All Forum Posts by: Serge S.

@Ben Leybovich  very interesting perspective from a property manager in the trenches. I've said it before and I'll say it again ... the only one making money on this asset class is the property manager. And believe me, those the hardest fees he will make. If your considering taking this plunge just ask yourself, why do more than half the PMs out there choose NOT to manage this asset class?

I must admit that the lure is so strong. The numbers look so good on paper. Wow $30k buy in and $700 rents! Over 10% cap rate! Better than anything I can find in my market. Buyer beware. Listen to Leybovich and the guys that have already played and lost that battle.

@Ben Leybovich  well since you said I'm the only schmuck left that buys homes with 25% down, you guessed it, I'm feverously searching for homes to buy with 25% down:) In all seriousness ... working hard to get some units in my 56 unit fully furnished for superbowl vacation rentals. VRBO rented very quickly at a very high rate which will eat all my loss to lease and vacancy for January. Quickly rented out nearly the entire spring and now looking to get another 1-2 units furnished and rented. 

@Brandon Turner take note. You were asking about vacation rentals. I finally took the plunge and think I've stumbled onto something big. The high revenue of short term rentals in a multifamily complex can add some serious value to a complex. We shall see how that goes. Fingers crossed I don't get bad reviews with my first couple visitors. Was hoping for a Packers Patriots Super Bowl as those are the fans that travel but should be fine w Seattle New England. Might have as many as 3 vacation rentals for Super Bowl weekend. 

Working to close an acquisition line of credit with Colony Finance to fund my 2015 SFR purchases. I have a year to deploy the capital, question is will there be enough deals? Looking at 1% deals in Arizona, newer construction over $1k gross rent and acquisition prices around $100k. Far cry from what I'm used to buying but hoping to buy with a minimum 25% front end equity. Sell at retail after a lease term or two and keep the best ones. Got my chips on metro PHX continuing to grow population long term.

Finally negotiating with an internet provider on a tower lease. I purchased a mobile home on an acre across the street from my 12 plex. Found out about the auction last minute and bid/won site unseen. Went to visit the property for the first time last week and found out it had a large wireless internet tower owned by a large operator. Found out that specific tower provides internet to over 200 homes and its the only game in town for that rural area. I'm hoping for a nice revenue share which will at least double the gross income on an otherwise average deal. $40k for the mobile and land, $750 rent, $10k rehab. 

Last but not least checking the forums to find out I've been called out for being the only Schmuck on BP buying homes with a downpayment. Oh well ... got to stay relevant somehow. How about 50% off Cash Flow Freedom University?

@Brandon Hicks  you got your self a @Ben Leybovich special! Good work. Keep us posted on your success and how the final numbers work out for you.

Wise man that @Brian Burke. Your absolutely right that I need to expand my thinking and am trying to do so. I never got into RE for bragging rights, I did it because of the financial rewards of buying distressed assets at below intrinsic value. When that opportunity passed I moved to multifamily and value add. Today I am originating notes.

The long term is where I start to lose focus. Every investment I buy, I know exactly what my exit will look like. Yet I can't say the same about my portfolio as a whole. I actually like your third option, as long as the then what blank can be filled in.

@Tristan Chicklowski@Account Closed I agree! I see notes as a very viable strategy although they are not as passive as people seem to think. 

@CK Hwang  yes, prime RE ... It took me a long while to realize that real wealth in RE is made via capital gains. Cash flow is simply a means to hold longer term to manage timing of the appropriate exit. Unless your starting with a bankroll, $100 per door doesn't go very far. I sometimes cringe when I see investors from SF and LA chase rust belt "cash flow" junk. No doubt those homes can cash flow, just not for the out of state investor. There will be times in a cycle when real cash flow is available in equity markets. That is when its time accumulate.

@Account Closed  Agreed, nice problems to have:)

I've been thinking about this a lot lately. How do you ultimately exit RE as a buy and hold investor? The most common things you hear people say is that they plan to hold forever and pass along their homes to children/spouse. Others say they will continue to 1031 and ultimately end with a nice stable large multifamily investment that sends them checks in the mail.

My problem is that I've been around long enough to know that both of these are bad strategies. By the time you will pass along your homes to your kids they will be functionally obsolescent junk in most cases. What are the odds your kids will have any interest in managing those homes not to mention the competence to do so? 

The 1031 to a large multifamily strategy is even more laughable. Again, by the time you pass, this multifamily will be a C class liability waiting for the wrong property manager to destroy it. Your heirs will be the sellers of a distressed asset that @Ben Leybovich and @Brian Burke will buy for pennies on the dollar. My last large multifamily investment was purchased from a women in just this situation. Her father would have been much more wise to sell the complex well before his death instead of leaving it for his daughter to ruin.

So ... whats left? Do you play the cycles? Buy when the fundamentals support it and sell when they don't? Or do you sell at the top of the cycle and then move into a different asset class or focus on transactions (flips, commissions, etc)?

Thoughts??

2009 - 2012 were fantastic years to quickly accumulate wealth. Many of us took advantage and the ones that were able to buy and hold in mass have built substantial balance sheets. 

When I first started, my goal was to simply have enough passive rental income to pay my own mortgage in the case I got fired from my corporate job. Once I achieved that, the goal changed to have enough to pay for all my living expenses. Once I achieved that it became 100 doors. It seemingly never ends.

So here we are in 2015 and the game is much harder. In speaking with BP veterans it seems like we all continue moving forward. My question is, when is enough enough and what does "enough" look like. Is it $10k a month in passive income? Is it 100 doors? Or is it never enough? When do you take account of what you have and shift to work to protect your assets rather than risk them to grow further?

@Ben Leybovich @Steve Olafson @Brian Burke  interested to hear the pros that have been through multiple cycles and had the opportunity to hit critical mass in their investing careers. Also interested to hear what the plan over the next 24 months.

@Ben Leybovich  is correct although I would characterize it a bit differently. Being cheap, frugal or thrifty (however you want to call it) is not something I would necessarily be proud of. It can spin into a disease. There are people who can't sleep at night when they realize they have been "ripped off" a few bucks.

It is all in where the money you spend comes from. Cash from earned income needs to be guarded and cherished. This is the hardest money you will ever earn. It is taxed the most and earned through your labor. I don't care how much you earn, its not enough and will eventually stop. The goal is to convert this to passive income that never stops and is not a function of your labor. Once you have done that, you allocate a portion of that specific cash flow to your lifestyle. 

The guy that drives a fancy car isn't necessarily an idiot or living above his means. If he has XXX in passive cash flow and a balance sheet, that car may be very immaterial to his net worth. Thus you can argue he is living below his means much more than the guy that drives a $1k Honda but works for an hourly wage.

While your in the process of converting earned income to passive, yes you need to be frugal and push every dime you can into the conversion process. Once your there, learn to live. I don't think driving a $1000 Civic when you have millions in net worth and passive cash flow is necessarily something to be proud of and brag about.

10% cap rate markets exist on paper not so much reality today. Midwest? Maybe if you live there and are very competent at property management AND have the knowledge of street to street value in each neighborhood. 

If you think you can fly in for a weekend and achieve those returns consistently, I would talk to investors that have been there and done it for more than 5 years. Numbers look wildly different over 5 years than they do over 1 year or on an excel spreadsheet.

Finally - look at IRR which is your rate of return over your projected hold and not just cap rate. Cap rate is a lure and not much else.

If your in SJ - look at Richmond, Pittsburg, Sacramento suburbs and central valley.

@John D.  yes you are the high bidder and they will take your "offer." If I may offer a word of advice ... DO NOT use their title provider. In my area its Prominent Escrow. They are beyond incompetent. They have negotiated a deal with Homesearch to process these deals at very low margin. They lure you into using them by paying for the buyers title policy. They make all that back up in junk fees so your still paying the same. They have bungled multiple deals for me that have caused a lot of pain in the subsequent resale. 

Use your own legitimate title co.