All Forum Posts by: Peter Stewart

Quote from @Ken M.:

Quote from @Peter Stewart:

FSBO's can be a huge pain sometimes. The seller may not know what they are doing. Or, think they know it all because they've sold a few homes on their own (vs an experienced agent that has sold hundreds of homes). They are not licensed and there is no oversight. So, on the other end you have to be very cautious.

When I help buyers purchase FSBO's I often have to do all the work for the seller too, even though I'm not getting paid to represent them. Also a pain.

FSBO sellers may not have the pricing tools that agents do, or the expertise to know how to properly price the home. So that's another hurdle to overcome (they are typically overpriced).

The vast majority of real estate lawsuits come from unrepresented parties. I don't know the exact %, but I believe it was around 75% of them.

Ultimately, I think hiring an experienced listing agent will net you the best price and terms, and will more than make up for the 2.5-3% you would pay them. 

Just because you can run doesn't mean you are joining the US Olympic running team any time soon. And just because you can sell a house without professional assistance doesn't mean you should. You would not represent yourself in court, you would not operate on your self, you would not act as your own dentist, etc - there are reasons that we rely on professionals when dealing with important matters, and selling a home is no exception. 

Good points.
And of the 80% (tens and tens of thousands of agents that have had 1 transaction or less in their careers) how is that any better? ;-)

You seem to be saying "

Just because (you can run) you are an agent  doesn't mean you are (joining the US Olympic running team)  going to be competent any time soon.

You have what is called "selective" reasoning. 

Oh no, I completely agree here - there are WAY too many agents in the business. It's WAY too easy to get a license. So many have no idea what they are doing and no business in this business.

There is a reason that 10% of agents make 90% of the money. 

I have to deal with agent incompetence on a daily basis and it drives me insane. 

FSBO's can be a huge pain sometimes. The seller may not know what they are doing. Or, think they know it all because they've sold a few homes on their own (vs an experienced agent that has sold hundreds of homes). They are not licensed and there is no oversight. So, on the other end you have to be very cautious.

When I help buyers purchase FSBO's I often have to do all the work for the seller too, even though I'm not getting paid to represent them. Also a pain.

FSBO sellers may not have the pricing tools that agents do, or the expertise to know how to properly price the home. So that's another hurdle to overcome (they are typically overpriced).

The vast majority of real estate lawsuits come from unrepresented parties. I don't know the exact %, but I believe it was around 75% of them.

Ultimately, I think hiring an experienced listing agent will net you the best price and terms, and will more than make up for the 2.5-3% you would pay them. 

Just because you can run doesn't mean you are joining the US Olympic running team any time soon. And just because you can sell a house without professional assistance doesn't mean you should. You would not represent yourself in court, you would not operate on your self, you would not act as your own dentist, etc - there are reasons that we rely on professionals when dealing with important matters, and selling a home is no exception. 

I am all for people going big, but if you are brand new to RE investing, I would start with something smaller to get your feet wet. You don't want to make mistakes on a $2.5M property. Make them on a $200k duplex, or something like that.  

You will need to have a nice pile of cash in reserves for a rainy day. And you'll need at least $500-750k for the downpayment if using traditional commercial financing (20-30% down). However, I think it will be very difficult for you to find a lender willing to work with you given your lack of experience and lower income (relative to purchase price). Also if the gross rents are only $18k per month and the purchase price is $2.5M, I don't think it will cash flow well (if at all). Just doing some quick math - if you finance $2M at a 7% rate, your monthly payment will be over $13k. That is before taxes, insurance, property management, repairs/maintenance, etc. 

If you get seller financing, most sellers will want some type of downpayment. Even if it's only 10%, that's $250k. 

If you don't even have that amount, then I think this deal is too big for you to take down on your own. I would either partner with more people (find more experienced people to work with and/or people with $$) or pursue a much smaller deal first (residential MFR, 2-4 units).

You are selling a house, not a business. It is a residential property and it will be valued as such. The income potential is irrelevant. 

Now, I understand where you are coming from. But, that is just not how residential real estate works - that is how commercial real estate works. Anyone getting traditional financing on the home will have to have to have an appraisal, and the appraisal will be based on the comps.

The only exception is if you find an all-cash buyer. However, they should be saavy enough to understand that the valuation of the house is based on what similar properties in the area over the past 6-12mo have sold for. 

I would not supply any streaming channels. Give your guests high speed internet and smart TV's - they can use their own log ins for the streaming sites. Pretty much everyone has Hulu, Netflix, Disney, etc these days. 

I've never had a single complaint from any of my STR guests regarding not providing streaming services.

Also, be sure to set that expectation up front in your listing - let guests know you provide high speed internet and have smart TV's so they need to bring their own log-ins if they want to use any streaming services. If it's right there in the initial listing they can't come back and complain about it later.

As someone who lived in Los Angeles for 12 years, was a RE broker for 6 there, works with TONS of CA clients, has plenty of friends and family up and down the coast, and owns and has owned rental properties there, I can answer this for you.

#1 - You are parroting MSM talking points about how "bad" it is there without actually having any real knowledge of the situation (at least that's what I gather from the post). In reality, you're only seeing a small sliver of what life is actually like there. You are reading the 1 horror story about a crazy tenant that the owner could not evict for a year, and missing the 10,000 other positive stories. 

Now, don't get me wrong - CA definitely has its issues, but it's not like every block in CA is full of drug addicted sidewalk pooping landlord scamming thieves. Most of CA is very nice and life is very "normal". 

People invest in CA for many reasons. It is a gorgeous state. The weather is awesome. The food is amazing. The culture is amazing. It's an economic powerhouse. It's a global destination and a world famous city. And boy can appreciation be amazing.

However, investing there today looks a lot different than it did years ago. Cash flow through long term rentals is pretty much gone. Your main two plays are appreciation or development (build new construction, condo conversion, etc). The price to play is very steep, so it's not for beginners or those with limited capital. The market is also pretty volatile, so if you play the short game, you can get burned badly. 

I'm in the same boat. After 16 years in my career (RE broker) and 13 years as an investor, I'm at the equity growth stage as well. 

I shifted from investing with a cash flow focus to the appreciation and tax benefits side of things. C class areas/properties to A class areas/properties. I always make sure that the properties are cash flow positive, but the large bulk of the money I make from them is from the other items (appreciation, debt paydown, tax benefits, etc). 

It seems to be a pretty natural evolution for many investors. When you don't have any money/equity (early in career and/or early in your investing journey) the tax benefits are pretty minor. But, once you do build some wealth and have a high income, you realize how much you can save/make by owning the right real estate - numbers that far exceed any cash flow you might make on a property. 

A lot of the answer depends on your income, how long it took you to save up that money, and what your risk tolerance is. 

For my answer, I'll assume it took years to save up the $80k, income is "normal" (meaning you are not making $500k+/yr), and you are moderately risk adverse.

If those are correct, then first off I would not spend all the money. Keep some as reserves. I'd spend maybe ~$60k of that money. I would buy a turnkey 2-4 unit property in a well known mid to large city. The property would be in a C+ to B- type location, with cash flow as the main objective and appreciation second (75/25 split). Purchase price up to $300k.

That way you will have a property that produces passive cash flow every month and appreciates slowly and steadily over time. Risk is minimized due to the amount of rents, property condition, property price, and location. Also you spread out your risk over multiple units, so if you get a vacancy, you still have money coming in (vs a SFR - no tenant = no money).

Let that cash flow build up (don't spend it - put it all into a separate savings acct), keep saving (do whatever you did to get the $80k) and when you have enough money saved up again, buy another one. This time, I would consider increasing your risk a bit now that you have the first one out of the way. I would buy a similar property, but buy one that needs a bit of work. That way you can renovate it after closing and gain some additional equity. Stabilize the property, wait a year or two for some appreciation, and then refinance - pull that equity out, and then do it again. And again, and again. Fast forward 20 years when you are 60 and you have a multi-million dollar real estate portfolio that should be generating a solid amount of passive income.

You can certainly ask the agent who helped you purchase the property for advice too ;)

Since you are using a PM to run things, I don't see any need to meet anyone except your PM and the contractor/handyman you plan on using for repairs/updates. I would remain as anonymous as possible to the neighbors. Your PM is there to act as a buffer between you and the property. Let them handle the neighbors, cleaners, etc. That's what they are getting paid for. 

If your PM is handling the furnishings/decor, then I would not worry too much about the placement. If you are handling that side of things, then of course it makes sense to map it all out and start planning your purchases. 

Ultimately I think the main focus of the visit is to familiarize yourself with the property (since you have not seen it in person yet) and check on the rehab work and meet your contractor and PM. I would also drive around the immediate area a bit too, so you can get a feel for the area (check out Butler campus, Broad Ripple, etc). 

I researched all of them before getting into the STR game, and settled on Hospitable. It's fantastic. I've been using it for close to 3 years now managing several properties, and I have not had any issues.

Initial set up was pretty easy. I spent the most time customizing the messages (I use 95% of what they write, just add/tweak a bit to make them my own). 

The automated messaging is the best. I get compliments all the time about how responsive I was. 

Calendar syncing between Airbnb and VRBO has been seamless and flawless - never once had a double booking. 

I use Resort Cleaning and it links perfectly to Hospitable to automate my cleaners.

Ultimately though, all 3 platforms are excellent and will do what you need them to do.