All Forum Posts by: Michael Ealy

But I love MF. I realize my largest properties (90+ units) actually take up the least amount of work while giving me the highest amount of cashflow and profit when I sell.

But to reply to the OP as the best cashflow market in the country...as always the answer is "it depends". You can find good cashflow deals in a market but if you don't know how to prescreen tenants, then you will have negative cashflow regardless of the market.

1 Vote

Originally posted by @Lisa Sluss:

I think that may be my only option. Thanks for the advice!

When you sell, consider doing a 1031 exchange (obviously, you will sell your rental not the one you live in now 0I am assuming). By doing a 1031, you are able to defer the capital gains taxes and allows you to buy a bigger property with more cashflow.

5 Votes

Originally posted by @Account Closed:

Hi everyone!

My name is Aaron Amarant and I’m 17 years old.

I’ve been studying real estate investing for a few month now, but have always been around some larger commercial investors (because my dad is one).

My experience is still limited and that is why I’m here.

I am looking to dive into my first rental property (mainly multi-tenant) after I turn 18 and get my real estate license.

I’m from the Broward area and would love to get to know some people on here!

Aaron,

Kudos to you for thinking of real estate investing at such an early age. I can see your father's influence on you. I was thinking of parties and girls when I was 17 - not real estate investing :)

You are on the right track with "house hacking" and finding a job to support yourself and get a mortgage. The only thing I would add is to house-hack not a single family home but a 2-unit or 4-unit building. If that's not possible, then house-hack a 4-bedroom house and rent the other 3 bedrooms to roommates.

By doing so - you live rent-free/mortgage-free and maybe have some cash leftover - and more importantly, gain experience in landlording/ property management.

1 Vote

Originally posted by @Ben Leybovich:

You have to take all of these reports with a grain of salt. While Columbus, Austin, Raley, Phoenix, and New York are all grouped together in this graph, they are very different dynamically from one another. You are comparing 1M MSA in Columbus to 5M MSA in Phoenix to NY...

Milken is good, bit hyper-focused on technology, which may not provide enough flavor about the other sectors.

Ultimately, here we are. Today. Is the population story likely to continue in the MSA? Is the job growth story going to continue in the MSA? Is there an intrinsic barrier to entry relative to new development in the MSA, whatever it may be?

Maybe we are at 11 on the graph. Or, maybe we are at 9,25 on the same graph. Or, maybe we are at 11, but the green is going to stretch past 13...

This has never happened, but I agree with @Brian Burke - it seems to me that the forward-looking picture is what's really important. And, let's face it, all of us are making a guess at it; an educated guess, but a guess nonetheless.

It's good to talk with a smart investor like you. But hands down, Brian is the smarter one because he is the oldest one (LOL).

Seriously, I agree with looking at markets that will go up (forward looking) vs. looking at what happened and which markets have gone up. As Wayne Gretzky would say:

“I skate to where the puck is going, not where it has been.”

But as you said, in our game of Apartment Investing, knowing where a market is going is all an educated guess. It's more difficult than hockey but when you get it right, it's more exciting and profitable :)

2 Votes

Originally posted by @Brian Burke:

Dr. Mueller's market cycle monitor is an interesting report, but I don't use it to pick markets. Mostly because it tells you where things are now, or where they have been, but says little about where they are going to be in the future. That's kind of a problem with most market reports, however. As you said, just because a market is at position 12 today doesn't mean it goes to 13 or 14 tomorrow. In fact, it can go straight from 12 to 10 in a single quarter--I've seen that happen several times in the past with this study. Still worth looking at, nevertheless.

Other reports I like are the Milken Institute's Best Performing Cities Index, which should be releasing in the next month. And the PwC/ULI Emerging Trends in Real Estate report, which was just recently published (it comes out near the end of every year). Neither of these reports, nor the Mueller report are definitive, but when you see the same names pop up on all of these you should take notice.

For more submarket-specific data plus some forecasting into the future, I like the reports from Axiometrics and REIS. They aren't cheap, but they are cheaper than an acquisition or underwriting mistake...

As always Brian, your response is spot on and always helpful.

I agree that Dr Mueller's report is like looking at the rearview mirror. Things have happened already. In fact, when I look at the report in 2017, he said that Cincinnati is in a Hypersupply state. Good thing I didn't listen to that and still bought apartments and I got some really, really great deals as Cincinnati went back to Expansion phase and now back again to Hypersupply.

I will look into the other reports you mentioned. I am not a "macro-level" kind of investor but more "street-level" kind. I know Cincinnati because I live there and that's where I invest. I know the neighborhoods, and which streets are good and which ones to avoid. Investing in other states/cities - it's new for me, so the reports you mentioned are worthwhile looking into.

Thanks for sharing them here. If I can vote for your reply 10 times, I would :)

2 Votes

Originally posted by @Greg Dickerson:

@Michael Ealy what I mean is you can always find deals with margin in every market cycle like you did but you can’t always find deals with margin in every market like the two markets you mentioned Austin and Phoenix. These are most likely producing yield plays and fee deals vs margin opportunities.

You and I are opportunistic investors and look for margin so we need less competitive markets but have more flexibility to strike when the deal is right.

I like how you think Greg - because we think alike. :)

Hot markets - given they are hot and competitive, good deals are harder to find. I kind of agree with that, although, good deals exist even in hot markets. Regardless, I will not lower my buying criteria simply because the market is hot. The deal has to work even when the market turns cold because all markets will eventually turn cold.

1 Vote

Originally posted by @Michael K. Smith:

@Michael Ealy

Thank you for all this great information.

What areas have you invested in if you don’t mind me asking?

Cincinnati, Ohio

0 Votes

Originally posted by @Greg Dickerson:

Originally posted by @Michael Ealy:

Hi BP Nation,

I found the latest market cycle report. See below:

The "y axis" is occupancy. As it crosses the LT (Long Term) Average Occupancy, it's a good enough market to build new apartment buildings. Dr. Mueller (the researcher who developed this) divided the market cycles into 4 Main Phases/Cycles/Quadrants with 16 distinct points.

Best time to buy/ build are points 8 to 11 (Expansion) as rents & occupancy are increasing the fastest.

Points 12-13 are still good points to buy in because rents are still increasing but at a lower rate and occupancy is moving down to the long term average.

A city can actually move backward (not just forward) through the 4 Market Phases. So it can be in Hypersupply today but it does not mean it will go down to Recession stage. It can actually go back to Expansion stage.

So questions to experienced apartment syndicators/sponsors:

1. Do you use Dr Mueller's report in determining where to buy and when to buy?

2. I didn't find use for Dr Mueller's Market Cycle Report before BUT since now I can buy apartments nationwide, I am interested to know which cities I should focus on. Two cities keep on appearing in all the research my staff has done: Austin and Phoenix. What do you think of these 2 cities?

3. What other Market studies do you look at to evaluate/determine which cities/sub-market to buy in?

Calling on Ben Leybovich, Brian Burke, @Chris Salerno, @Grant Cardone, @Alina Trigub, @Ola Dantis, @John Casmon...

Since the graphic above is not very clear, below are the cities that are still in Expansion Phase:

Austin
Boston
Chicago
Columbus
Detroit
Houston
Jacksonville
Kansas City
Las Vegas
Los Angeles
Milwaukee
Minneapolis
New Orleans
New York
Norfolk
N. New Jersey
Orange County
Palm Beach
Philadelphia
Pittsburgh
Phoenix
Raleigh-Durham
Riverside
Sacramento
San Antonio
San Diego
Tampa
St Louis
Stamford

Michael- I do not use these types of reports. As you know real estate is hyper local and these reports use a lot of averages. The two markets you mentioned are very competitive as everyone wants to be in the hottest markets.

There are deals to be in every market cycle but not every market. I tend to rely on my own due diligence and market research regarding supply and demand. If occupancy is high with no new units in the pipeline it’s a good market to build and buy and vise versa.

What your seeing in the top sought after markets are yield plays and fee based deals. Nothing wrong with either but at 3-5 CAP that's what you have.

Thanks for chiming in Greg. I agree: there are always good deals in every market cycle. Heck, I made money even during the Great Recession. In fact, come to think of it, ever since my "come back", I never stopped buying apartments since 2004 - so I bought on the way up, during the peak, during the crash, on the way down and on the way back up to recovery phase.

And I agree with you on the real estate market being hyper local - it's down to the neighborhood level not just the city level. One side of the city can be an "A" area and a few miles is a "D" area. Also, I look at growth - more specifically, is there a value-add where I can do a light renovation and produce a significant increase in rents? If so, then it's a "Go".

Can you elaborate more on your statement that there is a deal in every market cycle but not in every market? I am assuming you mean a declining area - where rents are going down and vacancy going up - is a not a good area to buy in?

0 Votes

Originally posted by @Chris Salerno:

Originally posted by @Michael Ealy:

Hi BP Nation,

I found the latest market cycle report. See below:

Best time to buy/ build are points 8 to 11 (Expansion) as rents & occupancy are increasing the fastest.

Points 12-13 are still good points to buy in because rents are still increasing but at a lower rate and occupancy is moving down to the long term average.

So questions to experienced apartment syndicators/sponsors:

1. Do you use Dr Mueller's report in determining where to buy and when to buy?

3. What other Market studies do you look at to evaluate/determine which cities/sub-market to buy in?

Calling on Ben Leybovich, Brian Burke, @Chris Salerno, @Grant Cardone, @Alina Trigub, @Ola Dantis, @John Casmon...

Since the graphic above is not very clear, below are the cities that are still in Expansion Phase:

I think the Carolina market is going to be very strong. I do not see the major markets in the Carolinas going into a recession based on the strong jobs that are going to those cities. A lot of people focus on the media and these types of graphs. I think if they focus on buying a great deal they will make money in any type of market.

I agree with you Chris.

There are always deals in any market.

That's why I am still buying in Cincinnati even though it's in "Hypersupply". For example, one person I am coaching found a 138 unit apartment complex that the rents are way under $1/sqft and it's an opportunity to increase the rents with a light value-add and increase the value significantly.

But when I go outside my market, I need to have a preliminary basis on which market to choose and then based on that, which sub-markets and then if there are good deals in those sub-markets.

1 Vote

Originally posted by @Kimberly Kesterke:

Landlords have a noble mission. We provide safe and clean housing to our tenants, keep homes maintained and reasonably respond to our tenants requests. We provide housing options so that the government doesn’t have to. We build profitable portfolios that employ handyman, electricians, framers, dry wallers, plumbers, roofers, cleaning crews and real estate agents.

We take dilapidated homes and transform them into clean, safe, live-able spaces that create homes for people who either cannot afford a home or chooses to rent. This helps improve the landscape of the local neighborhood and increase property values for everyone who lives there.

We take on all the risk- we keep the water heaters running, HVAC repaired, plumbing working and toilets flowing. We set proper boundaries to our tenants with the expectation that rent is paid on-time- not only helping them make financially wise decisions, but when the proper programs are in place- you can help boost tenant’s credit scores with positive on-time payment reporting.

And yes, we deserve to make healthy profits in doing so.

So next time you hear some jacka@@ referring to landlords as slumlords- share this sentiment. Stand in your power knowing you are providing something that the government simply can’t do well. Know that you as a private citizen are adding tremendous value to your community.

And for goodness sake- please screen your tenant’s properly. You can’t be a slumlord if you don’t rent to unqualified tenants. Stick to your screening procedures and don’t second guess yourself.

Agree with you 100% that the real landlords are not slumlords.

However, I love slumlords :)

The reason why I became successful at this (and now have a portfolio of 1,000 apartment units) is I would take a property from a "slumlord" and put in the work and money to make it nicer than the other apartments in the area. I renovate a property in a "C" area and make it look like it's in a "B" or even an "A" area. By doing so, I am able to charge higher than market rents - in fact my buildings usually have the highest rents in the area.

So if others call you a slumlord, ask them if they know of other slumlords. You might buy buildings from the people you get referred to :)

6 Votes

All Forum Posts by: Michael Ealy

Michael Ealy has started 68 posts and replied 1506 times.

Post: What's the Best Cash Flow Market in the Country?

Post: Cash poor, real estate rich

Post: Hey everyone! Young perspective investor here.

Post: Apartment Market Cycles and Best Cities to Buy

Post: Apartment Market Cycles and Best Cities to Buy

Post: Apartment Market Cycles and Best Cities to Buy

Post: Class C neighborhoods

Post: Apartment Market Cycles and Best Cities to Buy

Post: Apartment Market Cycles and Best Cities to Buy

Post: I take issue with the term "slumlord" and here is why