All Forum Posts by: Michael Woodward

@Kevin Dickson , What was it about the down market that was making you suffer and eventually sell houses? Did vacancy go up or was it a function of your particular financing?

Don't feel too bad about not getting back into engineering. Sometimes I wonder if I would have been better off toughing it out. Now I feel somewhat stuck.

@Stephen Masek , Do you feel that you were in line with standard rental financials (50% rule, $100/door, etc) or were you leveraged outside of those guidelines.This helps me figure out the between investing risk and market casualties. Thanks for your input.

@Ben Leybovich , Yes, that does help answer my question. So far, all of my direct experience is with SFR but I've had my antenna up for multi-family for a few months. I'm still working on systematizing and streamlining my flip business so I haven't had time to spend with the rental side of the business. Before I light the fuse on that rocket I want to make sure my trajectory is right. Thanks for your advice. Your input gives me a lot to think about. Thanks!

@Bryan Hancock , Thanks for your feedback. I'm glad to hear that your business did well in spite of the housing crash. As I mentioned to Ben, my experience is in single-family so I want to at least consider buying some to hold. I also see the benefit of multi-family so your feedback will really help me design the right balance. I just wanted to make sure that the whole thing wouldn't blow up in my face despite the best planning.

@Amit M. , All good points....thanks again!

@Rob K , That's really interesting to hear that even though you're still upside down on some of your houses, you survived. That says a lot about the viability of rentals......and your planning of course. Thanks for your sharing that!

Regarding people that I've read about that crashed and burned spectacularly, the person that really stands out to me is Wade Cook. He was hot in real estate and had several books out when I was first starting up my venture. He was living the good life while his rental business paid all the bills. Fast forward a little over 10 years...... now he's in prison for tax evasion. I think I can assume that he's one of those you mentioned that didn't do the best job with his bookkeeping.

Awesome logo by the way!

@Pat L. , That's more great input! You were a brave man to wade deeper into the market in spite of the crash. I would guess that it was your experience that gave you the confidence to do that. Hopefully I'll be in that position the next time the market corrects. I agree that good deals are really hard to find right now!

@Bryan L. , It's more weird/coincidental than you thought.....I'm also TTU alumnus BSME (1997). The timing of my "restructuring" was also 2010! Let me know next time you'll be in Cookeville or anywhere in E.TN and we'll have lunch. I'm really interested to hear how you've been able to put together a part-time engineering job. I've been trying to figure out how to pull that off. I'll send you a PM. Thanks!!

Good idea Lane! Thanks for the tip!

@Jacob A. , I was having trouble moving a couple houses earlier this year so I decided to experiment with staging/appliances. Both houses already had basic appliances (range,dish washer, disposal, etc) but I just wasn't getting any serious interest in them. I decided to go all-out and put all appliances and furniture in the one I had the longest (more than six months at that point). I put EVERYTHING in the house....washer/dryer, refrigerator, microwave, living room furniture with end tables, and complete bedroom sets for all bedrooms (no sheets or blankets) pictures and decorations, window coverings, etc. Within two weeks I had a full-price offer.

That worked so well that I did it again on the other one that hadn't sold. Within four weeks I had a (nearly) full-price offer on it as well. I was just finishing up another house about that time so I decided to do the same thing with it. I had multiple offers on it the first week.

I'm a HUGE fan of staging now! It shortened my DOM (days on market) so much that it's part of my standard package now. I always budget for closing cost assistance and a full set of furniture and appliances.

Good luck!

@Chris Elliott , I think you've found an excellent way to start your investing career by partnering with your mentor....and it's something to be very thankful for because many successful people wouldn't agree to do that (as you said.... training their competition). Keep in mind that there's a real cost to him for diverting his valuable time from his own business to help you with yours. I've read about people that have gone to work for mentors for FREE, just to get the education so I think that the 30% split is a really good deal.

Many people spend many thousands of dollars with guru's for a one or two day event that they hope will provide them a working business model. A two day event can't come close to covering all of the spontaneous situations that will come up during your typical week of investing. You've got someone that's going to be at your side through every step of the process; available for backup whenever you need it which is incredibly valuable!

The thing you want more than anything from him is transparency. If you are involved in every aspect of the process, then not only will you end the year with some cash in your pocket, but you'll have an invaluable set of instructions for doing it over and over. If I were you, I would ask him to show you what to do and then let you do it.....with him looking over your shoulder. It's the difference between watching someone drive and getting the wheel in your own hands.

If you can learn in 12 months what most of us have spent years learning (the hard way), you will be way ahead of the curve.

Good luck!

@Karen Rittenhouse , I meant to include you in the conversation earlier to get your feedback. Thanks!

@Don Konipol , You mentioned that you bought your investments since 2002 with no debt....that means that you paid cash for them, right? If so, how did you reach the point where you had that much cash available?

You also mentioned that your high equity position allowed you to raise more capital to leverage. Since everything I do right now has to be leveraged at some level, I'm wondering where the line is drawn that creates a scenario in which I could survive a major market correction like the one we just went through. In other words, if I'm going to buy and hold a property right now, are the "standard" rental evaluation calculations (50% rule, etc) robust enough survive a major market downturn? I know there are no guarantees in life but what I'm trying to get comfortable with is whether or not doing everything "right" is enough to insulate my business from failure. I don't want to rely on "hope" for any of it.

@Mike H. , Your question about how people could fail after reaching a point of living off their business is exactly the question that's bothering me. I know that there are an infinite number of things that people can do that sabotage their business but I'm wondering how many of them were doing it "right" and still got burned. That's why I'm looking for feedback from people that had a "typical" leveraged position in their rental real estate and still survived the crash. The questions you raised are very good. I'm hoping to hear from more of the long-time buy and hold investors in the BP community that can give some input (@Ben Leybovich ,@Will Barnard ,@J Scott , @jon holdman, @Brian Burke , @chris clothier, @bryan hancock, @ann bellamy, anyone else with input....)

@Tom Goans , I agree that once you reach the point of being debt-free on your properties, your ability to survive downturns becomes fairly easy but let me ask the question in a different way because you've got enormous experience at this. If for some reason you had to start your investing business ALL over from the beginning,.....from scratch.....with NO money....... but using only your years knowledge and experience, how would you do it? What numbers would you use to re-create your rental business (50% rule, etc)? If you saw that there was a very high possibility of a major market correction five years from now, how would you structure your finances to weather the storm? This is the heart of what I'm trying to figure out. I don't want to move forward with rental purchases until I feel comfortable with my plan. I really appreciate your input.

@Michaela Graham , @Jeff S. ...thanks for your perspective.

@Amit M. , I think that's good advice to buy in areas where the market doesn't hyper inflate or deflate. I was building new houses in North Port / Port Charlotte FL when the crash happened. Land and houses were appreciating at "ludicrous speed" (google that if it doesn't make sense) until the market corrected. The area depreciated with the same ferocity as the previous appreciation....... EVERYTHING stopped. The reversal was catastrophic. When I moved there in 04 there was a house under construction on literally every street. When I moved back to TN in early 09, there was a house for sale (some only partially finished) on every street.

@Ben Leybovich , I listened to your podcast and read your articles so I know that you're bent strongly toward buy and hold. I wanted to ask you in particular what your mindset is toward preparation for the possibility of another bubble. Are you using only "traditional" financial numbers that work when the market is stable or do you have a "doomsday" plan in place?

@Joshua Dorkin , I wanted to ask if you could put together something structured (podcast, extended thread, book, etc) about the 07-08 real estate crash. A lot of us got burned badly during that time so it would be great to assemble something concise and specific that has stories and advice from investors that survived (or thrived), in spite of the crash, that we can use as actionable steps to fortify our current business plans.

Right now I'm only doing flip projects because it limits my risk. I'm in and out of a project in 3 to 4 months which means I don't have to worry about major market corrections.....but I really want to buy and hold some properties. I've heard a lot of stories from people that "had it made" with enough passive rental income to spend their days on the beach or the golf course, that eventually lost everything when the market collapsed.

I don't want to spend 5 or 10 years building up a portfolio of properties only to see it obliterated by a serious market correction. My business model wasn't prepared for what happened in 08 so I had to close my investing business and fall back on my engineering degree. I want to make sure that I"m smarter this time around so that doesn't happen again.

What do you think? How about the rest of the BP community? Do you want to participate in this kind of thing? I can offer some advice on how NOT to structure your business (for anyone that's not sure how to fail) but it would be great to hear from those of you that did well during that time....especially those that held rentals. I would really appreciate it. Thanks!

Thanks for the tip @Suzette Lowery ! I'll definitely give them a try. Maybe my local store will do a better job than they did for the others that had trouble with them.

Ditto @Sergio B. .... tile is the way to go for almost bullet-proof wear and tear. There are a lot of really nice natural colors to choose from. If you're concerned that it feels too hard/harsh, you could put a few area rugs to soften it some. That will also reduce the echo effect. Some people actually prefer hard floors (e.g. my wife).

Good luck!