All Forum Posts by: John Carbone

Quote from @Dan H.:

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Quote from @Dan H.:

Quote from @James Hamling:

Quote from @Dan H.:

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Quote from @Carlos Ptriawan:

@Carlos Ptriawan rent data is messy as you pointed out earlier in this thread. ON an annualized basis which is what I was referencing it hasn't happened. Would love to zoom in on the dollars in that monthly swings refin one is there a link to the chart? Meanwhile annualized data from multiple sources: 

OK understood, I use quarterly (short-term data) while you use long-term smoothed data, obviously, the result would be different.

I also want to point out, if 2019 data has  the rent-to-income ratio as 20.1% but in 2022 it's 20.5%, the line is actually stagnant, there's no real actual rent increase although the $ seems to increase. that's just an adjustment to wage. 

 Yep I'm just not concerned with short term shifts because every market/investment has it. I try and look at the trend over time.

As to the bolded section stagnation has happened. I would fully agree and go so far to say I expect it this coming year. But hte funny thing about inflation/wage adjustment:

1) I've made that very argument as to one of the main reasons why rent won't drop next year. It's not that far off if you adjust for the last 12 months of wages and inflation.

2) my primary reason for calling out rents have never dropped annually is because of @John Carbone prediction that rents are going to drop and people will magically be hurting the next year for profits if they bought recently. Historically that has just not happened. Especially in such a good job market (and even 5% unemployment is good if the fed can even push it that high) and while inflation is happening.

I don't know if we're going to see a drop in rents. However, I wouldn't be surprised if they did correct some. I don't have a ton of data to support this, just one personal example. My cousin moved out of CA recently and put his house on the market for $4,500 in early August. Definitely on the high side, but he should have been able to get 4k all day. However, he's now down to $3,550 and dying a slow death. 

This is a suburb of San Diego, not a lot of rental availability and rents are very high. I have rentals in the same city and every time I have a vacancy it's like a black Friday sale. Seemingly hoards people lined up around the block - a lot of them good A+ grade renters. 

 Rents San Diego county wide have continued going up even as RE prices have fallen. YOY  in my market the rent appreciation has averaged over 10%.  $4k was always high rent for that unit.  Rentometer lists the average as $3450 based on six 4 BR comps.  It also shows that the highest rent ever for that unit is the current rent.

 This property has been owner occupied for almost 10 years, so there's no recent/ relevant rental history for this exact property. I agree that the original listing price was too high, but I've seen other similar properties go for around 4k. He is renting it furnished with an 80" TV. These kinds of prices have been common in East county over the last year. I'm a bit surprised he can't find a renter for $3,550

https://sandiego.craigslist.or...

https://sandiego.craigslist.or...

It was not clear to me that it was being rented furnished. I do not know how furnished affects LTR rates. If it is furnished, did they consider STR or MTR? we have local STRs that have done well, but they are not in El Cajon

as for those “comps”…. They are not comps as neither referenced is rented and the second has been listed over one month.  The first has been listed at least 18 days.   it has been years since one of my rentals took 18 days to rent.   Comps have to have found tenants willing to pay the rent.  Rentometer is fairly accurate and used 6 comps.  

if the property is special, it can dictate rents far above the average rent but it has to have something making it special.  

 Just getting into metrics for the year. My teams "median" listing time to lease is 14.66 days. 

 Since the covid showing restrictions were lifted, we have found a tenant on the first day of showing every time in San Diego.  San Diego has a large rental shortage with associated low vacancy rate.  However, we do not pull the listing until the tenant has placed a deposit to hold the unit.  With our tenant check process, occasionally having to process more than one application due to tenant not meeting our criteria, and arranging to get the deposit, the listings usually are up over a week and sometime approach 2 weeks. 

>18 days is long time in our market.  Over 30 days is almost unheard of in residential (<5 units) rentals.

We have no units in El Cajon but we have quite a few units in escondido which would seem to be similar.  Our only 4 BR is in bad need of rehab so the rent on our unit would not be a good comp (it is far less than $3500).  

 Very similar process and market in T.C.. 

Listing stays active until an accepted applicant posts funds to secure unit and take off market. 30+ days list time is bonkers, totally unheard of unless it's a ridiculous ask, which some have gotten into that zone of ridiculous greed, pressing for $3k mnth rents on a place that was $1,500 just 24-36 months ago. Or just leaving a place looking like hell with marked up stained walls, nasty carpets, a general film of funk all over, saying idiotic things like "well, it's a tight market, someone will take it as-is". 

I don't allow those games to happen, I will fire a client. But other teams, I see them allowing all kinds of stupidity, and i don't know why, nobody wins in that case, it's a clear path to bad results. 

A few months ago my team hit an all-time record of average list time being 72hrs, that includes time for deposit received. It was insane. I had prospective tenants calling breaking down into tears begging to be allowed to apply on a unit that had approved pending move-ins. Never seen anything like it, insanely tight market for unit supply. 

This summer season is going to be even worse I think. People have to remember how many leases are multi year, so we didn't see the end of it this past season, which was record setting. With inventory even more tight, it's going to be another record setter.  

 @Dan H. interesting article on rents and realpage in big cities: https://www.propublica.org/art...

 I think it is a novel theory, but let’s look at some items related to the San Diego RE market many of which apply to other markets.  1) home prices have increased far more than rents.  This implies that rents require significant increase to get to historical normal price/rent ratio.  2) supply and demand. There is a very low vacancy rate due to rental shortage. 3) the market is geographically constrained.  Mexico to the south, pacific to the west, Camp Pendleton to the north, and going east quickly becomes quite harsh.  This limits future supply. 4) increasing regulations have increased risk.  These regulations include rent control, cannot distinguish source of income, difficulty doing evictions, etc. Increased risk results in increased cost to compensate for the risk (in this case increased rents).  5) San Diego had the strictest covid eviction moratorium in the country (a new risk, never before identified).  Tenant were allowed to break lease terms and not pay and could not be evicted (only evictions were for health and safety items).  New risk results in the need for increased rents.  6) in part due to eviction moratorium and not being able to force rent payment, most rents were not raised the first year of covid and some were not raised the second year of covid.  7) some markets, but not the San Diego market as demand stayed high through covid, offered covid discounts.  Some rents from tenants that initially rented during covid were artificially low.  Most tenants knew this.  Did they believe they would continue to get covid discount forever?

Or you can discount all the above reasons for significant rent increases and believe the significant rent increases are due to a tool knowing what units actually rented for versus only knowing the publicly available list price for the rental.  Note in my market it is very rare for a tenant to request to negotiate on the rent as they know about the demand so the publicly available information matches the actual rent in virtually every case. 

I will add that I do not believe residential RE is passive, but I want to make it fairly passive.  I intentionally let my good tenant’s rents fall a little below market (in contrast I raise our poor tenant’s rent above market).  If I was a larger rental owner, with teams available at all times to do tenant flips, maybe I would keep my good tenant’s rent at market.  I am ok having a little less profit for not having the work involved in a tenant flip and avoiding the risk associated with placing a new tenant (no matter how good you screen, there is still risk placing a new tenant). Those using the tool are encouraged to always rent at what the tool determines current market rent.   

 I highly suggest instead of letting good tenants get sub-market prices, to make those rent increase BUT also give "good tenant Discount". This effects the same ends BUT, it can have terms that if/when those good tenant actions end, so does the discount. AND it's showing the tenant what your doing for them, it shows the appreciation, put's a dollar value to it.    If you say to a tenant "oh, your great, i won't change your rents" what your saying is "I appreciate you so much that I reward you with the gift of nothing", because that's what it really is, NOTHING. So often a landlord will complain on something that went sour saying "and I was giving them this great deal on rents and it's like they just didnt care", yeah they didnt because they didnt see/ know/ experience what that deal is. 

Try it, I guarantee that tenant will by 10X more pumped when you do it via discount method vs just doing nothing. 

AND I also suggest for those good tenants, what I do is I also add in a referral offer that if they have someone they know who may "just as good a tenant" as they are, that They can earn a $100-$500 referral for those who lease.    Good tenants are a great pipeline for good tenants. Given then $ up-front and then at 1yr good renting experience is remainder.     I have never had this policy bite me, but as said I only offer it to select tenants. Ones I want to replicate. 

has the actual price of 2x4s lowered at Home Depot?

There are some sellers that I have been offering on that are in 100% DENIAL of the current housing market decline.  It's quite frustrating, what can I do?  It's still low inventory out there.

Anyone with Air Bnb arbitrage experience. When starting out did you create an LLC?

If so, I am assuming one LLC is enough to cover as many units that you scale to.

I read an article that said opening up a separate LLC for each unit is necessary to adequately protect you without risking all of your units at once but that seems like a lot.

Lmk

 Very very simple way to address this, and it's the core issue of it all. 

The current system gives entitlements in exchange for....... nothing. Absolutely 0. I call it the "Human Cat" factor. We are training generations to be Human Cats. We give them everything and expect nothing. Then we get upset when they meet our expectations, by giving nothing. 

If I had the power/office, all welfare and entitlement would radically change as issuance would require an action in return. All recipients would be required to be actively working. Now here is where it get's jazzy. 

There is workforce centers all across America, in every town, county all over. When persons apply for welfare benefits, or SSDisability benefits, or such similar entitlement programs, ALL would be required to complete an ASVAB test, a civilian type version. The results would direct options of placements. 

A joint venture would be made with Vo-Tech's across the nation. So a recipient has a choice, they can either attend an approved Vo-Tech approved course FT, as there job, can get placed into a skills-position as their job, or an assistive placement occupation which this is mainly for disabled persons. In joint venture with municipalities persons of disabilities or best matched with positions.    A person in a wheel chair can still use there hands, talk, there mind etc and guess what, it's actually hard for most of these people to find employment oddly enough and having known such disabled persons I know how much they WANT to contribute, sitting at home and rotting is mental torture. 

 Each center can open and staff it's own daycares via applicants who test into child care. Or have them at Vo Tech's for example, providing FREE daycare for those in the program AND providing skill training for those who tested into child care and development. Which it's across the board, incudes trainings on entrepreneurship for those who test for such, like managing and running a child care center. Starting to see the picture, EVERY job/function is a training opportunity. 

Are you starting to see the picture? This is a massive labor and talent pool that can self-sustain itself AND contribute massively to countless under staffed, under engaged activities and actions, all it requires is coordination and the established requirement that to receive an entitlement one MUST contribute. That you will work, learn, something, EVERYONE will contribute. 

The Vo-Tech would be a deferred student loan, that upon completion of certificate it moves into additional deferment that after 24 months of working in that occupational sector, is fully forgiven. You don't complete, bill comes due. 

We NEED to change the paradigm where we are currently of making "Human Cats" too one of HELPING people to better selves, to contribute, to receive help to survive while earning ones way out of the rut there in. 

And this would provide "the" workforce of skilled labor the entire world would envy. JV with private industry would come available. Think, why wouldn't an auto manufacturer JV to help develop a Vo-Tech skills program to train skilled line workers? U.S. wants to be the semi-conductor manufacturer, it starts with persons trained to do the job right?

This is how U.S. get back on the ball of "MADE IN USA". 

Only downside is, not much opportunity for politicians and trans-national corps to profit off of it. It by far betters the middle and lower class, big time. So we would need a gov FOR the people. 

The insane part is everything, I mean EVERYTHING in infrastructure exists today to do this. This could be launched in a matter of months, up to full operations in less then 24 months. Everything exists to do it except the political will.    They rather breed Human Cats. 

Our business benefits a lot from the program but I'm not a huge fan of it, at least in its current form. I deal with food stamp recipients all the time so I have a good grasp of who they are. A lot, and I mean a lot are entitled - 90%+ of my problems at the stores are food stamp recipients. Here are some interactions I deal with: Paying $200 worth of groceries and refusing to pay a mere .30 cents for a reusable bag (not covered by food stamps) - and then asking for delivery and not tipping the delivery driver. Trading their benefits for cash by trying to pay for another customers groceries. Asking to process non-food stamp items prohibited by law manually so food stamps can accept them. Paying for groceries and just leaving them behind for a myriad of reasons - (they don't care because it's not their money.). Not having enough in food stamps and expecting other people to cover the remaining of the purchase. Very common to see customers using more than one food stamps card indicating someone is ineligible aka fraud or there is a surplus. Purchasing groceries with EBT and reselling it to a bodega (small grocery store). My favorite one, theft which is an increasing issue here in NYC - I would say 95% if not more of the people we catch stealing are wielding an EBT card in their pockets (we know because we typically make them pay for it)

The program is so entrenched today that pulling the plug would obviously be disastrous and I do think there are people out there who genuinely do need assistance but the program today should be reformed. It should do a better job of filtering out who really needs help versus who doesn't, better job of detecting fraud and abuse, and a better job of actually lifting people out of poverty and incentivizing them to make more money.

 LMAO:  "If you decide to rent, you may benefit from a recent decline in prices. The median asking rent in the top 50 cities dipped 0.7%, or $12"......

Holly-cow, $12 whole dollars per month, lol, what will tenants do with all that spare cash..... 

So I checked this data, and it seems the cannabis store has increased sales 4x and liquor store is like 3x sales compare to 2019. I think you've point in this very particular subject LOL

Classical store like Kohl is losing money but cannabis store makes fortune. It's reality.

 They benefit by becoming the only other superpower in the world and an economic powerhouse. I don’t really see how the US can stop using China or how China can stop using the US - so we are very symbiotic to be honest. but they definitely benefit. JUst don’t see how they can meaningfully leap us without a massive change in things we cannot predict right now. 

There are a few major reasons why China has explosive growth (while a comment from James about China is a very typical lazy western cowboy that confuses why China is now growing faster than the west  LOL just kidding)

- they maximize their production capacity in the service manufacturing industry. Basically, they're the maker of everything with controlled-labour cost
- they do not follow the game of the developed western model that depends on central bank action that creates a bull and bear cycle thru monetary intervention although they're actively hedging their currency by buying a higher number of US bonds so their financial system can't easily be manipulated by US (Yellen is complaining about this today)
- their labour participation is almost like 100%, if there're more labour 'unemployed', the country finds the project (mainly infrastructure) for them, overseas. For them supply doesn't need to follow demand but they keep continuously creating new projects and supply, even when demand may not be there.
- their debt model is following like 50-100 years loan with a lot of private NDA. Project must use maximum participation of their labours.