All Forum Posts by: Michael Gansberg

Any EquityBuild investors should check out this earlier thread. It’s eerie.

https://www.biggerpockets.com/forums/311/topics/300843-has-anyone-invested-in-any-of-the-equitybuild-properties

Hi @Will Brown - I’m chiming I’m not with knowledge(sorry!) but with a question. Would the drainage requirements be mitigated by making the parking lot from pervious pavement/asphalt and the installation of a green roof(which would contribute to stormwater absorption?) I don’t have experience with what you’re doing, but I wonder if some smart infrastructure could reduce overall costs.

MG

@Robert C. - I think national inflation generally plays second fiddle to trends in local real estate markets. It's likely more than background noise, but less than a primary driver(this is personal intuition speaking, not something garnered from hard data.)

But inflation is one of those situations where perception becomes reality. If you think assets will inflate in value, what do you do? Convert as much cash as possible into assets that benefit from inflation. In other words, gobble up real estate like Godzilla. Now we're seeing inflation in the numbers- 2.9% year over year, handily outpacing wage growth of 2.7%(feel conned yet, certain voters from 2016? Maybe you should.) And what's the main goal of the Federal Reserve? Take away the punchbowl just as the party is getting started. I think the Fed chairman left the punchbowl out a little longer than past Fed chairpersons would have.

I guess the short of it is this- if inflation continues at the current pace, owners of real estate should generally be beneficiaries of that inflation, and renters will generally suffer. But to your question above, Robert- growth in wages can certainly keep upward pressure on rents.

Where does it all end? The divide between rich and poor will widen in the above scenario. The rich may feel good about it now, but when it continues for too long, it tends to rend the societal fabric upon which we depend- and it isn't too long before the "have-nots" show up at the door with pitchforks. I think November 8th, 2016, was an early display of pitchforks, though the wielders likely anticipated a populism which has not been forthcoming.

Crazy. These scams like Equitybuild and Morris Invest try to reinvent the wheel, and the results are exactly as one would predict.

Happy to help, @Rommel Taylor - I moved on. It was a frustrating experience from start to finish. But again- it was 3 years ago, so they may have improved their processes since then. Still- I'd try conventional banks first.

@Rommel Taylor - I tried working with them once. Lendinghome says it's an easy process, and fast, I found neither of those to be true. My experience has been better, faster, cheaper, and lower interest rates when working with a community bank I've done a bunch of business with.

One of the worst things about Lendinghome- and I know it seems petty- is that they have insurance requirements which they didn't disclose to me at the beginning of the process(though it was 3 years ago, they may have changed this process since then.)

The requirement was something about insuring the subject property to a certain percentage of its value with deductibles no higher than a certain amount- I believe they required the deductible to be less than 5% of the property value. I have no problem with either of those, but you have to give Lendinghome a deposit- if they told me I'd have to alter my insurance in ways which I was not willing to do, I wouldn't have started the process with them. If you can finance with a regular bank, you'll be much better off.

MG

Hi @Robert C. - I'm seeing pretty vigorous buying activity where I operate(primarily the Capital District in NY.) One way some investors might look at it is this:

1. Interest rates are rising, making loans more expensive.

2. But they're rising in an attempt to stifle inflation. So investors, expecting inflation, are willing to pay more for an asset because they(like the Federal Reserve) believe the rents supporting the asset will rise, which has largely borne out in my market over the last few years. 

Think of it this way- the investor can get a fixed-rate loan. Inflationary pressures incentivize just that- while the investor's loan costs are(or can be) fixed, rising rents can really goose returns and protect the investor against inflation.

This path that we're taking was easy to see coming- we've had accommodative monetary policy for about a decade, and just when the economy hits full employment, we get accommodative fiscal policy as well, which  in tandem with easy monetary policy and full employment should generally cause inflation, or rising interest rates, or both. The people running things right now are not the sharpest tools in the shed. 

@Aliz Raksi - something doesn't smell right here. From the beginning- the current owner bought it for $240k then rehabbed 9 units(so if the cost on that was $100k, his profit would be much less than your husband thinks.) But more worrying is the current gross rent- at $5k/month, that means each tenant is paying about $450/month? 

You mention in your post that "we would be cashflowing $800/mo with $105k down and no work." If by "no work" you mean there's no immediate rehab required, fine, I get that. But when tenants are paying $450/month, other kinds of work will be required. Like banging on their doors to get rent. Or sending exterminators when someone leaves the garbage sitting around for too long and the roaches notice it. How's the guy getting only $450/unit after he just rehabbed them- is that the going rate for a rehabbed apartment in this neighborhood? 

Based on everything in your post, a theoretical cap rate of 7.5% for a building across the country should cause you to run, not walk away from that deal. If you had good local management in place- that you've already battle-tested, and know that they're honest, competent, and won't walk away from you at the first sign of trouble- I might answer differently. But I don't think this thing at a 7.5 cap would make sense for anyone.   

@Joseph Ranola - I hope you enjoy the book, I enjoyed writing it. I think you'll find something useful in the area regarding finding management, it's probably the most valuable sentence or two in the book. 

I'd be happy to function as broker on any acquisition you're considering, but my management is swamped right now- we have more work than we can handle as far out as we can see. Roofs, front fascias, a replacement of a three story porch for rear egress, foundation work, 5 apartment turnovers(2 of which are intensive) - oh, and that's just what I remember of August while sitting at a Starbucks, by the way! I'm going to be selling off the more management intensive stuff in the coming months and replacing it with more chill stuff, because life is too short, you know what I mean?

As a younger investor, I fought for high cap rates(and by #$@#, I earned 'em.) Now, in my dotage(I'm 44;) I look at the portfolio and can clearly see that the theoretically lower cap rate properties have been substantial outperformers over the years on the metric of cash flow- so I'm pruning the challenging(and capturing the principal appreciation, *wink wink*) to replace it with the chill. 

MG

Hi @Joseph Ranola - you might want to take a look at Newburgh, NY. I think there might be some properties available fitting your requirements, and it’s not too far from Staten Island. 

The Capital District, where I primarily operate, also has property fitting your requirements, but that’s a real hike from NYC.