All Forum Posts by: Michael Gansberg

Great post, @Shiloh Lundahl. 

I've been building my team, knowledge base, and physical assets since 2003. Occasionally- far more often when I was a more active poster- I'd get messages like that. I'll paraphrase.

What they write:

Hugh G. Mooch: "Hey man, I notice you invest in xxx region, I was thinking of doing that too! Now that we're sympatico, can you send me the names/email addresses/phone numbers of your closing attorneys, your eviction attorneys, your land use attorneys, your managers, your general contractors, and anyone else with whom you've done business and had a positive experience? Wouldja throw in a brief synopsis about each of them and what they generally charge as well. Thanks!" (I actually got one like this a month ago. The writer said he'd "consent" to a phone call with me. How'd I get so lucky, I wonder!?!?)

How I respond:

Me: "Thank you for your email, Mr. Moocher. I've spent fourteen years investing and learning how to do this well, building my assets, my team, and other intangible assets collectively known as "goodwill." I've poured blood, sweat, and tears into this endeavor, raising it from scratch and turning it into a living, breathing thing. 

"Now, after 14 years, I find myself in a bit of a catch-22. You're emailing me because you believe I'm a successful businessman, with skills and knowledge you'd like to acquire. But a successful businessman would never give away his secrets for free, right? Surely, if I gave you this information, you'd know that I couldn't possibly be successful, and you could not rely on the information tendered. This paradox regretfully prevents me from being of any assistance to you."

Love,

Michael 

(tee-hee) 

I doubt you can do that based on a prior conviction. The tenant is still a citizen, with all attendant rights(except being able to vote, right? Maybe he/she can't own a gun?)

If the tenant pays rent on time and doesn't interfere with other tenants' right to private enjoyment, I'd leave it alone.

Side note: to me, an interesting societal question is about sex predators. A murderer leaves prison and is a free man- a sex predator leaves prison and must notify everyone where he/she lives forever. The sex predator has an impossible time finding housing, the murderer? Not really. It is odd how our society finds reason to levy more punishment against a sex predator than they do against a murderer. Something is wrong with that picture.

And- honestly- a building owner would generally be crazy to rent to a sex predator. Imagine having a ten-unit building, you rent to a sex predator(who has served his/her time,) and the other 9 tenants find out. Some of them flee. The act of renting to someone with that scarlet letter imposes risk and sometimes high costs on the building owner. Why are the risks and costs associated with renting to a sex predator borne solely by the building owner, and not the society which insists upon marking the sex predator forever? 

I'm not sure what the rules are in Ontario, but if she's been infected multiple times, odds are that she's the problem. Why would you be responsible for it? Tell her to call an exterminator and to leave you alone. You might also tell her that no tenant prior to her(if this is true, of course) has had any issues in this building/apartment.

Some states/municipalities require landlords to exterminate certain pests, in my primary area- bedbugs are in sort of a gray area. When they first became big in the news, the local code dept cited landlords and required the building owner to deal with it. Later, the code dept became so inundated with calls from tenants that they realized it wasn't tenable to keep citing landlords(who were not causing the problems.) So code then told tenants, "You caused the problem, you fix it!"

The caveat? If the bedbugs are present in more than one unit in the building, then it definitely becomes the landlord's problem. I've had tenants tell other tenants to lie to me(my management) and tell me that they also have bedbug problems to get a freebie extermination. This goes very poorly for them. My residents know me(through management) to be very fair, but I'm a human lie detector! I guess that's what a few decades in Manhattan does to people.

I still have my original Hudson investment, but my focus has shifted to the Capital District. If you can hit your targets in your local market, that could be a great option. I think vacation rentals are more challenging than year-round- more management, more vacancy(between tenants and in the off-season.) I'd suggest working your way outwards from where you live.

Interesting question, @Casey Gocel. Many investors are in your shoes. If you look at the large vibrant cities, this is a common problem- Manhattan's median apartment price is about $1,200,000, and the median rental rate is about $50k/yr(culled from various sources.) That's about a 4.2% yield if you purchased in cash, and had no expenses(an impossibility.)

I think you can turn this problem into an opportunity. My first purchase was two hours away from where I lived(Hudson NY from NYC.)  The cap rates were compelling, but illusory- managing in Hudson from 2 hours away turned out to be too difficult for me. It forced me to obtain competent management.  This step is essential in any investor's career- managing your own properties ceases to be scalable at some point. If you start with good management, you've already removed one scalability hurdle(capital will likely be your next hurdle.)  

Why not follow that plan? Stay within two hours in case you need to be there for some reason. That will give you the ability to meet with management on a semi-regular basis, and to drop in now and then. A two hour(by car or train) radius should allow you to find properties that meet your cap rate requirements. You can reach into fertile areas of NY, Pennsylvania, and your home state as well.

Hi Ryan and Anthony,

I'm an investor with a broker's license. I got my license about 3 years ago- initially, I'd have agreed with @Anthony Dooley, but I've since changed my position.

I started investing in '03, and my initial idea in 2014 was to get a broker's license to reduce my purchase price on investment properties. That concept was an epic fail- when I called listing agents and told them I was buying, and also expected my portion of the commission, their responses were so uniformly venomous that I lost deals over it. I believe that agents consider this to be "double dipping."

So I abandoned that concept and considered other possible ways to use my license profitably. I began acting as a buyer's agent for other investors on property types that didn't quite fit my portfolio- either the cap rates weren't right, or the sizes weren't right(too big or too small.) My deep experience in my primary market area(the Capital District of NY) was my selling point- I've been there and done that, and buyers saw the value in a broker with first hand experience.

After two years of practice, it's become another relatively stable source of income for me. It doesn't take too much extra time- I'm always looking for real estate online anyway, in fact I enjoy doing that, so I'm being paid to do something I enjoy. It also allowed me to act as a broker on properties that were outside my main stomping ground, and on properties which are owner occupant and cannot be considered investments. In short, it has expanded my horizons and allowed me to gain insights into areas and property types that I would have never dealt with in absence of my broker's license.

If your trajectory is like mine, and your primary goal is to be an investor(and you have the income and/or capital to support your initial foray into investing,) then I'd suggest honing your investment skills first, and getting your license second. On the other hand, if you lack the capital and/or skill set to invest, then perhaps gaining an insider's perspective by functioning as an agent could be quite valuable. Of course, you can do both in parallel at the outset, but in my experience, if you wish to excel at something, specializing(by doing only that thing) is a better idea than trying to do too many things at once.

Good luck! MG 

Hi Clayton,

One way to extract capital with little taxable consequence is to take a mortgage or HELOC against your condo. Assuming 70% LTV, you could probably walk with around $100k, on which your monthly payment might be around $500(this could vary kind of widely, depending on interest rate, if it's interest only, etc.)

In order to justify this strategy, you'd need to be able to invest those funds at a suitable spread. For instance- let's say you found a building which provided $1,100 per month of cash flow. In this strategy, your spread would be $1,100-$500 = $600/month. This analysis neglects all taxable consequences(which are generally favorable to you,) and all changes in asset value. 

The change in asset value might be the biggest part of this- for example, if you wrangled a building for $100k, and it was in an up-and-coming area, perhaps it would appreciate at 10%/year for several years, making this a super-sweet strategy. Or if you were wrong and the asset declined in value, this strategy might be a bad deal.

Hope that helps!

Skip it, pass, never mind that. The couple of hours spent researching, filing, mailing, etc., along with associated fees will get you nothing. You'd be better off catsitting, dogsitting, babysitting, with those few hours. At least you'd make $50 and provide a service. Or mow someone's lawn. 

Better yet, go buy some LED bulbs and install them in common areas- replace incandescents, halogen, or fluorescents. You'll save some dough on your utility bill. There, that was helpful! Have a nice weekend.

Most of Troy isn't in a flood zone(I say that because most of my properties there have mortgages, and only a few require flood insurance.)

If you want to avoid flood insurance(on a property in a flood zone) you can buy the property in cash. There's no law stating that an owner must have flood insurance, though in my experience, lenders require it when a property is in a flood zone(with mortgages, I believe there are laws regarding this.)

@Camilo Guzman - you're trying to fit a square peg into a round hole. I can't imagine an investor with any brains who would do this. It'd be just like lettin' the fox into the henhouse. Put another way, let's say some investor gives you 50% of the equity on a $100k deal. He's basically loaned you $50k, with only your word to do the work to pay him back. If you get hit by a bus, he's a goner.