All Forum Posts by: Kirk B

The government wants to kill as many people as possible. Just look at Terry Shivo.

Right now my plan is to reach total 50 units in 6 years. I am planning on doing the property management during that time so that I can have more cash to keep buying. Once I reach my goal, I plan on turning the management over to PM's and using the Income to pursue other endeavor's like buying a golf course!

Mike,

Thanks for your replies. You are probably right about my Agent. His primary approach is getting the properties far below market value.

I am fairly confident that I have identified Taz's study. I seem to recall looking at the same sample data pdf months ago.

I think that even though there is no perfect study out there, the 50% OER model is the best approach out there.

Kirk

What I am trying to show the Agent is proof which supports the theory that operating expenses cost half of gross potential rents. This is nothing any accountant I know claims. My agent has his CCIM, 30 units of his own, and tends to think the 50% rule is too basic.

Personally, I think the 50% rule is the most compelling approach out there if you are running a real estate business for cash flow.

Mike,

I found another study, but thats all 12+ unit again...

Kirk

So, no luck on finding the a study?

Mike,

Thanks for your input. I did look in that thread and Taz's links are the links I refer to in my first post. His name now is "No Longer Member" and the links point to a site that charges $199 to view those data! Did I miss the correct link? I remember Taz was going to have an intern look at his personal data, but I never saw that either. Did you?

To me it doesn't matter where the study places vacancy rate. I can do the arithmetic to evaluate it based on the operating expense model used on this site (you are the one that created this method?).

My point is where is the proof? Where is a bunch of Income Statments from a bunch of 1-5 family properties? Someone at some point in time must have undertaken this study.

Have you ever seen such a study?

Kirk

When you buy a stock, how will you know when to sell?

The expenses are not realistic.

I am trying to find a study with data on the operating expense ratio for residential real estate, and hopefully something that applies to my area. I want to use the data to prove this ratio to my real estate agent. He like a lot of other people seem to claim that operating expenses are far less than 50%.

The 50% rule is "The best available data show an average operating expense ratio in the US is 45-50%". Although these data are referred to often, I have never seen a (viewable) link ro these data or a citation. It seems a former prominent member linked these data, but that link is now inaccessible.

I believe that these data are fom 2009 Income/Expense Analysis®: Conventional Apartments published by the Institue of Real Estate Management. However, these data have nothing to do with any building less than 12 units! These data are summarized by 4 building types in 150 cities.

1)ELEVATOR BUILDINGS
2)LOW RISE 12-24 UNITS
3)LOW RISE OVER 24 UNITS
4)GARDEN TYPE BUILDINGS

Do these larger complexes/buildings have the same operating expense structure that SFH's and /or 2-5 family buildings? It may be a stretch to assume they do. Maybe my Real Estate Agent is right!

Can you provide another/better source of data for operating expense ratios?

source: http://www.irem.org/acb/stores/1/2009_Income_Expense_Analysis__P19312C1911.cfm

*If you look at the example data from Atlanta, don't be confused when you read OE=35%, their definition of OE doesn't include vacancy and other expenses so it is different from the normal definition here.

If I can summarize my approach toward appreciation into 1 sentence it would read:

When it comes to Buy and Hold Real Estate Investment, only experienced investors with deep pockets should "gamble" on the uncertainty of appreciation while all other investors should avoid considering appreciation as part of a purchasing decision.

It's shortsided to claim "no one should evaluate for appreciation." Some investors have made fortunes off of it. Guys like Rich and Will (tons of experience and $$$) are well suited to take on appreciation plays where there is little or no cash flow. Guys like me (right now) are not well suited.

The problem lies with the new guy who is undercapitalized and buys his first 1-5 places with negative cash flow. These guys often are swept up with all of the great things about real estate like taxes, appreciation, and GR-PITI=CF concepts. These guys would be far better off buying on a cash flow model.

Mike,

A major fallacy in your post above mine is that you are claiming that (paraphrasing) "no one knows what will happen with real estate values so dont plan on appreciation." Yet you are claiming that YOU know what will happen with real estate values when you write: "The housing market went through a historic boom and has a long way to go to reach the bottom (an equal deviation to the down side)".

Your argument is further weakened when you claim to know what is going to happen with the stock market (a form of speculation similar to appreciation).

Kirk