All Forum Posts by: Lesley Resnick

This is all about risk and how it is priced. If you buy a falling down house in the worst part of town it is high risk and high return. If you buy something that you can BRRRR it is a different risk and less reward. A turnkey should be priced top of market. All things being equal it is less risk than doing a renovation or just buying a house from an individual owner. The TK has renovated the house and found a tenant. Eliminating most of the risk and should be compensated for it.

With that said, it is not for everyone.  If you can manage the time and risk, there are higher returns to be found with a greater risk.  I agree TK's do well buying, as many have huge marketing machines.  I am not so sure about the scale of economy.  While they may be able to get a lower cost, there is a fixed cost for labor and materials.  They also have a ton of fixed costs that individual investors do not.  Beyond the production costs of the renovations, they have to run a business. This requires sales, HR and Finance.  If the turnkey provider does not have a finance executive, and not a book keeper, my advice is RUN.  TK is not a simple business to run.  You must fulfill a number of roles.  Marketing company, Real estate agent, GC and Property management.       

I am not seeing the coming fire sale.  The fed is going to step in and allow mortgage modifications sometime in late 2021.  The only real winners in the great recession were the hedge funds who bought houses in packs of 1,000 from Fannie Mae.  This was at the cost of the average home owner and tax payer, since Fannie Mae and others were bailed out with your money and mine.   Unless you had 7 figures and first was not a '1', you were not the big winner.  American Homes 4 Rent, which owns 52,776 single-family rentals across 22 states, they were a big winner.  This is not a zero sum game.  For there to be a fire sale someone has to lose and lose badly.  My strategy has always been to buy opportunistically and I will continue to do so.

I don't know what will happen, but I assure you it will not be a replica of '08

In the soft spoken words of Mike Tyson:

"Everyone has a plan until they get punched in the mouth"

Both are costs  of the loan, they just call it different names.  Often the application or processing fee is just a number like 999.00 and it translates to percentage of the total loan.  The larger the loan the lower the percentage.  The real dollars remain constant.

It is really easy to talk yourself out of a good property.  Double counting is a common mistake people make.

They renovate a property, then assume huge capital expenses, reserves, repairs and cost to turn the property with high vacancy.  The problem is none of these are real numbers, they are estimates and guesses.

I am more concerned with the numbers I know PITI and rent. Does the property need renovation?

I can assure that no one has ever lost money by the end of paying off a 30 year note.  If you bought the house in 1990 and kept it rented, it was profitable.  The short term is anyones guess. 

When it comes to BRRRR a key play is to find a value add. By that I mean add a bathroom enclose a car port. The idea is you are looking to increase the value of the property by 25-30% above the money you put in. Ideally, if you can fund the project in cash, your numbers will be much stronger. The hard money is going to cost you upwards of 10% of the money borrowed. I do some in cash and need to borrow if I want to scale. I regularly buy the property for cash and take out money to cover the cost of the building and reno money. This frees up money to buy the next property. There should probably be another letter in BRRRR to represent buy for cash then take hard money.

10-12% is common 

6 month project

1-2 pts funding 

1/2 - 1 point junk fees 

I have a lot of concerns about cryptos in general.  

What if the Fed creates a block chain digi-dollar.  Trades at the value of $1 us dollar.  It would virtually eliminate the need for all other currencies globally.  The third world would trade in US currency natively via a phone connection.  Our banking system would become global, micro loans to people in Senigal would be profitable.  It would be the next step beyond a reserve currency.  Further, the government could easily make cryptos illegal, due to money laundering laws.  I can not print up Lesley Dollars and circulate them, why is it different for any of the cryptos.    

The cryptos eliminate the governments ability to help the economy in an emergency (Corona Virus).  The Fed can create money and perform quantitative easing while managing interest rates.  I do not want an unmanaged money supply.  It is the ultimate in FIAT curency, there is no one that is saying, "I will backstop this currency".   We would have unimaginable booms and depressions that would be so extreme we would be exchanging wampum as money after the currency crash.

Bottom line is that Cryptos represent a challenge to the US losing it reserve currency status.  Further, other first world countries would lose their ability to manage their own currency.  This is an example of technology outpacing laws.  

I trust Mark Zuckerberg even less with control of our currency, than I do the Fed.  Facebook tried to create a currency based on their platform.  It was shut down quickly.  

If the best argument for Cryptos is they will go up in value and I can day trade them, it is doomed to fail.  For Bitclion to become mainstream, it needs to be exchanged in and out of the banking system and that will never happen.  Banks are required to keep reserves, how do you value reserves in multiple currenies, especially if one is volatile?

Eye Drive West -   Saw it today 

Pennsylvania has some great town names also.

Bird-in-Hand

Mt Joy 

Paradise, Pa conveniently located near Intercourse, Pa?

These are great.

Jacksonville was originally known as COWFORD.  It was a shallow spot in the St John's River to allow cows to cross.  Where they were going or why I am not sure.  

Like it or hate it, unemployment is not going to be an issue as long as the $600 federal subsidy lasts (7/31).  

$600 a week is more than many of my tenants make a week.

The federal $1200 should help as well.

The real question is how long it will take for the economy to remove the training wheels.