All Forum Posts by: Kevin Hill

Welcome! Its on Audible too!

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Under Water: How Our American Dream of Homeownership Became a Nightmare' is a new book by Ryan Dezember, a Wall Street Journal writer and is a sharp & timely reminder how hot real estate markets can go drastically wrong for some homeowners and real estate investors. Ryan adds his own personal struggles of homeownership after he purchased a modest home in the 'Redneck Riviera' of Alabama. He was forced into becoming a reluctant landlord himself. A combination of a divorce, his home losing nearly half of its market value, his neighborhood demographics changing (one of his tenants used the house to sell prescription drugs out of) and having to relocate for a better paying job left him stuck with a house he couldn't get rid of. His own personal ethics prevented him from just walking away from the property.

Other parts of the book cover the players in the local real estate game including real estate agents, developers, and city officials. Buyers were buying scooping up and flipping new condo units before a shovel was even in the ground at some of these developments along the Gulf of Mexico. The real estate speculation was at a fever pitch and some buyers got stuck holding the bag.

One other aspect of the book I enjoyed is about the entry of the corporate investor into the single family real estate market. Companies like Blackstone, Invitation Homes, Zillow, and OfferPad have entered the market as major buyers in certain parts of the country, squeezing out the small time investor looking to make a few bucks on a flip or buy & hold, or even the first time buyer trying to purchase a home for their family. Their entry into the market has also caused rental increases in the areas they invest in hurting the ability for some families to live in safe, desirable neighborhoods with quality schools.

Another takeaway from the book is how what happened in the heated Alabama/Florida Panhandle area relates to your own local real estate market. I had a friend who purchased a pre-construction townhouse in Bayonne along the Newark Bay. The developer's brochure showcased beautiful blue waters with sailboats and your own chance to buy in early and make some quick money. In reality, the complex took longer than expected to build, the market tanked, the Newark Bay was black & smelly, and he got stuck being a landlord for 10 years with the rent money barely covering his mortgage, taxes, and HOA fees.

There is a lot to learn from this book and its an entertaining read for any Bigger Pockets fan!

Thanks @Brian Ellwood! I remember you @Jonathan Valdes, thanks! Yeah, you have to be careful out there. Unfortunately, some people's ethical behavior gets even worse when the market is hot. Stay with it and surround yourself with good, ethical people.

I don't want to announce the sky is falling and be a Debbie Downer, but in my opinion, now is NOT the time to be investing in real estate for rookie investors, especially flips. I keep seeing a lot of posts from newbie investors about investing in their first deal and I'm worried for them. I am in North Jersey (Bergen County) and this is what I am seeing in my area.

COVID-19 has only decreased available housing inventory during the pandemic causing a spike to home prices and demand. I keep reading about the residents who want to escape from New York City and New Jersey is one destination for them. Houses are routinely gone within a week now with multiple offers at full or over the list price. This is not a good time for an investor (especially one without experiences in different economic cycles). This is not sustainable with the high rate of unemployment, mortgage delinquencies, homeowners going into forbearance, Sheriff foreclosure sales currently on hold to at least October now, increased requirements for mortgage qualifications, small businesses going out of business, and a likelihood that children will be at home again in the fall for distance learning, restricting parents' ability to work.

Overpaying for the property, delays in securing contractors/finishing the renovation, towns slow in completing Certificate of Occupancy/permit inspections, delays on getting the title work done, etc in a market that could turn on a dime is a recipe for disaster. Yout can't do a BRRR strategy if you don't have any equity after the flip is complete.

Be very careful out there. Get a mentor, hire an agent who is really looking out for you and not just trying to close a sale, and be patient. The great deals will be coming once we enter into a down cycle. Real estate is cyclical and cycles typically run 7-10 years and we are at about year 9 in North Jersey. Down cycles don't last as long, so pile your cash and be ready to strike when the good buying opportunities are here again!

You need permits for everything except the door. Don’t cut corners. I would only use a licensed plumber. If you have a dripping faucet, leaky toilet etc, those are handyman type repairs.

Try to think of the permits and inspections as making sure the work was done right to ensure safety and having future headaches.

I think it’s hard enough to find a good tenant without having a criteria like this. If they remained employed through the pandemic, they would likely remain employed through a 2nd wave. It should be legal though (you should consult an attorney of course) because if they work from home or not isn’t a protected class. It would be absolutely bizarre to have to turn down a tenant with good, verifiable income , a 700+ credit score that you can’t accept three because they don’t work from home. 

Home prices and recessions take some time to catch up. Limited inventory is causing the rise in home prices (depending on price ranges and town). Now is not the time to get a good deal, patience.

Tank removal I have used Lombardo Environmental to remove a tank from my parents' house and also for REO listings I have had. Also heard good things about MH Tank Company.

For soil testing, I had a good experience with Eco Logic Environmental for an investor client for a suspected leaking tank. They did boring samples for an underground tank REO listing I had.

I don't have any recommendation to install an above ground tank. The companies I recommended for the other services might have some recommendations for you.

You can still have an oil tank soil test contingency, however you will only be able to do boring holes around the tank and have the soil tested. This type of testing will likely only reveal if there is a major leak. If there are pinholes in the bottom of the tank, the testing probably won’t pickup the leaks from beneath the tank. 

I doubt a seller will want to remove a working tank, as that would also require a conversion to natural gas and likely a new boiler. You can possibly try to negotiate a credit or put money in escrow in case a leak is discovered after you close but the cost of a leak and remediate can vary greatly.

You can purchase tank insurance, then after you close, have an above ground tank installed in the basement. The tank insurance is only for this type of scenario, it doesn’t cover a conversion.

You could always then convert down the line.