All Forum Posts by: Michael Weis

In expanding my horizons beyond my high tax town, I have found a house in a nearby town that has much lower tax rates and seems like it has good potential. What is giving me pause is that as part of the town's effort to revitalize, a major mixed-use development is being built directly across the street from this particular property. It will have commercial, residential (condos and rental apartments) and will have hundreds of units when it's complete. I know it's hard for anyone to judge this particular deal, but all other things being equal, does it make sense to purchase across the street from a major development like this, or will it be too many new units coming on the market all at once that will undermine my efforts to rent it out?

@Jaron Walling I've just made an agent change. A personal friend has been acting as our agent despite the existence of a rock star in our area. So, now I've got the rock star on my team and our friend is going to work for us in a different part of the region. The rock star agent, also invests, has a property management firm and is a contractor, so I feel that with his level of expertise in the area, we should be able to find something that meets our needs. If not, then I'll have some ammo to use with my wife. 

@Jeff G. thanks for the clarification. I've read David Greene's book and would be eager to give it a shot, but as I mentioned in my original post, my wife is not ready to go that route, so I have to see what I can do locally for now, at least.

@Caleb Brown forgive me, but what are OOS areas?

So I live in an area in Central NJ where the average age of the homes is 100+, the prices for even the distressed properties are already pretty high, tax rates are ridiculously high and the interest rates are climbing rapidly. Plus, the town is not at all hospitable to creating new units out of attics or basements...maybe garage conversions on a case by case basis. So there's virtually no way to hack these buildings to increase the income. Yet there are a lot of multifamily properties in this town, supposedly "perfect for investors" and people are snapping them up like crazy even though I don't see how or why the sale prices would ever work. 

I already have a duplex and a fourplex, both of which I might not have purchased had I known then what I know now about real estate. But I've got 'em now and I live part-time in one of them, so at least that one is kind of worth it. There's a major university a few blocks away, a teaching hospital and pharmaceutical companies all over the place, plus Amazon down the road now, too. Lot's of great economic fundamentals, but the reality is that the annual maintenance on these houses is already killing me even though the properties are clearly appreciating. Do I just punt on this neighborhood and find greener investing pastures? My wife also is the one who is bringing most of the money to the table, through inheritance, and she wants to invest but doesn't feel comfortable doing long-distance REI.

Is there any approach that anyone can recommend to justify continued investment in an area like this, where an actually good deal may only come along or be "made" every once in a blue moon, and if not, how do I convince my partner to expand her horizons?

@Daniel Beckius I have been thinking a lot about off-market deals lately since the ones my agent is bringing me are all on the MLS and horribly priced from an investment POV. There happens to be a distressed property right across the street from one of my other properties that has been empty for quite a while, front porch is falling apart, kitchen cabinets and appliances have all been removed, etc. There are also a couple of other pretty rough-looking properties in my neighborhood that might be interesting. So I just knock on the door or write to them to get the process started?

@Joe Villeneuve I already walked away. Thank you for clarifying my thoughts as to why this was a disaster in the making.

As for my agent, Joe and @Larry Turowski I have really been wondering about this. My agent is a friend who works hard but doesn't really work with buy-and-hold investors. He's done some deals with flippers but isn't really adept at analyzing properties from the perspective that I need. And yet, he has worked his butt off for me and really wants to help me find the right deal and learn himself. He is, interestingly enough, also the person who led me to my 4-unit last year, which was my most recent mistake, but I didn't know how to analyze a property back then, so I can't pin the blame on him completely for that. And BTW, when I say "mistake" I mean that the property is cash flowing but we had to sink a lot of money into the DP to make that happen, so it's a glorified savings account. Anyway, my agent is a good guy, pretty savvy in general and has a good eye when we go on showings together--he sees everything--and he's a hard worker, but he also doesn't really know about finding off-market deals. Is it a mistake to keep working with him? Can I expect that if I give him my parameters that he will be able to learn what he needs to learn, or should I just move on and work with someone who's already got the experience? And if the latter, how do I move on without damaging the relationship?

@Malcomb Stapel Thanks for the insight. The short answer is that my agent does not have the ability to invest with me. The other answer is that I don't want my money sitting around doing nothing AND taking up a lot of MY time to do it, as there is not enough income to support a property manager. The truth is that I don't have tons of capital lying around that I can afford to sink into a property like this. 

@Daniel Beckius I am no pro, believe me, but I hope to play one on TV someday! :) Seriously, though, we like the fundamentals of the area (lots of business, university, hospitals, and strong rental market), but I would rather try to BRRRR than buy a property the old-fashioned way. The real problem is that I don't really understand how that's possible in a market like mine, where even the unlivable houses are overpriced for what they are. I think I can hear the answer already: "So, find another market to invest in."

I'm looking at a 4-family in a town where I have other properties where I did not know what numbers to run. Those were mistakes but I live in one, so I can live with that, so to speak. I am not eager to make the same mistake three times, however. Now that I've learned what numbers to run, I see that this particular property will not cash flow for at least a 1-3 years. It's not a BRRRR and I will end up having to sink a fair amount of capital into it, including converting from oil heat to gas in order to get the tenants' utility bills off the books. With the utility bills that the owner is currently paying, there's no way this property at this price would ever cash flow. Without them, and at full ask, it will still take 2-3 years of raising rents before I see a modest 2-3% cash on cash return with a cap rate of about 1.5%. My agent says I need to look down the road rather than at what the numbers are now, as long as I'm not losing money. But even as I look down the road, as rents rise and the property appreciates, the ROI and the cap rate will stay the same, unless I'm missing something. Should I even be wasting my time on this, or is this a potential gold mine and I just can't see it?

@Bob Okenwa that's very useful. So even though you are contacting the listing agents, your buyer's agent is still getting all the deals. He's working for them even though he might not be the one making the initial contact, if I'm understanding you correctly.

Thanks @Bruce Woodruff. I guess that make sense, but still not totally clear why it would be rude if it's done above board. People can make their own decisions. But I'm here to learn, so appreciate your input. I'm sure I will learn more about this as I progress in my own licensing process.