All Forum Posts by: Rick Albert

 I disagree with this. You don't know his financial situation. What if he is a high income W2 worker? Now he has to hustle as a Realtor where it is common not to close your first deal until 6 months to a year down the road? Pass.

I have clients who are successful in real estate and none of them are Realtors or even have their real estate license. 

Plus, there is no legitimate Realtor training geared towards investing. You get your license and you are on your own. If you go the mentorship route, just get a mentor on the real estate investing side instead.

A better use of his time if he feels overwhelmed is to partner on a deal. He learns the process and gains a rental. Far better use of his time, resources, and experience.

There are a couple of ways to start:

1. Find an investor friendly real estate agent that will double as a mentor. This is what I do for my clients. I have clients where we have been able to buy multiple properties because I'm there from start to finish. Grill the agent in asking how they can help beyond just opening a door.

2. If you are going with a property manager, find ones that will be honest with you. I invest out of state so I rely heavily on my PMs to be honest with me. I'll send them interested properties and if they won't manage it, I won't buy it.

3. Consider house hacking. If you have the capital, save it and house hack. Your cash on cash return will be much higher in the long run.

4. Do not rush into something just because you are eager, but also understand that it is not timing the market, but time in the market. 

It really comes down to supply. You are correct, in markets like Texas and Florida where there is a ton of building, they might face challenges in 20+ years. Areas like Los Angeles where is no room to build, it may not be as big an issue.

Also keep in mind we are far from this becoming an issue. I'm a millennial (one of the larger populations) and we just had our first kid last year. If this is the only kid, then it won't be a problem for another 18-22 years. By then so much can change from immigration to build regulations to lifestyle. I would imagine it is really hard to predict.

I've house hacked twice in Los Angeles, so I know what it is like to be in an expensive market. I also grew up in the Bay Area, so I'm familiar with these areas (very high level). A couple of things to keep in mind:

1. FHA will require a self sufficiency test when buying 3-4 units. This means the property needs to cover all the bills once you move out (75% of the rents). Because of the price point, this is unlikely.

2. Don't expect a deal. Keep in mind if the numbers work at 3.5% down, why wouldn't an investor putting 20%-30% down buy it? Be humble and realistic in your numbers.

3. Investing in high priced markets is one of the fastest ways to build net worth. You buy a property for $2M and with 3% appreciation, you made $60K in equity. Think about how many small properties in the mid west you would need to accomplish the same thing?

If you want a referral for an agent let me know. I worked with one to sell a property and it was a good experience. He is also a flipper and investor. 

 Hey Donna,

There is a lot more information that I would need to be able to answer that question. If you have a listing agreement signed with your agent, then I would defer to that person because it could be perceived as overstepping considering this is what clients pay me for and I don't want to overstep on what you have already discussed with your agent.

Generally speaking, if you have a completely vacant property, it can sell faster but no guarantees. I can't give timelines because it depends on the price, specific location, etc. List for $1 and it is gone in a day. List for $2M and it may sit. It all depends. 

Most of my properties that have tenants in them tend to sit for much longer because it is a different demographic of buyers. Often times they sell for less because of it. Because yours is a triplex, it really comes down to the numbers.

A couple ways to look at this:

1. Could you just build a garage? Maybe that makes more sense. The challenge is it might take a few years to make your money back from a cash flow perspective but you might be able to offset some that in the form of equity.

2. The whole point of house hacking is to be able to buy more properties down the line. If it fits into your overall plan, then buy the next one.

3. What does the rental market look like? He may saw he will leave but if inventory is tight, it might have second thoughts.

For MFU, it is definitely a Buyer's Market. The Month's Supply in Los Angeles County was 8.7 in February. This makes sense given the challenges Los Angeles faces.

For the residential side (condos and single family homes), it was 3.4 in February, which has slowly increased since December. 

Really what I have been seeing on the retail side (buyers for themselves) is they are getting pickier knowing they are staying in the homes longer. Plus we are seeing more household formation (babies) so things like yard space is becoming more important than before.

On the investment side, it has always been about the numbers. Since we are more rate sensitive, it is all about the numbers. I was speaking with owners yesterday who are going to lease out their single family home. They asked if the home could be sold with tenants. I said yes but at a steep discount. For example if their home is worth $900K vacant, expect it to sell likely around $600K with tenants. It's just a different buyer pool. Plus with the price gouging laws still in effect, it's not like they can ask for market rents anyways since the previous tenant was paying below market rents (they had lived there for 12 years).

It will be interesting to see what happens over the next 12 months.

When I'm meeting new investors, here are the mistakes I'm seeing:

1. They all want "steals." They want these home run deals that on a practical basis are either hard to find or don't exist. Go for the base hits. While they are spending a year plus finding that "steal," I'm buying base hit properties. Go for the small wins because the bigger gains will happen later on.

2. KEEP IT SIMPLE. Beginner investors read about these outlandish investors doing creative financing, seller financing, hard money loans, etc. and think they should do it to. What these gurus aren't telling people is they have the money in the bank as collateral (easier pitch for Seller financing if the Seller knows they actually have the money) and they have the experience to make hard money lenders comfortable. The first question a HML will ask is "what is your experience." Start simple. House Hack, do small projects. This is not a race, but a marathon. With experience means more opportunities later on.

3. It's ok to stumble, as long as you are stumbling forward. On my second house hack it was a disaster. Construction costs were much higher and we had so many delays. Fast forward to today and when we move out our main house will more than cover ALL of the expenses and our ADU will go into our pockets.

4. It's not timing the market, it's time IN the market. I know that's cheesy, but it is so true. If you think about those who bought a property the day before the market crashed back in 2008, if they kept their property, they would be about 2/3 of the way down with their mortgage and the values have come back stronger. Many of them are in better shape than if we were to buy today.

First of all, check your local laws on what you can and cannot do. 

What property improvements are you thinking and at what cost? If market value is $350 more per month plus you have to factor in vacancy. For example if you spend $10,000, then it might take you roughly 28-30 months before you start breaking even. Chances you the numbers make more sense just to raise rents to somewhere in between. Save the money for when they move out or invest in another property in the meantime.

This is a tough question because this is where Realtors will come out saying that their market is best.

The reality is you can make it work in almost any market. From Los Angeles to Birmingham, the numbers work if you employ the right strategy.

I invest in four different states and have different perspectives on each one. A few things I consider/learned:

1. Population over 100K. I want to make sure there is a big enough tenant pool.

2. Major job hubs. Things like hospitals, universities, manufacturing, whatever. Just want to make sure that tenants can get a job.

3. Are you looking for good cash flow or good appreciation? Not too often to have both right off the bat.

4. A new thing I look into is weather conditions and insurability. My business partner and I bought in Saint Louis and when it had massive snow the tenants asked if we would split the cost of snow removal. Not a big fan because who's to say that it won't snow the next day? These eat away at your profits. 

5. What is your current living situation? Are you house hacking? Do you rent? This can play a role as well because sometimes investing in your own backyard might make more sense. With an FHA loan, you can put $35K down and acquire a $1M asset. Home appreciates 3% ($30,000) and that's 85.7% cash on cash return on your equity. You wouldn't be able to do that anywhere else as a straight investment property without partners or creative financing.

6. Keep it SIMPLE. Too many times I'm seeing beginner investors try to make it extremely complicated because that's what they see active investors doing. What is the result? I never see them buy. You can get more creative later on with experience.  

Hope this helps!