All Forum Posts by: Michael Lee

Hello and welcome here James!  Please know that my purpose is meant to teach you something about real estate and is not meant as an attack on you personally.  I have been listening to a gentleman that has been buying real estate for about 25 years and is a multi-millionaire.  He currently owns almost 5,000 units of all apartments.  Price is not his #1 concern.  His #1 concern is positive cash flow on day one after all bills are paid.  Another thing near the top of his list is adding value by raising the rents or making improvements interior or exterior.

I would also research the local area rents and raise them when the lease is up or if their is a clause that says you can do that with the proper notice.  Plan on looking at all leases, all unit interiors to access any repairs that need to be done or any upgrades your strategy calls for.  Look at actual income and expenses for the last year on a monthly basis.  That gentleman I referred to earlier has predicted to make 150 million this year.

He walks properties "for sale" everyday. He works hard everyday and just turned 60 years old but he believes working at lease 6 days per week if not 7. His first purchase was a SFH and he feels good that he broke even selling it after an unexpected move out. Since then he has mostly bought apartment complexes and has never lost any money and talks down about owning less than 32 units which usually allows you the chance of hiring an experienced Property Management Company to handle the daily operation that includes the screening and maintenance and you just manage the managers and get regular (once a week) financial statements and you still have positive cash flow.

He's been on that webinar twice that Brandon and Josh do and that is what got me started to listening to him on YouTube.  He says very often to never buy less than 10 units.  I do not have any experience with that so I cannot confirm or deny what he is saying.  He owns his own television station and does about 6 or 7 shows a week that are usually about an hour long. 

That and owning his own jet allows him more flexibility and maximizes him more time to spend with his family.  He is married to a younger woman and has two girls that are about 3 and 6. He is a little pushy on his sales but he has taught me very much mainly because he has so many videos on YouTube.  Maybe you ought to spend more of your time on raising money legally and forming Partnerships that keeps you in control and buying apartment complexes.

He ideally looks for a 6 to 8 cap rate.  Do not count on anything happening in the future.  I looked at that property and some concerns came up to me. One is its age.  Are there any code issues? I would talk to an experienced city building inspector to see if he is aware of any problems.  Have you had any General Contractor do an estimated M & L. to make your repairs or updates that obviously need to be done.  Have you done a worst case scenario?

How many of the six are occupied? Is there any past due property taxes?That gentleman I mentioned before says that finding out who is the broker is the only dependable thing about Loopnet.com. Do not believe any Broker that does not work for you. Are there any mechanical problems? Why are its rents so low? Is it because there is alot of competition? There is not several financial numbers not given like ROI, NOI, or cash flow. That other investor I keep mentioning wants positive cash flow on day one.

You might should call the area's properties and act like a renter fishing around to know their price for renting, their floor plan mix, and are there any specials used to increase their occupancy.  The first impression on the subject property and the other one's in that area?  Trust your gut.  I have never been to Minnesota so I cannot make any geographical statements.  Are there any washers and dryers on the site?  Any tenant negatives?

Good luck to you!

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Hello Aaron!  I would suggest that you sell your liability as soon as you can, yes I said  liability, It is called an asset to brainwash you to think it is but when you add the property tax and maintenance, you'll see what I mean. House values have even only kept up with yearly inflation over the last 100 years.  I live just outside of Dallas, Texas, and after I thought about it it is true that you're lucky if you break even.    When you realize you have spent what it's is worth today, you will realize when you add in property tax and maintenance you break even if you are lucky. 

I paid just over $100,000 on it originally and it's worth about $250,000 now but when you add in what I've spent on property tax and maintenance I just break even after about 34 years.  Owning a home is usually a bad investment plain and simple.  You might be saving the money between a rental unit and a home purchase debt service.   I joined biggerpockets about 5 years and since then I have learned many things.  Being bedridden has given me much of that time educating myself, 7 days per week.

The things you have been taught in grade school and told by your family is not true anymore.  You should be learning the legal way to raise money and forming Partnerships and buying apartment complexes under your control.  The more units you own, the better you'll be.  You might have noticed that people that have been successful with rental units in  houses have to own about 20 or 30 of them just to cover their monthly bills, then they might get some of the profit when they own 30 or 40 all at different addresses.

With apartment complexes you might just have one address where you have many units.  Owning a single digit of house units are not worth the time you have to spend on them or turn them them over and they usually cost you twice as much as you have thought or saved for.  In today's economy it's better to either own apartment complexes (which don't require any experience) , Fix and Flips, or Quick Flips.

I do believe that real estate property ownership is a game of quantities and how many offers you make will effect your success.  I usually know what I'm talking about because I have been in construction management for about 30 years as well as having a real estate broker license for about 30 years and having a business college degree with honors that emphasized real estate.  So I've been around a block or two.

I say what I say as an attempt to let you know more about this world and I have not meant for you to take this advice personally. Not mentioning your age can effect your answers. I had to pay PMI until my property got down to 80% of my value or the loan balance. One other way to make money is to offer your home as a Lease Option to somebody that has been turned down by a Bank and not knowing their are alternatives and act like they can pay their bills.

A HOA can be very risky so ask about them before you buy (from future neighbors) another one of thattype of unit and know their requirements or possible special assessments for capital expenditures and know if that property is close to making one. Renting will usually allow you to save more money than buying.

Do not believe all that you are told, especially from those that have not done what they are talking about.  Your parents may love you but they did grow up at a different time and are just telling you what they learned when growing up and most people do not know what they are talking about and that today things are alot different than they use to be and that the times has changed.

Good luck to you!

Hello Ben! I agree with Melissa. If you only own 1 SFH rental property you are proving the trouble that might and will probably lose money in a long term investment. If that is a single family rental unit with a HOA involved is not a good idea and not reading or ignoring their requirements and restrictions is another mistake. Why did you buy this in the first place?

I would recommend that you learn the legal ways to raise money and how to form Partnerships and buy an apartment complex that can still have a positive cash flow after hiring a Property Management Company that takes care of the property daily operations.  I have heard that you need an apartment complex that has a minimum of 32 units.  

Never hope that anything is going to happen in the future when investing.  Base your decision on actual income and expenses, not on a pro forma that is usually just a dream.  Do not make any assumptions when investing.

Good luck to you!

Hello Isaac!  Please understand that my answers should not be taken personally.  Probably, buying a Turnkey might be the best way to go.  That means that someone else does the renovation and renting,   Your need to travel is greatly reduced.  I usually disagree with a person that buys a single rental unit.  Most successful people own many units to reduce the pain of vacancy, especially unexpected vacancy.  The local demand and the location really are important as well as the total number of invested on units. 

On Turnkey companies, I recommend Memphis Invest and Maverick Investing.  You might have been currently money on what you currently have  it's not guaranteed and you may have been successful partially because of luck.  I live just outside of Dallas, Texas and I tend to believe what Michinori said but I would add certain other cities like Chicago, Dallas, Cleveland, and Atlanta.  

Whatever you do, be careful and invest in a growth area a diverse city and where you think we are in the real estate cycle. the age of the subject improvement and if there are any possible subject construction items that need to be covered up or removed by a special contractor.

Good luck to you!

Hello and welcome to this site Joshua!  Please do not make anything I say as a personal conviction.  Getting a special and start off with low down payment is not as good as you think but if the  the location is important as a consideration, the demand for what you buy property and tenant screening, it's in  growth area, is it located within a diverse area, the parking that is available, do you have deep enough pocket if funds are needed, Do nearby amenities exist, is there any nearby retail stores and what are they and does it fit your ideal tenant, and are there any existing tenants.  Does the future look good for that location?

You might ought to be learning how to raise money, form Partnerships,  purchasing apartment complexes, and having positive cash from day 1 could be the best way to go.  You may have heard that having apartment you need to have experience to own them is a myth.  I'm not saying that four-plexes are all bad but are usually feel that their future will be perfect and vacancies are painful, especially unexpected ones.  Most success stories I've heard involves owning many houses and they are all at different addresses.

One of the main reasons is because of the pain you experience  with a vacancy.  The more units you own, the less painful vacancies will be.  I'm not saying you'll ever lose money but beware of it's riskiness  and it will probably cost you twice as much as you budget for turnovers.  I have been studying very hard for about 5 years, full time, while being bedridden and I have about 30 years of construction management experience as well as having as real estate broker license for about 30 years and a college degree in business that emphasized real estate with honors and being born and raised in Dallas, Texas.

I think all of that background qualifies this 62 year old to be listened to and believed fairly qualified when it comes to real estate and all of what I've said is just a part of my experience qualities.  I could keep going on.  What I'm trying to say is to be very careful owning only 4 units a gentleman that has been buying apartments for about 25 years and owning about 5,000 units and is a multimillionaire has taught me a few things with his many videos on YouTube and being on with Josh and Brandon a couple times and doing many public speeches and predicting he will make about 150 million this year might qualify him as knowing what he's doing.  He is a little pushy on sales but he knows alot.

He says owning single number units is very dangerous and should not be considered because there are many hidden dangers but you need to get started somewhere.  I'm just saying that learning how to raise money and forming Partnerships while you control them might be the way to go.  When you own an apartment complex that has a minimum of 32 units you will be able to hire a property managed by an experienced Property Management Company on a daily basis and free you up to be more productive.  I am sorry that this message was so long but I want you to succeed and I had a bit to say to inform you.

Feel free to ask me about any other particular items that need more attention and you think I might be able to answer.  This is a pretty good place to reach out to me since I am here just about everyday.  In a few more words I want you to be careful, be patient, and take action when you feel ready to go and do what you want to do and never quit.  You might get a few bruises along  the way but stay strong and in control.

Good luck to you!

Hello Marquis The first thing that popped into my mind was is that going to be evaluated as a rental unit or a Fix and Flip? I would suggest that you ignore any interest shown by the Bank. I would suggest you get a trusted GC to give you a close estimated repair cost for a rental or sale. Is there any demand in that area for a rental? Are there any restrictions on that address by a HOA or any government law. It's location could make a difference on what I suggest. If those two options could provide a price range and give the subject Bank the lowest price of those two types of use. The Bank's current statement of value does not really tell you what they will take.

I would recommend the sales routine over renting just one rental unit if you could make a decent return on your amount invested.  There are a few reasons I would consider to rent it.  That is the location, the areas economy, the price you get,  first impression, the nearby amenities and retail stores, the demand in that area for rentals, and the price you get.  The less, the better in this case.

Good luck to you!

Hello Chris!  Please do not take anything I say will be taken personally.  It is based on my experience and knowledge.  What you are saying is assuming that everything looks and good does not consider any vacancy, especially unexpected vacancy and that the future times are going to be perfect.  As that is only about 1 unit and that is very risky.  We cannot tell what the future holds.  You did not mention it's location nor the demand for that area.  Is there any units that are truly passive income for a o?  Who's managing or providing maintenance?  The age of that house may make a difference.  The management and maintenance does have monetary value even if you are doing that yourself.  Does it make a good first impression?

Good luck to you!

Hello and welcome here Sam!  I would recommend a Fix and Flip over a single family unit unless there is much demand for it in that area or what kind of financing you are counting on.  Special financing, demand, or growth in that area are all necessary to rent it out but it is still very risky. The more units you acquire, the better.  One choice is long term ideally while the other choice is short term. Before you decide, check local law that may not allow rentals in that area.

If rentals re in your future learn how to raise money and forming Partnerships.  The ideal investment in this economy is purchasing apartments but they typically, if done right, they will have positive cash flow every month. When you form a Partnership the best type keeps you in control and makes all Partners involvement and ownership variable.

When you purchase them, at least 32 units will enable you to hire a Property Management Company and do the daily operations. Start small and work your way up.  Remember that the more units you have, the less painful vacancies are.  This is a numbers game.  The more offers you make the more deals will become yours.  The price is not as important than positive cash flow and have it on day 1 of ownership.

It is better if it's an add-value property.  This is where the cap rate is important.  They're usually more like bang in the buck.  If you have heard that buying apartments takes experience is a myth. 

Good luck to you!

Hello and welcome to this site Jim!  Do not knowing the house was recently rented means anything.  I would suggest you knock on the direct neighbors doors and see if they may have some contact information for the neighbor/owner.  You might check with the Tax Assessors office to see if they may have an address.  The City does not try to reach out to the owner beyond what you have already seen.  A skip tracing company is not a bad idea.  Just make sure they have a good track record of experience and compatibility.  If the property shows any sign of mail receipt or any maintenance might help.  If he lives out of that City you could write him/her a letter of your interest and how you could pay the tax bill as part of your offer.

In the meantime, you might ask the Tax Assessor clerk who handles the tax foreclosures and ask them if a mortgage company is involved.  They would probably bid at the auction. You might ask the clerk or assistant what the requirements are and where are the auctions are held because each county is different. Most only accept full payment on the bid amount that won immediately.  Some give you an hour to pay the full amount.  

• Whoever you talk to at the tax foreclosure office should be able to give you all of the important dates needed like the foreclosure date and any contact info they may have.  I know nothing about Virginia or any of their particulars on auctioning.  If you end up having to go to an auction  to pick it up and If time permits you may want to go to an auction just to observe.
• Good luck to you!

Hello and welcome to this site Joseph!  I would pay off every debt except school debt.  All other debt will probably give you negative points when loan qualifying.  Use any money involved in paying debt should allow you to save more.

Good luck to you!