All Forum Posts by: Leo R.

Great question, but it's not a question that I can answer for you...it just depends on what you're willing to sacrifice, what your goals are, what resources you have at your disposal, etc., etc.

Obviously, NYC real estate is its own beast, and what works in many other markets isn't feasible in NYC. ...NYC is a notoriously difficult market to operate in, particularly for a beginner (and even for a pro)...I have quite a bit of real estate investing experience, but I'd be pretty intimidated to try to break into the NYC market (that doesn't mean it's impossible, just that it's probably a lot more challenging than many other markets).

One thing I've found is that success in real estate investing often requires sacrifices (especially when you're starting out). For instance, you might have to sacrifice by living in a city you don't like for a year or two to get started, or maybe you have to sacrifice by having housemates in a house hack, or living in a neighborhood that isn't your favorite...or, you might have to sacrifice a lot of time doing things like building a team, analyzing properties, etc., etc.   

...in general, these types of sacrifices tend to be easier when you're younger (especially before marriage/kids)  ...as the Great Warren Miller said about becoming a ski bum: "every year you wait to do it, you're just one year older when you finally do do it"  --the same thing applies to real estate; the sacrifices necessary for success often become harder to make the older you get... it's a whole lot easier to live in a house hack with 7 housemates when you're in your 20s than when you're in your 40s!

...also, you mentioned that investing out of state could be riskier...maybe, but maybe not--it depends on a million different factors (like how much money you have, whether you have a good team in place, your willingness/ability to temporarily move out of state or at least travel out of state, etc., etc.)...  there is no "perfect" strategy in real estate, everything is a tradeoff, and every strategy has its own pros and cons. When I'm trying to make a tricky decision, I'll often write down the various pros and cons of the different options--this helps me get a better idea of what decision works best for me--I'd suggest trying that.

Good luck!

A friend of mine referred me to him (at the time, I was completely inexperienced with real estate investing; I had never bought a property)...so, it was just dumb luck...but, I did have a bit of experience with construction/carpentry, and I could tell that he knew a lot more about those issues than the typical agent, based on our initial conversations--so I immediately got the impression he was pretty experienced....I also knew that he was one of the top grossing agents in the area, which is another sign of experience....

If I had to find a new agent now (knowing what I know now), I would interview them to find out whether they had the experience I need  ...I'm pretty sure there are BP articles / podcasts, and probably lots of resources online about how to find and screen an investor-friendly agent--it's worth looking into those resources.

Another consideration: the relationship a beginning investor has with the agent is completely different than the type of relationship I have with my agent after years of business... for instance, if I call my agent, he will answer immediately, and he's willing to have multi-hour long conversations (even when we're not actively involved in a transaction!). He's willing to do this because I'm his best client, and I have a proven track record of business--my agent has made a lot of money helping me acquire properties over the years!....but, if I were inexperienced, and had no business history with him, there's no way he'd devote so much time to me... real estate is transactional, and you get what you give.

Good luck!

@Nadeem Najam I've found that Facebook Marketplace attracts a lot of inquiries...

Also, many cities have a local website (sometimes associated with the local news channel, local newspaper, or other local media outlet) that posts classifieds--these types of sites can be very hit and miss, but in some cities, they're the go-to source for rental listings...

Also, as others have mentioned, right now you're fighting against seasonality--very few people move in October/November (and even fewer move in December/January).  ...most people move sometime between May and August...   Because of that, you may need to substantially reduce your rent to attract a tenant this time of year... (but, it's usually better to get 100-200 less per month than have a unit sit empty).

Good luck out there!

@Zihan Huang this type of question ("how should I start?") gets asked a lot, so here's my response pasted from a different thread:

There are a lot of ways to get started in RE investing, but all other things being equal, a house hack is a better strategy for a beginning investor who doesn't have much real estate experience.

Why? Because, house hacking is comparatively simple and beginner-friendly (and therefore has the highest likelihood of success), but strategies like BRRR'ing, flipping, wholesaling, out of state investing, etc. are far more complicated, and have a far higher chance of failure because they involve so many "moving pieces".

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).

With a house hack, you can make money while learning the essential skills you'll need to succeed in RE investing (e.g.; how to analyze properties, how to find an investor-friendly agent, 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). So, you can make money and learn invaluable lessons with a HH, but it's typically a much lower risk strategy than BRRR'ing, flipping, out of state investing, or wholesaling--which are strategies that (when executed poorly) can easily bankrupt a beginner.

Moreover, 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.

Plus, if you do decide to do one of the other strategies in the future (such as out of state investing), you'll be much more prepared to do it if you have a HH or two under your belt--a ton of the lessons you'll learn from a HH can be used to successfully execute an out of state investment/BRRR/etc.! ...in fact, I'd say that a HH should be a necessary prerequisite to the more advanced strategies for most folks!

Now, having said all that, house hacking isn't 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!

@Emily Simmons you mentioned you're a beginning investor, which begs the question: why take on all the risk and difficulty of advanced strategies like flipping or wholesaling, when there are easier, less risky (and just as lucrative) strategies that are more beginner-friendly?

I know you mentioned a house hack wouldn't be desirable because of your family, but could you get by house hacking a multi-family property?  ...I ask, because a HH is typically a much better strategy for a beginner...

Flipping and wholesaling are both (comparatively) high-risk strategies that beginning investors should think twice about--beginners can get into extremely hot financial and legal water very quickly with those strategies...heck, even experienced folks can get themselves in very sticky situations flipping/wholesaling...

All other things being equal, a house hack is a better strategy for a beginning investor who doesn't have much prior experience...

Why? Because, house hacking is comparatively simple and beginner-friendly (and therefore has the highest likelihood of success), but strategies like BRRR'ing, flipping, wholesaling, etc. are far more complicated, and have a far higher chance of failure because they involve so many "moving pieces".

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 flipping or wholesaling is more like a double black diamond).

With a house hack, you can make money while learning the essential skills you'll need to succeed in RE investing (e.g.; how to analyze properties, how to find an investor-friendly agent, 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). So, you can make money and learn invaluable lessons with a HH, but it's typically a much lower risk strategy than BRRR'ing, flipping or wholesaling--which are strategies that (when executed poorly) can easily bankrupt a beginner.

Moreover, 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.

Plus, if you do decide to BRRR/Flip/wholesale a property in the future, you'll be much more prepared to do it if you have a HH or two under your belt--a ton of the lessons you'll learn from a HH can be used to successfully execute a BRRR/flip/wholesale! ...in fact, I'd say that a HH should be a necessary prerequisite to those strategies for most folks!

Now, having said all that, house hacking isn't 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!

@Nhi Nguyen I believe that the laws about deaths in properties vary from state to state (and I'm not familiar with these laws).

From an investment standpoint, if the death in the property demonstrably lowers the property's value, then yes--I'd either offer less, or just avoid the property entirely.

From a personal comfort standpoint, people obviously have widely varying reactions to deaths in properties...some people would be completely unwilling to buy or live in a house where a death occurred, and other people don't care.

Personally, I've lived in old houses all my life, and I presume that people have died in those houses (it's almost a statistical certainty for a 120+ year old home)--and it doesn't bother me at all.  

However, I recently experienced a situation with a death in a property I had under contract, and it affected me completely differently than I would have expected.

The house was my dream house, and I had been under contract for a while; we had just finished the inspections, and everything was going smoothly. One day, my agent and I went to the house to do a walkthrough, and we happened to run into the seller's daughter (a recent college grad who had been living in the house, and was moving out). We talked with her for about 10 minutes, exchanging pleasantries and discussing the house and the neighborhood--she seemed really nice.  Tragically, that night, she committed suicide inside the house (self-inflicted gunshot).

I reacted to this situation very differently than what I would have expected--it shook me up pretty badly, and I just couldn't see myself owning the property (much less living there). For me, it turns out that I react completely differently to knowing someone (who I had met) died tragically and violently in the house, versus the more abstract assumption that someone has died in the house in the past (again, I've always lived in old houses that probably had deaths, and that doesn't bother me).   ...In the end, we canceled the contract on that house, which is no picnic in any situation--much less a scenario like that... 

Real estate investing is a roller coaster, and all sorts of things (good and bad) occur that no real estate book or podcast or forum post can really prepare you for... but, moral of the story: when it comes to deaths in properties, it's definitely worth thinking about--because people have very wide-ranging reactions to it (everything from complete indifference to complete unwillingness to have anything to do with the house). If the death was violent or especially tragic in nature, it might have a particularly negative effect on peoples' willingness to buy the house or live in the house...

Hopefully that provides some context...

@Puett Willcox if you're getting 5 doors with 20k down per door, what type of properties are they, and what grade are they? (20k down usually means 100k purchase price, and I don't think there are many markets where you can get much for 100k...even in the midwest)   

...but, I'd love to be proven wrong!

@Lin Ding you mentioned that you plan to refi in the future...the problem is, nobody knows when (or if) rates will go down (and in fact, they might be elevated for a long time).  ...the last time we had inflation this bad (late 70s/early 80s), rates rose and didn't come back down for a fairly long time (years)  --here's a graph of mortgage rates going back to the 70s:  https://fred.stlouisfed.org/se...

I think all buyers these days need to be able to live with the property indefinitely at the rate they're buying it at right now. ...If a property doesn't pencil out at the rate it's being bought at, then it probably doesn't pencil out, period.

@David Lund this question gets asked a lot, so here's my response copied from a different thread:

As others have mentioned, an investor friendly agent is an agent with investing experience. But what does that mean? ("investing experience" could mean experience with house hacking, flipping, STRs, syndication, or any of the other many investment strategies). An agent may be a total rockstar when it comes to BRRR'ing, but they may know nothing about STRs. So, you probably want an agent who has experience with the investment strategies you plan to pursue.

Also, IMO, successful investing requires an agent who facilitates a strong due diligence process, and who has the ability to see opportunities that other buyers miss. Because of this, my agents need to be highly experienced in assessing the potential problems of a property (my agents are often as good or better at spotting problems than the inspector!), and my agents also need to be able to envision the value-add opportunities the property presents.

I'll give you an example of each:

First, an example of an agent going all-in on due diligence, and saving me a ton of cash and headache: When I was an inexperienced investor, I found my "dream house", a property that I instantly fell in love with. I was ready to buy that place on the spot. However, while I was succumbing to shiny object syndrome (admiring the fancy new kitchen, new hardware, and beautifully tiled bathrooms), my agent was crawling around in the basement crawlspaces, collecting cobwebs and assessing the plumbing. The basement had some un-finished spaces, but most of the basement had just been beautifully re-finished with a mother in law apartment (which I was going to rent out). I tell my agent to write the offer, and he says "OK, but before we make an offer, you need to understand that the entire house has galvanized steel plumbing, which will fail. It may fail in 5 years, or it may fail in two weeks, but it will fail in the relatively near future. When that plumbing fails, you will need to demolish substantial portions of that brand new basement MIL apartment to replace the plumbing. It will cost you approximately $35k-45k to demolish that fancy new finish work in the basement, re-plumb the house, and then re-finish the basement again. Are you prepared to take that on?" (the answer was no, and although I was incredibly disappointed, we walked). Point being: my agent began the due diligence process the moment we walked into the property. He did not wait for the inspection to begin the due diligence process. ...and it saved me $35k-45k and a massive headache. A NON-investor friendly agent (or an agent looking to make a quick commission) would have said "yes, this house is SO CUTE! LET'S BUY IT!", and I would have ended up with a serious problem. That's the value of an agent who goes hard in the paint on due diligence.

Now, an example of an agent thinking creatively and seeing a value-add opportunity that everyone else missed: There was a house that had been on the market for a long time, and the reason was obvious: it was only a 2 br 1 ba house, and the floorplan was very, very weird, so nobody wanted it...however, my agent spotted that the listing had unusually large Sq footage, so we went to check it out...10 minutes after walking into the house, my agent says "we can turn this loser into a winner". The floorplan was arranged in a way that some non-load bearing walls could easily be removed, some new walls framed, and with about $40k, the house would be transformed from an un-appealing 2/1 that would lose $300/mo as a rental into a very appealing 4/2 that would cashflow about $500/mo (incl. the debt service for the rehab)... We bought the place and executed the plan--not only did it become a solid cashflower, the property value also increased by about $125k. It's critical to understand that the agent who recommended this rehab knew about building code, construction techniques, and the costs associated. For instance, he identified the load bearing walls when we walked the property, he understood where the existing plumbing was, and where new plumbing would need to go, he assessed where HVAC ducts were, and where new ducts would need to be routed, he understood the changes that would need to occur to the electrical system, etc., etc., and he understood the costs of all of those issues. Plenty of people (agents included) can come up with pie-in-the-sky ideas of how to change and improve a house, but few have a real understanding of what that work entails, what challenges will need to be overcome, and how long it will all take and what it will all cost. ...how did this agent know all this info? Because he had personally rehabbed many of his own properties--and had done that work himself, and also via GCs!

We'd all love to buy turn-key, A-grade, cashflowing and appreciating properties, but those properties are almost non-existent. Because we have an extremely challenging market (high prices, increasing rates, limited supply), being able to envision and execute value-add strategies that everyone else misses is often the only way to make a property succeed--so, having an agent who understands value-add strategies is a huge advantage!

Agents with this type of expertise are worth their weight in gold to an investor--especially when the investor is relatively new and inexperienced. This is true in most areas of life--we are most in need of an experienced coach when we're learning something new (particularly if what we're trying to learn is a high-stakes process like RE investing). The less experienced the investor is, the more experienced their team needs to be!

Good luck out there!

@Ryan Shekell presumably, the comp data used by air dna, the PM, and anyone else who gives you data, is at least a couple months old (or its YTD data)...either way, the market today is a different universe than it was a few months ago, and it's likely that it will continue to change (particularly with STRs, which tend to get hit hardest with vacancy during a recession).

So, even if the data you're getting was accurate at the time it was collected, it's probably almost meaningless now.

Moreover, there has been a lot of news lately that the STR market is way oversaturated with supply (and again, demand is dropping fast because we're heading into recession). Further complicating the matter is the fact that air bnb recently changed their platform and algorithm to focus primarily on the top teir, A+++, highly unique properties (think: luxury beach-front treehouse), and more "normal" listings aren't getting much traction any more... lots of specific details on these issues are outlined in a variety of recent BP podcasts (e.g.; the on the market podcast), and tons of other sources all over the interwebs, so it's a good idea to read up...

Good luck out there!