All Forum Posts by: Leo R.

 Also, between PGH and Cleveland, I'd probably go PGH...my (subjective, and possibly totally incorrect) view is that PGH has a stronger, more future-proof economy--it's often mentioned as a model for post-industrial transition that other cities should follow. Plus, I've personally found PGH to be a more enjoyable city to spend time in...  ....but, obv., you'll want to do your own research.

Good luck!

 @Chelsea M. yep--it's a great city. I don't own property there (most of my property is in the Western US), but I grew up in the Pittsburgh area, so I know it pretty well, and I'm considering buying property there....

As for taxes, if I remember correctly, PGH does have an unusual tax related to purchasing property, but I can't remember the details...perhaps a local pro like @Anthony Angotti can fill you in on that...

@Chelsea M.  as @Anthony Angotti mentioned, it's worth looking into Pittsburgh.

Always ranked as one of America's "most livable cities", great amenities, charming neighborhoods, interesting topography, diverse economy, good arts, food & & culture, great sports, relatively protected from natural disasters...it has winters, but not nearly as bad as some more northern cities.

Arguably the most underrated city in the U.S., in my opinion!

Good luck out there!

 @Nathan Gesner you simply cannot make this stuff up   :D   ...every time I think I've encountered the pinnacle of idiocy, something like this comes along to prove me wrong.

@Michael Marcotte welcome to the SLC real estate market!

Before you go looking for a partner, I'd suggest you closely consider, and find the answers two questions:

1. "WHY do I want a partner?" Partnerships make RE investing exponentially more complex. With a partnership, you have a whole array of moving pieces that you don't have when you're flying solo (e.g.; cost responsibilities, profit sharing, decision making authorities, work responsibilities, contracts & corporate agreements, etc., etc.) Every single one of these moving pieces will cause more work for you, and every single one is a potential point of failure in your venture. Although partnerships can be useful for some investors, for inexperienced investors, they often cause more problems than they solve. Often, the only party benefitting from a partnership is the attorney raking in the legal fees to broker and create the agreements, contracts, etc.

Moreover, inexperienced investors often want a "partner" because they're (rightfully) intimidated by RE investing, and--because misery loves company--they feel more comfortable with a partner. Granted, it is more comfortable to take on a challenge with someone else at your side, but this instinct can lead an inexperienced investor to form an ill-advised partnership with another inexperienced investor (who is also intimidated, and who also wants the "support" or a partner). When that happens, now you have two people who have no clue what they're doing, tied at the hip--the blind leading the blind. As a real estate newbie, the only type of partnership that makes much sense is a partnership with someone who has all the real estate experience you currently lack (but need)--and this brings up a second question: 

2. If you're 100% sure you need and want a partner, the next question is: "What value am I bringing to the partnership?"  ...if you're not 100% clear on this, then a partnership will never materialize, and if it does materialize, it will likely fail. The value you bring might be in the form of capital, experience, access to deals, the ability to put in a lot of work, etc., etc., but you have to bring SOMETHING to the table.  ...regardless of what type of value you bring, it has to be sufficiently valuable for the partner to benefit (and if the partner is a highly experienced and successful RE investor, they ain't gonna come cheap).  

I'm constantly approached by beginning investors with no real estate experience who want to "partner" with me, or want me to "mentor" them, but who have zero idea how to make it worthwhile for me.  In most situations, "partnering" with or "mentoring" a beginning investor is code for "wasting my time trying to help someone who's constantly screwing up (because they're a beginner) and getting nothing in return".  Why should a high net-worth, highly experienced investor put their time, money, experience, reputation, and resources on the line for someone with no experience?  ...you'll have to answer that question if you want to figure out a partnership with anyone who brings any real value to the table.

Now, does this mean you should never partner with anyone, or you should give up on the idea of a partnership? No. It simply means that, if you want a partnership, you'll have to figure out answers to these types of questions, and you'll want to thoroughly educate yourself on partnerships before forming one.  I have partnered with, and have also mentored inexperienced aspiring RE investors in the past, but those arrangements were mutually beneficial, and the partner or mentee brought significant value to the table.

Good luck out there!

@Kimberly Kim as others have mentioned, the increasing rates (and decreasing values) make flipping and BRRR'ing exponentially more difficult right now...I'm fairly experienced with RE investing, but I personally wouldn't attempt a flip or BRRRR at this time unless the numbers were just absolutely bulletproof...and I wouldn't recommend a flip or BRRRR to any newbies right now because the viability of future refis and future values is a huge unknown at this time (and there are many indicators that rates will be higher, and values lower in the near future)...

I'm not familiar with ARVs in your area, but your instinct that 375k may be too high could be correct...Where is that ARV number coming from? If it's based on comps from sales of a few months ago, then that ARV number may almost be meaningless now--the market is COMPLETELY different now. Specifically, a house that would have sold for, or appraised for 375k a few months ago probably won't sell or appraise for that much now, or in a few months/years from now.  In most markets, inventory, DOM, and price reductions have increased exponentially in the last 6+ months, and will likely continue to increase as rates continue increase. Because of this, basing your ARV on comps of sales from a few months ago can give you an inaccurately high ARV! Your ARV should be based on worst case assumptions about the future market (and in some areas, the future market will likely be substantially lower than it is today).

As for renting it out, I'm not familiar with the rents in your area, so you'll want to do your own thorough market analysis of that...however, at face value, it sounds like it would not perform well...For instance, if you bought it with an owner occupant mortgage at 5% down at 6.7% interest, and had an additional 50k of debt for the rehab, the monthly debt service would likely exceed your rent income if the rent is around 1600/mo (but that's just rough math--obviously, you should run your own numbers). 

Overall, it sounds like a questionable deal at face value...

Does that mean you shouldn't invest in real estate? Absolutely not--there are lots of opportunities cropping up in many markets! Moreover, there are lots of strategies that have a better chance of success than flipping/BRRRing right now--in particular, I'd suggest looking into house hacking. So, I'd suggest keep analyzing properties, read up on more recession-resistant & lower-risk strategies (like house hacking), get your financing/payment method lined up, find a top notch investor-friendly agent, and view as many properties as possible...keep grinding and eventually, opportunities will reveal themselves.

Good luck out there!

@Jonathan Feliciano this is a commonly used strategy in a lot of places, and it can definitely produce good returns and enhance the usability of a house when done correctly. ...though, there are also plenty of examples of it turning into a poorly-planned hack job that ruins the usability of a house...

A few things to consider:

-Does the garage connect to any wet walls, and is the sewer main easily accessed? If so, that could allow you to more easily plumb in a bathroom (making the garage a master suite).

-How easy/difficult will it be to get HVAC supply and return ducting to the garage? (or, if you're not using forced air, how will you heat and cool the space, and how easy/difficult will it be to install that equipment?)

-How easy/difficult will it be to update the garage's electrical so that it works as a BR?

-How easy/difficult will it be to insulate the garage?

-Is the garage situated at a spot where a bedroom makes sense with the flow of the rest of the house? For instance, if the garage is on one side of the house, and all other bedrooms are on the other side of the house, that could make for an awkward floorplan...similarly, if the bathroom(s) are on the other side of the house, and the person occupying the garage BR has to walk through the kitchen, living room, etc. to get to a bathroom, that could be awkward...

-Does the garage have existing windows that can be repurposed for the bedroom, or will you have to cut and frame in new windows?

-How easy/difficult will it be to engineer and build a new wall/window/door where the old garage door once was?

-How close is the garage to the street (or other things) that might make a BR less habitable? For instance, if the garage is just a few feet from the edge of a busy street, that might make it less usable as a bedroom.

-Does zoning/permitting allow the changes you have planned?

-How important is it to have a garage at this property, and in this neighborhood? In some areas, a garage is more important to the value and usability of the house than in other areas...if it's really important to have a garage, could you build a separate garage somewhere on the property?

Good luck out there!

@Blake Ramsey I'm a college professor, and a real estate investor--so my perspective is somewhat from both sides of the coin here...

First off, your post is well-written, which gives me the impression that you have some of the skills necessary to succeed in college, and it also gives me the impression that this is a topic you've been considering carefully; kudos.

As they say, there is no "right" answer; it just depends on your goals, what you enjoy, what you're good at, what opportunities are available, etc.  

For some students, taking time off from college makes them realize how much they miss being in college, and they eventually return with a newfound level of enthusiasm and motivation!...other students leave, and never come back.

All things being equal, people with college degrees do earn significantly more on average than people without college degrees. ...but, of course, there are also plenty of immensely successful people without college degrees...

One thing to consider: you can learn a lot in college that you can apply to any number of fields/careers (other than what you major in). For instance, college students learn time management, organization skills, social skills, verbal & written communication skills, public speaking skills, planning and goal setting skills, analysis skills, logistical skills, critical thinking skills, etc., etc....you'll be able to use these skills in mechanical engineering, real estate, or whatever career path you decide to pursue.

In fact, I'd say that there are relatively few major-specific things that I learned in college that I still use today, but there are many other skills (like analysis skills and logistics management skills) I learned in college that I still use every day! I have no doubt that many of the skills I picked up in college have been essential in helping me succeed in real estate investing (even though I never took a single real estate-related class in college!)

As investors, we often talk about the importance of having a diversified portfolio. Well, having a diversified set of skills is just as important, and for the same reasons--it allows you to be adaptable and better able to offset losses--which allows you to succeed where others fail. ...college is one of the most time-efficient ways for a young adult to acquire a highly diversified set of skills (almost regardless of their major).

So, as long as you're able to keep your college expenses reasonable, and you don't have to go into large amounts of debt for college, a college education can be well worth the time--even if you don't end up pursuing a career related to your major.

But, just like most things in life, what you get out of college often depends on what you put into it...students who don't put in effort toward learning, gaining new experiences, self improvement, etc. won't magically pick up the aforementioned skills just because they're enrolled in college. If a student isn't putting in the effort, it sometimes makes sense for them to take a break from college and re-evaluate.

As for real estate, you mentioned house hacking. In my opinion, house hacking is the single best way for people to get started in real estate investing--and it's something you can definitely do while in college (in fact, I'd say that college and your 20's are the BEST time to house hack!...house hacking usually becomes exponentially less appealing and less feasible the older you are, so get at it while you're young!)

There are a lot of ways to get started in RE investing, but all other things being equal, a house hack is often the best strategy for a beginning investor.

Why? Because, house hacking can produce great financial returns, it teaches you essential RE investing skills, but (compared to more advanced strategies like BRRR'ing or wholesaling), it is comparatively lower risk, simple and beginner-friendly (and therefore has the highest likelihood of success).

More specifically:

1. A HH can produce great financial returns.  A HH can substantially lower your living expenses, while creating cashflow, appreciation, mortgage pay down, and tax benefits. A HH can also involve opportunities to force appreciation and/or rent (e.g.; by adding an extra bedroom in a previously under-utilized space).  When executed correctly and repeatedly, house hacking can be very lucrative, and there are multi-millionaires who built their fortunes on repetitive house hacking! Although it's a strategy that's good for beginners, there are plenty of very experienced RE investors who continue to HH, because it's such a powerful strategy.

2. A house hack will teach you the essential skills you'll need to succeed in RE investing. With a HH, you can learn how to analyze properties & markets, how to find an investor-friendly agent, how to spot value-add opportunities at properties, how to engage in a strong due diligence process, how to screen tenants, how to manage the property, how to build a network of contractors, plumbers, electricians and other pros, how to manage the book keeping of the property, etc., etc., etc. If you want to succeed in RE investing, getting this experience will be critical! In my experience, a HH can provide incredibly valuable lessons that no mentor, real estate course, book or podcast could ever teach (though, I'd still highly recommend reading up on relevant RE resources, listening to podcasts, etc.).  

Plus, if you decide to do one of the other strategies in the future (such as BRRR'ing or out of state investing), you'll be much more prepared to do it if you have a few HH's under your belt--a ton of the lessons you'll learn from a HH can be used to succeed in other areas of real estate ...in fact, I'd say that a HH should be a necessary prerequisite to the more advanced strategies (like flipping) for most folks!


3. Compared to other strategies (like flipping, wholesaling, etc.), HH is relatively simple and lower-risk, and therefore has a higher chance of success. I always use this analogy: would you tell a beginner skier who has zero experience to ski a double black diamond (the most advanced terrain) for their first run? (obviously, no; a beginner could easily get themselves killed on double black diamond terrain!). Beginners should start off on beginner terrain, where they actually have a chance to learn and succeed. A house hack is like that beginner run (but BRRR'ing, wholesaling, and out-of-state investing are more like double black diamonds).

The fact of the matter is: real estate is often a high-stakes endeavor, and the more advanced strategies (like BRRR'ing, wholesaling, flipping, out of state investing, etc.) can easily bankrupt a beginner when they're executed poorly.

Now, having said all that, house hacking is not necessarily easy (if it were, everyone would do it!)...it's just easier than the more advanced strategies...House hacking still takes significant due diligence, skill in analyzing the market and the property, time and effort to learn about tenant screening and property management, the ability to anticipate appreciation/depreciation trends, etc., etc., etc....and even with lots of skill and preparation, things will still go wrong (vacancy, plumbing leaks, bad tenants, etc.)--but that's the nature of the game. As James Brown sang: you gotta pay the cost to be the boss.

Good luck out there!

@Joshua R. have you ever tried to let prospective tenants view a property on their own? (for instance by using a remote lock and/or security cameras and/or zoom)? ...if so, how did it go, and is it something you'd recommend trying?

Also, what is it specifically, that makes doing long-distance evictions harder than normal?