses and it's not an improvement that will drive higher rents.

My really quick analysis tells me that this property is not likely to cash flow after taking into account the likely capex and management expenses.  If this is something you are really interested in I would suggest negotiating for a lower price and more favorable terms.

Best of luck.

Hi James,

For multifamily properties the market is still strong but has been cooling (properties days on market is increasing & price reductions).  While the number of days a property is on the market is tracking higher, cap rates are not really reflecting the higher cost of borrowing yet.  As such, investors need to really scrutinize their numbers and have adequate cash reserves.  In this area, my belief is that you can make a 1-2% deal but it will be based on what you can do with a property (value add/reposition). 

I think the next big question for the NW besides HQ2 will be how the market will react as the Federal Reserve continues to raise interest rates.  While most investors seem to expect the Fed to stop raising interest rates around the 3.5-4.5% range there is a lot of evidence (required financing for both federal deficit and national debt) that would indicate rates could raise much further than most people are anticipating.  

Investors need to evaluate their current strategy to ensure it will work should larger economic forces move agaisnt them.

Hi  Allen,

There are a number of different rental associations in WA that you can join and get access to their rental applications.  RHAWA & WALA are the two that I am most familiar with.  If you are just planning on having this one rental, I would just join WALA as it is the less expensive of the two organizations.  As you get started there will be a number of forms that you will need over the course of your landlording career besides a solid lease.

Best of luck.

John

@Ryan Mccarthy congrats on owning a free and clear property. That provides you security and a solid foundation to build from. I agree with your assessment of your rental that it is not providing the highest return on your money invested and that is before factoring in things such as cap ex. My investing focus is on multifamily properties so I’m biased towards them as an asset class. Right now the multifamily space is extremely hot and as such the returns are depressed. That said, with interest rates rising I believe the market will gradually start to cool off. I haven’t invested out of state but there are a lot of folks doing that right now. My advice is start attending local meetups (there’s one in Marysville) and networking with people investing out of state. Also, I would continue to look at all the deals you can and run numbers. Go into this knowing most are going to be over priced but the experience will help you in the long term. Finally, keep building your cash reserves so that when you come across that deal you can move quickly. Best of luck with your investing.