All Forum Posts by: Lesley Resnick

IN FULL DISCLOSURE, I have lived in Jacksonville my entire life and own 25 rentals here.  I am a full time investor focused RE agent.

If you live in a gateway city, don't even bother looking, your rowing against the current.  Sure people say, I will buy for cash and a take a yearly loss and wait it out and sell it someday.  If that is your situation buy the S&P index fund and just let it ride.  Typically these city's have unfriendly landlord laws, long evictions tenant rights that encourage bad behavior.  Ask the NYC rent-controlled apartments how that is going?  To bring units up to code, will cost more than all the rent for the next 5 years.

Looking at the nationwide demographic.  People are moving south and west.  The gateway cities in the south have some of the same problems.  Miami is a good example if you bought pre covid, you are a genius and are killing it now.  If you are trying to buy in now you are to late.  

Now my market, Jacksonville, is benefiting from the migration growth.  People who want to leave the Northeast and west coast, but do not want to pay Miami prices are coming here.  Florida has low property taxes, a diverse and growing economy. Insurance in Florida is higher than other places, but it is stabilizing as the claim laws and assignment of risk laws are being re-written.  

If you like media lists of best of….Jacksonville shows up on those lists.  We also show up on the negative lists, "worst place for left handed single gear bicyle riders", obviously an  overstatement, but you get my point!

It is not a one data point deciscion to invest in any city or at all.  In total, my analysis is RE is an amazing investment over the long term and I belive Jacksonville will continute to be at the forefront of that class of investment.   

The Thing I can say with authority is, "listen to the market", the trend is your friend.  You must analyze what the market is telling you.  

Fix and flips are a function of:

Local absorption rate, how long it would take a market to sell out if nor more inventory came on the market.  Even if you are correct and built 25% value, you could lose it all to the time you hold the property.

Understand the costs and time for the renovation.  It will take longer than you think.  You can come in on budget, but your timeline will go over.

Where are prices going?  What will the market look like when you are ready to sell.  Today is less important than in 6 months when you close.

DSCR:

After you pay all the bills do you have money left over when you buy?  There are more metrics and xls than could possible be useful.

What is the trend for rent?  Inflation is going strong and driving rents.  Can the average person afford the average rent in the area?

Do  you like the neighborhood?  Do you like the city.  Gary Indiana and Detroit, have some super  program numbers, but I don't want to invest there.  There is a day coming that those areas will rise from the ashes.  You could go broke waiting.

The real question is what is your risk tolerance and do want a job or to be an investor? Fix and flip is not passive, nor should it be. You need to watch the project or it will get away from you. DSCR can be truly passive if you set everything up correctly.

In short, there is no right answer only each individuals situation and goals.

In RE, The Rule of…is time driven.  

In the words of Jay Leno, "you did not overpay, you bought to soon". 

 If this is a long game, then today's return should not be the only criteria.  Inflation will take care of all RE investors.  How much did you parents pay for the house you grew up in?  What is it worth today?  

It makes sense to evaluate properties with a critical eye.  However, there is a lot of art over science.  I have seen a lot of pretty spreadsheets and if I gave you the property for free, the xls would not like it.  I always suggest that investors reverse engineer.  In other words, does your 100k purchase require 3k a month to please the spreadsheet.  (Cap ex, property management, expenses, reserves for vacancy, emergency funds, mortgage, tax, insurance, travel expenses.)

The market will tell you what it is willing to do.  The 1% RULE has become challenging to achieve anywhere.  Just a few years ago it was easier to make.  Behind that rule is the idea that better neighborhoods are harder to make the numbers work.  Homeowners push out investors.  If an area has few homeowners then you are in an investor market and you can achieve higher returns.  Other investors are not willing to pay a premium.  Home owners see if differently, if I want the house (school system, proximity to family), then they will pay a premium.  Additionally home owners take better care of their properties than renters.

If you wait for the perfect pitch you will never get on base.  There is a solid portfolio to be built on singles and doubles.  Home-runs these days are rare.  I am bullish on the long term outlook and do not worry about the daily ups and downs of the RE market.  

If you want something to worry about...can the average income support the average home purchase or rental?  If no one can afford the rent, then the pro-forma is meaningless.  

This is tough stuff.  There is no substitute for experience.  Regrettably, there is no one catch phrase that is going to keep you out of trouble. 

 It is the cost of an education.  I recommend finding people with experience to look at the deals.  Anyone who has been at this for any length of time has lost on deals, or is not telling the truth.

Welcome to the CLUB!

The bigger problem is you must make more in Real Estate than your W2 job.  If you are married your spouce could qualify.

Go to the IRS.gov site and read the publication on it.  It will cover all the scenarios.

It is really simple… You get what you pay for.

If you choose the lowest cost provider, that is what you will get.  There are a lot of agents out there who will work for practically free and don't know how to protect their customers.  

If all goes well and there are not issues, then you don't need to pay anyone to help you.  The problem is there is no way to tell if you are going to have a problem before you get into the deal.  

You only need to make a bad buy or get ripped off once and it will make sense why to hire experience.  Many new investors become over confident and want to save a few bucks up front and regret it after.

If your agent isn't willing to tell you to walk away from a deal, then you should reconsider if you should be working with them.  Agents only get paid if the deal closes.  There is obviously a vested interest in the deal closing.  Regardless of the the cost, the agent you are looking for values relationships and reputation over any single deal closing.  

The other problem with COC is that it is easily manipulated. What is the COC on a house you pay cash for vs a house you finance? The cash in for the first example is clearly higher, but is it better deal? If you renovate the property in year one, what does the COC look like? What if you leve the building vacant for 6 months while doing the reno? Don't do anything, delay all maintenance, COC looks great. If you are someone likes to consider, cap ex, repairs, reserves and vacancies, COC falls apart there as well.

There are very few REAL number in real estate.  The rest are derived from the REAL numbers and even those become less meaningful over time.  I like gross rent multiplier, how much the property produces compared to its costs.  It allows a comparison of the performance of dismissal assets.  The second number I like, is how much do you have left after paying actual expenses, not the "could be" expenses.  It is difficult to normalize future expenses on an old building vs a new one.  

The last part is a little squishy, what is the area like?  The more depressed and rough the area, the higher the return. Ocean front real-estate generally has horrible cash flow.   

The lots are split and reflected online. I need to go back to addressing and get a number for the second lot.  I may go owner occupied. I was talking to a lender and their low income programs are amazing, if you qualify.   

Got another citation from the city.  They told me if I send them proof we are moving forward they would not write me up.  I called and left a message for they guy at the city.  I need to deal with the city on the splitting of the lot.  I have not gotten back to it.