All Forum Posts by: Victor Menasce

Hey Michael Nguyen Pflugerville is a growing area. There is a new town square coming in the near future. This sounds like a good investment. But the problem is that it's not a great investment. As Stephen Covey used to say, "the best is the victim of the good". Merely doing good is seductive because it's good and often easy. Austin suffers the same problem as Dallas. It has no natural boundary (like Manhattan) constraining it's growth. So very little reason for values to climb. The city can continue to grow up the I-35 corridor and land to the north is cheap. Increasing value requires an imbalance of supply and demand. Look for neighborhoods in transition. I would recommend near the UT campus just east of I-35. I think there is opportunity to reposition properties in that location. But be careful. There could be some duds in those areas too. Avoid paying too much. Talk to Phil Grove and many others. Get some local expert opinions.

One of the biggest myths is that property management is expensive for what you get. Sure, there are examples of property managers who do very little and who try to maximize their income on the back of the landlords. The type of property management you want is the one who thinks like a landlord. They recognize that the path to maximizing their income is to maximize the performance of the property for the landlord. But property management is more about managing the tenant relationship than managing the property. This is impossible to do remotely. The second challenge is when you try to go small. Property managers need a minimum of 75 doors to have a viable business. The sweet spot is closer to 150. So if you only have 10 doors, it's difficult to get enough attention. It's easier to go bigger. The bigger you go, the lower your costs will be on a relative basis. Real estate is a big business. By definition, business is a team sport and property managers are part of your team. Anything else is called self employed.

Jake Recz welcome! Never too early to start. A close friend of mine started at 21. She just win business woman of the year at age 27. Her business is now doing $30M per year. I took a career shift into investing at age 45. I'm now building residential subdivisions and multi unit apartment buildings 5 years later. Just make sure you get lots of practice. The best way is to find someone who is doing something similar to what you want but has much more experience. Go work with them for a few years to learn the business.

One of the nice things about Microsoft project, is that you can export directly to Excel. Since Excel is now available on smart phones anyone with a smart phone can open the project file without requiring a full Microsoft project installation.

If your wholesaler found the deal and put it under contract, you may be able to pay them an assignment fee for the assignment of contract. That isn't a commission. It falls under contract law, not real estate law. If that doesn't work, then maybe you could hire that person as a consultant and pay them a consulting fee that isn't tied to the property purchase.

There are a few things that aren't adding up for me. If the town is poor, then rents of $1,000 per month seem high. Taxes of $8,500 also seem high for a property in that price range. I smell something fishy here. There are a few unscrupulous sellers who are short of cash and will seller finance to rookie investors and then foreclose to get the property back. Meanwhile, they keep your downpayment. I have no real reason for suggesting this, other than gut feeling from what you presented. Something just doesn't add up. Hope I'm wrong. If I'm right, I hope I saved you from a bad experience.

Tenants insurance covers only the tenants belongings (furniture, personal effects, etc). If they choose not to purchase insurance, then they are assuming the risk, not you. You should be carrying building and chattel, flood, fire, and liability insurance. If your tenant is paying rent on time and keeping your place in good condition, why would you evict?

Think about it. Put yourself in the shoes of someone who has just made a bunch of money, whether you're living in China, or Russia, or Brazil or even India. Changes in government, politics, economy can all have an impact on your wealth.  The stock market is too volatile. The there are not too many liquid investments in China and the rules are continually changing. More importantly, many of these investments require constant monitoring (this is hard work). Many wealthy people need a place to park cash where it will be relatively safe.

Real Estate has that  quality. In excellent neighbourhoods, values are retained over the long term, and the US has historically been one of the most stable places to invest in. So all of this makes sense. In Canada, we're seeing the same effect in Toronto and Vancouver, and to a lesser extent in Calgary. Chinese investors want a place to park cash where it will be safe. Many are buying second homes and condos. They're almost always being purchased in cash with no financing. 

This past year, China replaced Canada as the #1 group of foreign real estate investors in US Real Estate. In 2012, Canada spent 18.5B on US Real Estate and China spent $16B. In the past 12 months, China has spent $22B, and Canada only $14B. The UK, and Brazil are in third and fourth place. So if you're a real estate professional, that's a significant market. You can make a very healthy living specializing on one segment of foreign buyers. 

I use a similar process in all my properties. However, the property manager is the one taking the photos. They get uploaded to Dropbox on a regular basis. It's part of the regular communication between the property manager and me. Dropbox is also used to upload monthly owner reports, tenant leases, etc. I use the same process with my construction managers.

Real Estate Owned properties (REO) are properties that have gone through the judicial foreclosure process. They went to auction on the courthouse steps, and for whatever reason failed to sell at auction. They went back to the bank and became classified as an REO property. The bank is still trying to dispose of the property.

There's no real drawback to an REO property. The banks have a few rules that they like to enforce as part of the sale process. There is usually some room to negotiate.

1) Banks prefer to sell to individuals rather than professional investors. They hate the idea of investors profiting from the bank's losses. So they sometimes insist that the buyer be an individual, not a corporation.

2) They also usually insist that the contracts are not assignable. So you cannot wholesale the deal to another investor. Again, they don't want to lose money and see an investor profit from their loss.

3) Banks tend to be intimidating in their negotiations. However, you can negotiate with them just like any other party. I successfully negotiated a $50,000 reduction in price in a multiple offer scenario. 

4) Do your math. Make sure that you stick to your numbers. Don't let their negotiation stance influence your discipline on what constitutes a viable project.