Quote from @Lucas Thomas:
Quote from @Robert Ellis:
Quote from @Stuart Udis:
@Lucas Thomas
1. Anyone who relies on the 1% rule needs to be educated
2. This was a 10 condo ground up project I developed. I sold 7 units and retained the A1,B1 and C1 units. Paid off the construction loan in full and exited my LP investors with the first 7 sales and then took on new low levered debt on the three units I kept. I believe my current loan balance is $915,000 across all three units. The two similar line units that I sold traded for $480,000 & $490,000 respectively and the neighborhood has appreciated since March/April 2022 when those untis sold. I also retained seven surplus parking spaces that have separate tax ID's. I am preparing to break ground on two townhoms across the street at 22 E Durham and each will recieve two deeded spaces. The remaining three parking spaces will be deeded to the A1, B1, C1 units when I choose to sell and each will get 2 deeded parking spaces. That should push those sales well over $500k. The 2 line units have roofdecks and sell for about $50K more historically.
3. In Philadelphia there is a tax abatement to incentivize new construction. The legislation has changed but my 23 Durham condo units qualify under the former legislation. My tax bills are under $2k/year per unit.
4. You are looking at assessed values not my cost as I explained above. Almost hitting your arbitrary 1% rule. :)
5. You are just looking at the A1 unit. I just re-leased the B1 unit after the previous tenant was there since February of 2022. MY C1 unit similarly has been leased by the same tenant since February of 2022 and remains. Turnover consists of touch up paint and cleaning. In and out, no cap ex because these are 3 year old units.
5. Are you really going to double down on cap ex and operational costs not disproprotionately impacting lower cost real estate?
6. Are you saying that if you by lousy real estate in non "landlord friendly states" as you put it there's no responsbility to address cap ex or operations? At best you are just putting duct tape on issues. You sound like a wonderful landlord any tenant would love to have...
You can keep chasing your 1% cash flow in crappy neighborhoods with ductape repairs. I will take quality of life, take pride in ownership in the assets I own and know the equity I've accumulated can easily convert to cash whenever I want.
I'm with Stuart. I never met any companies publicly traded that have to deploy billions of dollars that are buying old crappy houses unless they were built after a certain year. pooled capital likes low risk and this strategy of tenants that can barely make any money isn't the play. look at Blackstone one of the largest privately held reits they aren't deploying any dollars into this strategy. the majority is new construction which is by far a superior strategy than purchasing existing. individuals or companies who buy existing are typically intermediaries who's model relies on cash flow from day one and high returns from cash flow without a real value add strategy. in new construction you have so many more tools. The strength of new construction not only in just jobs but also in net value creation is unbelievable and can never be compared to existing houses. Cities change and most of the time houses are cheap when net migrations are negative. i used to own a demolition company and clean out company in Columbus Ohio and we used to clean up after section 8 tenants and I can't tell you how many times they did more damage to units or left more property than their security deposit covered and that their rent covered. owners would lose all the cash flow in one day when they had to pay us 3k for a cleanup. bad tenants are the worst kind. I left that part of the industry and existing inventory for all ground up construction and I personally have no plans to own individual investment properties ever again or invest in existing inventory. the only reason people do is because of their cash situation, the market they are in, or they have limited knowledge.
Robert's Steps to Success:
1. Buy Blackstone because real estate is too hard.
2. STEP Two: See Step one.
.....
https://www.fastcompany.com/91020630/housing-market-blacksto...Plus Blackstone and its brethren DO buy SFHs. Mostly through intermediaries. They are also the ones who have ruined it for the rest of us by spearheading the insane price increases we see all over America that makes 90% of cities essentially "unbuyable" on an investment standpoint.
And apparently Blackstone and I are more similar than anyone cares to admit. "Safe and Legal, But not Cosmetically Pleasing" is a standard practice by them per the article excerpt below:
"Blackstone catches flak
Blackstone doesn’t always have the best of intentions when it rents out its houses and deals with its tenants’ problems, according to Tablet, an online magazine. In fact, giant landlord is accused of a host of sins.
“The goal of institutional investors like Blackstone is to optimize profits,” the Tablet article said. “On the ground, that translates to maximum allowable rent increases, evictions, the rise of hidden fees, a reduced investment in complex maintenance, and even efforts to influence state and local housing policy.”"
Since you have so many kids you probably didn't read much into either of these companies. Let me do it for you:
Homebuyers of america average age of a property is 27 years and is worth $338k. As measured by value, 49.7% of the portfolio is concentrated in three states: Colorado (23.9%), Washington (14.3%), and Minnesota (11.6%)
https://dbrs.morningstar.com/research/370160/dbrs-morningsta...
Tricon residential average age is 29 years and $348k. As measured by broker price opinion (BPO) value, 67.7% of the portfolio is concentrated in three states: Georgia (29.8%), Arizona (19.5%), and Florida (18.5%).
https://dbrs.morningstar.com/research/442890/morningstar-dbr...
Those aren't D rentals bud. not by age, not by price, not by locations. These guys aren't pooling funds and buying D rentals in Cleveland ohio or Toledo ohio. you still shot yourself in the foot there's still no justification. between the two purchases they spent 9.5 billion dollars and they bought very nice, fairly new housing portfolios in strong tier 1 or tier 2 cities. D rentals on their own are in tier 3 cities I'd argue or the worst parts of tier 2 cities. I hope one of your businesses isn't real estate.
There's a place for Blackstone and these other institutions in the marketplace. at the end of the day this is just a buy and sell of them. if you are anti Wall Street I can't help that. the point is that your D rental theory if that's what you are trying to prove isn't good. someone would be better off putting their money into a syndication and taking ownership in a nicer asset than this than putting together a class D rental and hoping for the best. all of these are newer than 1990 which is very new for housing. the houses you are talking about are going to be built prior to 1950 with deferred maintenance in very poor cities.
