All Forum Posts by: Robert C.

@Josh Thompson, Your in-depth knowledge of a market will develop over time as you take each step towards buying your first few properties. I think you'll find it's a layered learning experience - speaking as someone who invests locally.

Initially, you'll decide what numbers you want to achieve, and look at properties online or in person to see how achievable your financial goals are. That will give you the first impressions.

Then, I think the first big leap (and dose of reality) is starting to put in offers. Once you put in a handful of offers that get rejected, you'll start figuring out where the market actually is (not just the ask price). And you'll start getting a feel for what you're actually willing to accept to close a deal in a particular market.

Once you land your first deal, then your knowledge levels up again as you deal with rehabbing/timelines/property management and the ultimate return on investment after completing the physical work on the property. And this will influence your market assumptions for future deals. Some of the knowledge will be retained the first time, and some of it will need to be beaten into your skull as you repeat some of the same mistakes again the next time!

Eventually, you'll be able to eyeball opportunities, but you will still have to keep repeating the same steps for any given market if you want to maintain the knowledge as the economy shifts. 

@Jay Hinrichs, Following up on your comment about historically low rates - do you think that rates will drop again in the next 2-5 years? 5-10? Or do you think the 3-4% deals were as much of a unicorn as the great recession itself (once in a lifetime)? Wondering what you see from your vantage point. It seems like 7-10 year commercial loans are lower than 3-5 year loans lately. 

@Ray Loveless, I have a lot of trust issues when it comes to signing buyer exclusivity agreements, so I'll share an opposing view. In my mind, there are a lot of conflicts of interest from the brokers' side. In a tight market like today, with fewer and fewer good deals available, how do you know a broker is putting your interests ahead of another client that they've worked with longer, or that has more money than you? Many of the top agents in my market are also investors themselves, and it's clear that they will sometimes take a great deal for themselves rather than pass it on to their clients. 

I think trust has to be earned in both directions, and signing a piece of paper from the outset can put a damper on the future relationship. As an active investor, it can quickly feel inequitable when only one person is legally bound to be exclusive. 

Whatever you decide to do, one thing I will say is that it's always best to be transparent. Bring up any questions or concerns prior to signing the agreement (maybe that can lead to a better understanding or different arrangement even). Also, make sure there is a reasonable termination clause or a hard expiration date.

@Charlie MacPherson, This drama has already played out in San Francisco, and in the end AirBnb acquiesced to the demands of the city. The lawsuit is just to try and bring some negotiating leverage to the table. Maybe they can prevail in an east coast court? But I doubt it. 

In terms of the requirement for owners to live in the unit, AirBnb has always maintained that most of their hosts do that anyways to "make ends meet", so it weakens their argument on that point. 

For what it's worth... signs of the market already getting attention.

@Matthew Cain, I can imagine it, and I do pay on 8 llc's currently. When you're starting out, trying to get around it is more hassle then it's worth imho - the money either goes to an attorney or some other person to help you out. If you're going to register out of state, it's more for the liability/privacy issues - not to avoid the annual fee. 

@Nicholas Leone, @Jared W Smith, @Nik Moushon - All reasonable rebuttals, and I'll definitely step up more when #1 comes up - it happens very often with different architects. I always wonder "what use is that red pen, if it doesn't make it into the next revision??" Ha.

For point #2, Nik, I'll just add that I think it should be more of a balancing act than it seems to be in my experience. I certainly don't expect to be the only client. In managing properties, I always deal with renters who think they are the only one with a problem and that we should have repairmen readily available at 10pm on a Sunday night! BUT, it seems to me some architects are priced as if I were the only client. Once hourlies hit $200+/hr, there really become diminishing returns for me (and higher dissatisfaction) depending on how long it takes to get that next revision back. I think architects should consider "well, if I have 7-8 projects, and it's going to take me 3+ weeks to get back to this guy, maybe my total bill for that 10 hours work is a little high." As I'm sure you're well aware, every couple days delay adds up to big extensions to project deadlines. For the developer, that means lost rents, tax payments, rescheduling, etc. To be fair, part of this is also setting better expectations up front, which is a problem with every contractor involved in the building process, or even just saying "no" to taking on a new client. 

Only other thing I'll mention is I don't totally buy into the whole liability argument for owning the drawings. I mean, when something goes wrong, the liability is shared just as much as the rest of the creative process. When the developer gets sued, everyone gets sued. So yeah, the architect has to protect him/herself, but so does everyone else. 

Anyway, part of my comments are just "arguing the other side", but this stuff does come up when I talk to other developers/investors and they are asking/giving referrals. Plus, what better way to get in a few cheap shots, than posting my complaints in an online forum! ;)

@Uzi Pablo, I've been having fun watching the responses to your post here because... well, not a lot of people of your financial means ask something like this in the forums. Pretty entertaining!

I posted this once before, but it sounds like you fit the profile for Tiger 21 perhaps. A friend of mine turned me onto it. I'm not actually a member myself, but he seems to get a lot of value from the network (he's a retired hedge fund guy in his early 40's). I like to follow their quarterly reports, though, which tell you how the members allocate their wealth. Right now, it seems like about 25%-30% of assets get allocated to real estate. You may want to take a closer look so you can ask your peers directly (going along with that theme of talking to people more successful than you). Good luck!

@Chris Witt, I do use architects and sometimes I use "designers" depending on the size and scope of a project. Most of my projects are extensive remodels of existing buildings, although I'm completing my first new build SFH now, and moving into more ground-up development.

In response to many of the professionals here, I'll start by saying that I do see the value of architects beyond just drawing plans, especially when it comes to navigating the building department, understanding codes, referring contractors, and understanding good design/layout. However, since most of the responses here are pro-architect, I thought I might list some of my gripes below instead!

Architects' hourly rates can get expensive, and as a client the bill can seem outrageous for a number of reasons:

1.) Especially with the newer generation architects - every time I come up with a list of revisions and sit down with an architect, only about 50% of my comments make it into the next revision. Makes me feel like they're wasting my time.

2.) It's happened many times when an architect bills me for 10 hours of work, but it takes them 2-3 weeks (or more) to show me any work product. If you're going to charge high hourly rates, especially those of a principle, then the work should be returned in a timely manner.

3.) It's the nature that when you bill hourly, you're going to get more scrutiny from clients wondering how you're spending the time and money. Same thing happens with attorneys. I would sometimes rather be given a flat fee arrangement even if the hourly worked out to be more in the end, just so I don't have to keep wondering about it. Also, billing hourly for a process that is inherently inefficient (dealing with bureaucratic building departments) does you no favors.

4.) At least in California, the architects own the drawings. For most of my remodel projects, at least 50%-70% of the creative ideas/modifications come from me (and that's being generous). That hardly seems fair.

From my standpoint, working with a licensed architect all depends on the scale and potential profitability of a project. Sometimes, it just doesn't pencil out in terms of time or money.

@Steve Buchanan, Just a small note- you have to give 60 days notice for any rent increase above 10% in California. If the surrounding market is as you say, then raising the rents $100 will likely not cause many people to move because there’s nowhere else to go and they probably already know they’ve had it pretty good. If you have the capital to remodel several units at once, then maybe raise it higher so you get some turnover and can capture the greater cashflow.