All Forum Posts by: Mike Roy

@Evan Smeenge - I'd strategize with your CPA to create the best tax outcome for the way you manage profit and distributions.      

 @Frank Patalano - Maybe the education itself is holding people back too?  Biggerpockets has revealed so much back-of-the-napkin wisdom about the 1% Rule, the 50% Rule, the 70% Rule, etc. and the lack of availability of those deals may have some new investors frozen in place.  I'm hearing more and more smart people on podcasts say they are holding cash; waiting for opportunity; that historic cash flows and price/income ratios suggest a cycle top; that interest rates have nowhere to go but up ...  That must have an effect on listeners.  Maybe that "inaction" of not buying is actually the "action" of raising cash and being patient?

So many successful investors have built empires over the past 10 years on lucrative cash flow deals that just aren't there anymore.  What made money in 2010 wont' work in 2019.  This is all to say that, for education to create action, the investment thesis must be compelling.  In 2019, buy-and-hold multifamily is likely not it for most new investors.    

@Kevin Jurgensen - It sounds like you just offered to give your money away.  You're going to get a lot of takers.  

@Sunshine Chow - Sunshine from SoCal, love it!  :)  Plenty of people make money in C and D class, but it's a specialized niche that requires thick skin.  I think where people miss on these is that they underestimate their pro forma expenses.  Yes, you might see a nice fat 2% Rule property, but what does that mean if vacancy is 15%; or turnover costs are twice what a B property would be; or if property managers charge 12% instead of 8% because your building is so difficult to manage.  Are you sure the numbers work out better? 

And even  if you can generate superior returns, is it worth the headaches of dealing with the drama inherent in a lower quality neighborhood?  What is the opportunity cost of your mental capital?

The big thing, though, is not so much the CURRENT quality of the neighborhood, but it's TRAJECTORY.  If the neighborhood is bad because it's in a sustained decline with no demand drivers in sight, I would stay away.  However, if the neighborhood is bad but improving or in the path of progress, then you have a different story all together, one that might be worth taking on the headaches as the area improves.  

@Frank Patalano - Good conversation starter, so let me give you my vote!

I think fear of failure is what holds back a lot of new investors - that they'll lose money, that they'll prove the nay-sayers right, that they'll validate their own limiting beliefs.  I think that identifying the fear is the easy part, but overcoming it is where you can add value to your clients.

For me, I try to overcome my own fears through education and motivation.  The more I know about an investment - the down side, the upside, the opportunity cost - the more comfortable I will be in making a decision.  For motivation, I always remind myself of the "why."

As you're working with new investors, I would suggest trying to be that resource that bridges the education gap and keeps them focused on their big picture goals, and I think that could help resolve a lot of inaction into action.

@Elford Stephens - First step is to look at the lease for guidance, as it's pretty standard to outline how guests are handled.  If you don't have a lease, the second step is to have her sign a new lease or at least a document that outlines community standards, if you want to keep her month-to-month.  This document should include most of the language you'd find in a lease, including how you handle visiting guests.

If by "last February," you mean last month, then you can be forgiven for not having had the tenant sign this document already.  You can simply alert her that her proposed guest arrangement violates building policy and that you'll be having her sign a policy agreement shortly.  If your guest policy restricts visits to, say, 7 days, then you can tell her that a stay longer than that requires the guest add their name to the lease and will increase monthly rent by X dollars to offset the increase in utility expenses, wear and tear, etc. 

If you mean February, 2018, then you have a trickier situation on your hands, as it's been more than one year without guidance on building policies.  In this case, you're best bet might be to simply explain your concerns and negotiate a mutually agreeable solution as a one-off.  But let her know that it is your fault that she did not have her expectations set at the beginning and that  you are going to correct that from happening again by furnishing a building policy document.

@Jeffrey Grieshop - Yes, shop around.  Multiple credit pulls for a mortgage will not ding your credit if done in a tight time frame.  Maybe 15 days, but I thought it was 30.  

 Any asset that produces income that exceeds its expenses. 

@Annalise Kingston - I recommend getting a couple of roommates and renting an apartment for now.  Keep those costs down until you complete your education and start producing income.  All a single family house is going to do for you at this point is create a huge financial obligation and possibly restrict your mobility.  And to do it when price/income ratios are reaching historic highs seems rather reckless.  

If you do pursue the FHA loan, please do report back and let us know if you get one. That would be a nice data point for us all! :) But seriously, don't do it!

Hmmm ... Experience as an EMT and firefighter?  Why not create a consulting service to apartment owners and operators where for a flat fee you inspect their properties to identify opportunities to reduce safety hazards; improve emergency response; reduce fire risks/improve fire suppression; suggest actions/improvements that would reduce their insurance premiums, etc.  

With this, you're experience and credibility provides a competitive advantage, the field isn't crowded, and the specialized expertise provides a higher barrier to entry.  Best of all, it's something you could scale by developing a system and hiring employees to do the inspections.

All you need is proof of concept.  Get one owner to allow you to inspect one building (do it for free), and achieve quantifiable results, and you'd be off and running.