All Forum Posts by: Marcus Auerbach

Hi Benjamin, sure - what do you want to know?

Sounds like an unprofessional agent. We usually turn listing meetings in 48 hours and our specialist (Amanda) spends about three hours to establish fair market value. It's a very data driven approach. We then sit down with the seller to determine the strategy. Start high and then lower after two weeks, start right at FMV or start purposly below to create competition in the first 3 days and drive the price up. Lets say FMV is 310k, we could start at 319k and hope someone will jump on it, we could price it right at 310, or we would price it at 300 to create urgency. (We don't do 299, because we want it to show up in the search from 200-300 and 300-400, if you go 299 you loose the upper bracket.) If you are looking for a professional agent I can look up a top producing Keller Williams agent in your area and check his/her training and background.

@Evan Turner if you want to look at this through the financial lense you should a line for capex (major repairs and rehab based on age) - at some point every home needs a roof, windows, new plumbing, new heating, cooling, kitchens, bathrooms, electric, siding, doors, trim, flooring, garage door, foundation repair, sewer lateral repair, treee removel etc etc. you get my point. On a typical Milwauke ranch home this is probably somewhere areound $50 per square foot of living space. You through pretty much a whole set every 50 years or so.

The second issue is that on average you will have to deal with a lot more drama. Late rent, no rent, trouble getting rent. Unpaid water bills (now on your tax bill). All kinds of personal drama, family issues, domestic violence, crimes, burglary (your tenants being robed), drug issues, kids issues. Higher vacancy rates, more turn over, more cost per turnover. Phonecalls late at night and headaches being introduced in your life. My freidn Jeff had to bring the cops yesterday to take pictures of his own house he is trying to sell. The tenant is fighting him. Please note that I am saying on average, you will have some great tenants too.

There is no free lunch in Real Estate. Every seller wants as much money as possible for their properties. If someone is selling a home for a small fraction of what the sticks and stones would cost to build it (basically at a negative land value if you assume the house is worth what material and labor did cost at the time of construction) there is a reason for that. They are selling something that is so undesirable that they practically have to give it away. Once you buy the portfolio you are in the shoes of the current seller. Now you are the owner. To avoid the capex issue, a popular startegy is to buy a C or D class property that is still in okay shape and collect the cash flow until the property is starting to need repairs and then quickly sell it. This way you can "milk" the asset for a few years and defer improvements to the next owner. Ever aksed the seller of the portfolio why he is selling what he is going to buy next?

Yes, the cash flow will be great. But you will have really earned that money by the end of every month. This is not going to be very passive investing. I am not saying you won't make money, because you will, I am just saying it is a lot of work and I want you to be very clear about what you are getting yourself into.

Congrat's Cody for being bold, can't wait to see the book and yes, you will be in good hands with a KW agent ;-)

I always knew it is just a matter of time until I would have to deal with the worst case plumbing issue - a broken sewer lateral under a rental property. So, I was mentally prepared for the big bill, but it still was not fun to actually go through it. For those who have not had "the pleasure" I thought I'll share...

I got a text on Thursday night from a tenant informing me that there was sewage in the basement and it was comming out of the floor drain. Fortunatley our drain contractor was able to get out there next day Friday morning right away with the big snake to clear out the sewer lateral. I had a bad feeling, because as a standard procedure we always have the entire sewer snaked before we put a new house into service and this one was just done half a year ago. (most of our Milwaukee housing stock is built in the 50s and many sewer lines have never been cleaned, so we do it as a precaution...) So I was expecting bad news..

The snake did not go through and after sticking down a camera they informed me that the line was broken and the front yard needs to be dug up. Fortunatley the problem was located outside the house and not under the house (so we did not have to get inside the house and bust up concrete!) I was lucky to get an excavator out there same day on Friday afternoon and 3 hours later we had access to the line and could inspect the problem. 

They had to dig up a massive trench, about 11 feet deep to get to the line. The individual drain tiles were in really good shape, but two of them were disconnected, because 60 years ago they had been supported by some leftover construction lumber over a soft spot (instead of crushed stone, as supposed to). As the wood was rotting away over the decades, the weight of the dirt pushed them down and diconnected them eventually. 

If I would have had the sewer line scoped as part of our purchase inspection we would have probably found the issue. I started to remember that when we had snaked the line the first time the plumbers told me they were pulling out clay, but eventually got it to work. As the tenants moved in and more water went through the line the wood started to rot out and the ground got softer from all the leaking water making the issue worse quickly until the line collapsed and filled in with dirt.

The crew worked quickly, bute very careful to not tear up the water line with the excavator - usually burried right next to sewer. Once located they had to hand dig the last foot, remove the individual tiles and the solid content inside, clean everything up and install a new PVC sewer pipe. 

Of course the remainder of the line back in the house was filled with solids, as the tenants had used the swer line for weeks despite the fact that less and less of the liquids could pass. Remembering the guys cleaning out the 15 ft slud of fresh solids helped me a lot writing the check later on... yuck! By Friday night the line was replaced and back in service.

The crew came back on Saturday with a load of gravel to propperly fill under the new pipe, we passed city inspection and then the trench could be backfilled. The remainder of the dirt had to be loaded on a truck an hauled away. The total bill came in for just over $6600 and was a little bit higher that normal, becaue they had to work on a Saturday. Understanding how much work it was I think the bill was reasonable. In the end I was glad we could do it so quickly. The tenants were glad too and relieved that they were able to use the shower and bathroom within 12 hours of reporting the issue - they had already started calling family, because they expected it to be a several week long issue.

Lessons learned? We still buy properties and will not scope the sewer lateral before the purchase, it's simply to expensive and involved compared to the probability of this happening. So we will play the odds. It's just one of those things that you have to deal with when they pop up. And in the end it really was not that bad, just a little expensive...

Here you can see an old sewer tile in the right side of the picture. Also shovels and standing water.

Keep the miles low.. 

I wonder what Hank Moody would say to that?? Starts with an F.

@J Scott Ha, yes I am sure! And once you got used to the feel of a German car it's hard to switch to anything else, right? Can't wait for the the new X5!

@Rich Weese

What a pleasure to read your response! Isn't that the reason why most of us are here - lifestyle (and cars, of course)?

The sad thing is that we don't have the roads nor the drivers to enjoy our cars here the way the Europeans do. When I was still living in Austria I had a little BMW Z4 with a nice engine and rear wheel drive, not even half the HP of your cars, but enough for narrow roads. My daily commute was 20 minutes of winding mountain roads, down in the morning and up in the evening. What a joy every day after work to bolt up the hills and pass cars in the short distance between the switchbacks! I would always count cars passed and then drive against my own best lap. The Z4 was an excellent drifter and very easy to control on the throttle with great stiffness in the suspension. That was 10 years ago, today I live in Wisconsin and drove to the office in my Q5 TDI on a straight road doing 55 miles and hour. And if I would pass a car every day I would probably get shot by some angry person before the end of the year...

I might need a toy in the garage again though some day ;-)

The probelm with dream cars is the excitement wears off very fast, after a year you will be thinking about getting something more practical.. it's like that hot GF, who is actually a complete bi$#@!

Buy and hold out of State is not easy but doable, flipping out of State is a recepie for desaster. The good news is that you can always flip close to home, even if your market is too expensive for a cash flow rental. The grass just looks greener on th other side! Good luck!