All Forum Posts by: Karl B.

100%. Inflation is killing most Americans and it will get worse if our government keeps printing money and failing to balance a budget (2001 was the last time the Federal Budget was balanced - total failure). 

A lot of my tenants have halfway decent jobs but many don't have savings. It's shocking. One couple are each managers for two different companies and paid late a few months ago due to an unforeseen expense. They're back to paying on time but it gives me the impression they don't have much savings. 

A few tenants have paid late due to delays in receiving payments from their job which also leads me to believe they're living paycheck to paycheck. And I'm primarily a C-class property owner and roughly 80% of my properties have rents under $700 per month. 

My main market has super low inventory and a lot of local investors are sitting on cash, waiting. Some have taken equity out of their properties and are ready to spend the cash on new deals. 

One aspect that interests me is a lot of commercial debt is coming due in 2024 and 2025 which means a lot of these commercial owners (including apartment buildings) will need to refinance at much higher rates and some of them will be forced to sell or turn in the keys as the refinanced interest rate will eat all of their cashflow and then some.

The residential space is so unappealing in my market (again, low inventory and inflated prices) that I'm looking forward to commercial opportunities. Of our commercial properties we sold the majority of them over the past few years (resulting in us paying off all our commercial debt) and are likely holding on to the two crown jewels of our portfolio unless someone wants to offer us stupid money for either of them. Both are large industrial warehouse complexes. We also have a 'home base' commercial property which we run another business out of and will definitely keep. 

Opportunity is going to continue to show itself - the tough part is timing it so it's always good to be ready while also looking for other deals in the meantime. 

I sure do! We have VERY low inventory and properties are going for silly amounts in C-Class areas (not knocking C-Class as it's my bread and butter). I've seen some properties triple the past few years. It's insane!

Land in A-Class areas can be had in my market without breaking the bank. 

I've thought about it! There's an investor at my local RE meet-ups who does A LOT of new MF build. He's not building huge apartment buildings - small MF and townhomes but he's got triple-digit doors.

If I was going to build in my market it would be A or B-class because as mentioned the land can be had for a realistic price (there is some MF zoned land) though there's also talk (in my main market) about loosening up zoning in hopes of getting investors to build and/or repurpose old commercial into MF. The city is that desperate for additional rentals, especially affordable housing. 

I think 3/4 of it is getting a solid tenant in a property. 

Yes - from time to time one of my tenants will do something boneheaded to damage a property that causes me to roll my eyes but the majority of them keep it to a minimum and move-out damage is minimal (typical things like wall damage - mainly nails and screws) or scratched wall and/or baseboard paint/oil on the wall near the stove.

'Tenant proofing' a property is also something I'm big on. I have a tenant who broke his shower knob twice - the handle is 100% Mickey Mouse plastic. It's the Moen replacement piece. So I went to one of my plumbers' faucet shops and he sold me a metal handle version for around $30 (VS $8 or so for the crappy plastic knob). I don't think the tenant is going to break the metal handle!

The same goes for LVT (I buy commercial grade which has a thicker wear layer) and I've started tiling kitchens as a tenant will scratch/tear the heck out of a LVT or linoleum floor when they move the fridge or stove (while cleaning). 

Use coin-op instead. If you use a base fee your tenants' friends and family will show up and will run your laundry machines ragged. I discovered this in a small multi-family I had purchased years ago; the friends and family made my water bill very, very high as they had their own washer and dryer there when I purchased the place. 

Buy some used coin-op machines. If you're patient and are willing to drive to get the machines you can buy solid coin-op washers and dryers for under $300 each. 

I don't think I've ever paid more than $150 for a coin-op washer and it was a commercial Speed Queen - super rare to get one at that price but I came across it on FB marketplace and jumped on it. 

Five or so years ago I bought electric dryers from a large apartment company for next to nothing - they just wanted to get them out of their office building. 

Also, I've found tenants love the fact I have washers and dryers in the building. Some tenants cherish this though some will simply do their laundry at a friend or family members' place. The laundromat up the street charges $2.00 per run and my machines are set to $1.25. 

I also recommend putting a soda machine in there as well (they can be purchased for relatively cheap and are plentiful on FB Marketplace) - but price the soda at a good, low price so you're not gouging the tenant. You wouldn't believe how well Mountain Dew sells in a soda machine (Coke/Pepsi and Dr. Pepper do well also but Mountain Dew sells like nothing else).

Why give up 30% when you can keep 100%? 

Even the great Ray Lewis retired when he was 37; your career is winding down and based on what other ex-professional athletes have told me it's important to find a fulfilling profession after their playing days end (I knew a USC football player and he told me he and his fellow Trojans have a text thread and a lot of guys have trouble finding purpose in their lives after football ends - some of them never even played in the NFL and still felt incredibly lost after football).

You have the capital and it sounds like you've done deals prior. I would recommend buying a smaller multi-family and running it yourself. Of course, the more work it will need the sharper the learning curve. 

Consider it a crash course in hands-on real estate investing. A property where you're going to learn a lot in managing it but it won't be too much to handle at present moment as it's not too many doors (of course, the correct number of doors depends on different factors). 

It will be your hands-on education and believe me - when you self-manage you learn A LOT in a short amount of time. And even if you don't like it and end up preferring syndications, limited partnerships or outside management (though you can train your own management team - it's not at all hard when you've self-managed) you can at least come to that conclusion on your own terms and at worst I promise you'll have learned a lot about managing (even if it ends up being something you never want to do again on your own). 

You don't need to buy expensive real estate courses or give a huge hunk of equity to someone.

And this is why I self-manage. Even when living in Los Angeles I self-managed 6 doors in Pennsylvania. 

Although I've had minor damage to properties it's never come close to 10-12K. 

I deal in C-Class properties. My acceptance criteria is 625 credit, 3.5 earnings AND NO PRIOR EVICTIONS. 

I continued to accumulate properties in my PA market and after living two years in Missouri I decided to move back to PA to continue buying as my properties more than pay for my standard of living. 

I recommend you make yourself familiar with some KCMO real estate groups (such as The Apartment Association of Kansas City) and perhaps go to one of their meet-ups (the cost will be worth it) so you can network and try and find a PM who doesn't suck. 

I still have a duplex in Columbia, MO that I self-manage from PA and while living in Columbia I quickly learned most of their PMs were hot garbage (my duplex is in a neighborhood consisting ONLY of duplexes and many were managed by PMs); that's typically how it is in most markets. The few good PMs out there tend to manage A and B class as they're spoiled for choice.

I've caught a lot of possum, raccoons and skunks. 

Here's how you catch a skunk and lower the risk of it spraying: I set all my box traps near the corner of the house so the trapped skunk doesn't see me when I toss the tarp over the trap (I come from the other side holding the tarp in front of me and then I drop it over the trap). 

At that point you can shoot the skunk or if you don't feel comfortable with that you can hire a wildlife person to come, remove the skunk and kill the skunk off premises. 

At least that's how it works in my area, law-wise. One must either release an animal on the very same property or kill it. Relocating is against the law where I live. Of course, possum have a lower core body temperature = they almost never gets rabies and are not aggressive so let's just say a possum has nothing to worry about if it's caught by me :-)

Great stuff! What advice and red flags do you look out for at judicial tax sales?

I know the risk of liens tends to be less for these auctions VS an upset tax sale. 

Any space for your own washers and dryers? Undercut them :-)

I'm currently receiving 5.75% on CDs. I would never buy commercial at such a cap rate unless I was doing a 1031. 

A lot of commercial is going to need to be refinanced in the next year at a higher interest rate = pain in the commercial sector. Cap rates are going to climb at that point as demand will be down. 

Of course, if you're in love with this SG location you can always offer less so it equates to a more attractive cap rate, especially if you're a cash buyer.