All Forum Posts by: Marcus Auerbach

I can't give you a yes/no based just on your numbers: most people make mistakes with their assumptions: rent too high/low, underestimate capex etc. Second, I could not tell you how much the property is worth once you are done. How about the location?

The last 5 years we have gone away from "do the numbers work" to "do we want to own the property?" and then you make the numbers work. Try negotiate, put more down, improve condition etc. I invest in Milwaukee (since 2008) and I do not buy anything from before WW2. We have a lot of 1920's inventory and while they are architecturally attractive, old buildings are VERY expensive to rehab, because everything was custom built on site. You can't just go to Home Depot and buy a new door.

For a first deal my gut feeling is that it is too complex: mixed use, but especially the rehab. You don't need to make all your money on your first deal, but you do want to make sure there is a second one. And if you tank you first one, there will never be a portfolio.

So my recommendation is to worry less about the year one cash flow (totally overrated as a decision-making factor, yet you have to start there), instead look at it more wholeistically, opt for a less complex deal, and buy the best quality real estate you can afford. 

 Brokerages lack the means to do so, but frankly also the motivation. A brokerage could not care less if prices are 5% up or down, as a business the only thing that matters is transaction volume. A super-hot market can lack transaction volume and is hard on agents. Much better to have a balanced market with about equal supply and demand.

Definitley not a reason to panic, just interesting to watch the data and see this play out in a present day market. The inventory numbers are mind blowing to me. We have literally 651 listings in a market that is half the size of Boward County and they have 18,000 - we could use some of that inventory.

Way too much equity for a 2008 melt down, and people can just NOT sell and hold.

My data is from RPR and it's condos plus SF combined, I believe I can filter condos. 

It will be interesting to see how the psychology plays out. I wonder if some owners will become sellers because of what they see in the market. Its that get-out-while-you-can menatlity. Or it might just level out. With a couple more years of elevated inflation the affordability issue will be softening too.

What i am trying to understand are the reasons and the dynamic of what is happening there. Are most of the condos second homes?

Yeah, this is RPR data, so it's SF+condos combined. So seems like it's more a condo issue at the moment, which points me to second homes and not Airbnb as the main driver. 

As an investor, I am always looking for opportunities and you have a lot more leverage to negotiate in a high inventory market. In my market, anything good goes way over list. 

And for agents changes in the market mean more transactions, so that's good in my book. I work mostly with relocation and higher-end clients and consumers think a super hot market is good for agents. It sucks, I'd rather have 2 offers on a listing and a day to review than 12 offers and 2h binding acceptance! And on the buyer side it's just brutal without inventory. So I'd love for my market to cool off a bit!

The question for me is what are real specific reasons WHY this is happening in S-FL? When you understand the reasons you can form an opinion on the extent of this situation and what will happen next. What do you see?

I just looked through some numbers for southern FL and they look bad. 

Miami-Dade County has over 8 months worth of suppy, Monroe County (Florida Keys) has almost 12 month worth of supply. Anything over 5 is considered a sellers market. 

Boward County (Fort Lauderdale) has 8 months' worth of inventory, almost 18,000 homes for sale. In comparison my home market Milwaukee County has 1 month supply and a total of 651 homes listed for sale. Granted, at about half the population, but the difference is almost incomprehensible. This looks like post 2008 levels.

Sold to List Price ratio's are slipping below 95% in FL, I have not seen much under 100% in 5 years. 

Who is local in Miami, Palm Beach, Fort Lauderdale, and Sarasota and can speak to the market down there?

 Impossible to give you a good answer without knowing the property value. Not worth it on a 100k house, probably worth it on a 300k+ house in the long run. 

The appraiser will not give you much now, but when it comes time to sell, it will make a big difference. 

Fun fact: best ROI in the annual Cost vs Value report is a garage door. It's relatively cheap for how big it is, but large and can give you a lot of curb appeal.

Very nice work @Alan Asriants. Your experience shows! 

And I like that you are not cutting corners on things that are required (like code-compliant electrical) to things that are just nice, like backsplash or 3 way switches.

Cost-wise, this is really a best-case scenario and it is great that you are pointing this out!

For example we usually budget about $2,500 for kitchen appliances including dishwasher, because we rent to families and a full-size french door fridge alone will be $1200-$1400.

And we usually have two bathrooms, and they take a lot of material and labor. We are usually around $50 to $60/sf but that usually includes new windows, new HVAC, all new pex etc.

The category Misc. Materials is very sneaky indeed! It's not the cost of the big ticket items that kills your budget, it's the loooong list of small tasks and receipts!

I use SVA in Brookfield, but they are a big firm. With a hand full of rentals you could go online to any CPA in the US, but I have a thing for doing business local and stay in the Milwaukee area. 

What I have done in the past is Google CPA near me, phone interview maybe 5 or 6, ask them if they have REI clients and what types of properties. Interview the top 2 in person.

I would also ask if they can do accounting for you. 

We have a separate accounting service, drop off all the paperwork once a month, they have access to all our bank accounts, so they can reconcile Quickbooks with our bank accounts. If you stay on top of Quickbooks every month, doing taxes in spring is super easy.

I did my own accounting for too many years, was one of the happiest days when I hired a professional accountant.

It does not matter what the seller wants. Or the listing agent.

If you have a provision on assigning leases to the buyer and transferring security deposits in the Offer To Purchase (in Wisconsin that's part of the standard form) the title company will put the SD as a line item on the closing statement. End of story.

I can't imagine the Iowa State contract does not have a similar provision!? Without it the lease would remain between the previous owner and the tenant, you would not even be entitled to rent...

...and don't forget to collect a W9 right away and a copy of their insurance! Which BTW solves the issue of having contact information on file.