All Forum Posts by: Aaron Taylor

I personally think it's too early to buy right now. There are no deals yet. A few more months, maybe, but with unemployment at like an estimated 13% last week and probably climbing more this week, I can't see the advantage of buying right now. Financing is going to get tighter leading to less buyers, and NOI is probably going to drop on most places, so values should fall in multifamily. REIT's have just gotten crushed, so in my opinion if you're looking for 'deals' that might be the place in real estate to look right now.

This is what's going to happen here in my opinion.  A lot of businesses are 'sticks in the mud' when it comes to working from home and stuff like that.  They just won't do it as they don't trust their employees honestly.  However, this situation has forced almost all of them into doing it...and they're going to find that it honestly works pretty good, and it will become 'the new norm'.  Why own a main hub and 30 branch offices, when you just have those people work from home and save all the overhead.  When you're working with a branch office, you have no idea whether that person is at the office or on a beach either way, so why pay for the building?  Doesn't make a whole lot of financial sense, it's a lot of overhead for 'trust' issues.

Also, it's probably going to inflationary/deflationary to certain job sectors depending on where you're at.  People who do programming/design/etc that can be done anywhere, well if you live in an area where those jobs pay 1/2 of what they do on the coasts, well your salaries might be going up as all of sudden as companies become more used to remote workers.

It's going to speed up the delivery trend that was already happening.  Food delivery trend is going to speed up a ton.  Theaters, car dealers, service based businesses, etc may not make it very long either, further driving down real estate.

Basically, there's going to be a lot of downward pressure on commercial until this is over, and a lot of stuff may never recover if it lasts long enough.  Will people still go to large movie theaters if new movies on demand is successful?  If work from home is successful and 5% of the population doesn't drive anymore to work, what will that do to the need for office space and vehicles?

What's happening here is what happened to music with the ipod, video with streaming, pc games with Steam, etc...technology came that allowed something to be faster, cheaper, and easier.  Businesses were resistant to it (aka the current Amazon way) until financially this event is forcing them into it to survive.  It was going to happen eventually over 10 years, this is just speeding up the process A LOT.

Until one (or multiple) of these things happen, the economy and real estate are both going to slide considerably:

1)  Shut off all non-essential air travel.  I'm in KC, one of the lowest totals currently.  How can we contain anything when we're importing it from everywhere on a daily basis?

2)  Lockdown major infected cities.  You've got to stop the spread.  This half-way doing it is just not going to cut it.  You either do it, or you don't.  

3)  Find a cure or effective treatment that dramatically reduces the death rate

4)  Testing kits that everyone in the US has or can take daily.  If you can constantly test, you can weed it out pretty quickly.

Although the steps that have been taken in the last week are a big improvement, it has to taken even further.  Air travel is the number one offender, it has to be shut off to the major areas of infection.  It's the whole reason we're in this mess.

Having been involved with both and looking more into both for future investments, this is what I'd say:

You can get into SFR's or small multi's with a lot less money or creative financing

The better the sponsor (or at least more in demand), the higher the minimums they require usually.  This makes it hard to diversify.

My syndication stuff has beaten my worst properties but not my better ones.  I don't see it ever beating my better properties.  And from my research, that seems to be about par for the course.

You can recover from a bad SFR mistake a lot easier than a syndication mistake, as time will usually recover all mistakes there.

The syndication stuff is less work for sure once it gets going.  But if you have a property manager, you personal properties aren't that much work either.

Personally, I think you should have both. And start with the local active stuff and then gradually rotate into syndicates. It also depends on where you live, if you're trying to invest out of state then I'd much rather do syndicates then rather than trying to SFR suff.

 No, the multifamily may not be a better deal.  You have to look at the financials.  These same things exist in my area, and you'll have something like:

house for 100k renting for $1k

house converted to triplex for $100k renting for $1500

Now on the surface you'd say the triplex is a home run.  But as you look into it you see:

no separate water meters so the owner pays

no separate electric meters  so the owner pays

no separate gas meters so the owner pays

have to pay trash

have to mow/handle snow

higher property management fees

etc

So the single family might be making way more money at the same price, despite the fact that the triplex has $500 a month more rent.  And then you have to look at the roof and the fact that 3 units has 3 times as many furnaces/ac's in some cases that may need replacing.

A lot properties look like gold mines on the surface when they're really anchors.

 Yep, you need to solve their problems.

Also, I've found that if the seller doesn't want to give you a number, then just forget it 99% of the time...they're just going to waste your time.  Almost every time in that scenario when you do finally get a number, it's so high that there's no way you could make a deal.  That's not just real estate, it's anything you're buying...if they won't give you a price, it's because that price is way too high.

Even before you start investing, you have to get your finances and time management in order.  Like these things:

1)  Get your finances in Mint or Personal Capital

2)  start working on cutting your expenses

3)  start trying to find ways to save up more time in your day.  Like maybe work from home to save commuting time, etc.

4)  while saving this money (now a higher rate due to the better income/expense gap) you need to start getting educated.  Podcasts, books, researching markets, etc.  Books like Set for Life, the Millionaire Next Door, the Millionaire Real Estate Investor, Rich Dad Poor Dad, Cash Flow Quadrant, etc.  You need to have this education so you know make smart choices.

5)  Start looking for real estate locally.  Analyze different deals so you can figure out what a good deal looks like.  Do it over and over.  

6)  When you have enough saved up, pull the trigger.  I wouldn't even do a rehab for your first one, just buy one that cash flows right out the gate and is setup to have minimal problems for years (i.e. newer roof, furnace, etc).  

After you have that one, things will start snowballing.  You just need that first one.  After things will get a lot easier because of the confidence boost it will give you.  

All of these guys touting syndications, that's great if you make a crapload of money each year.  Most people don't, and would be better being more active, at least to start.  Basically, if you have more money than time, do passive, and if you have more time than money, do active.  You have to decide how bad you want it as well, you have to make some sacrifices if you want to get ahead financially.

 It might be true, it may not be true, but when it comes down to it you really can't take the opinion of someone who gains from that opinion (as the author is a syndicator).  It's like getting car buying advice from a car salesman, whenever the person you're asking has a financial gain at stake you really can't use their opinion as guidance.

Right now you have to be a little careful with some books as instead of just being educational, they're being used as a lead magnet/funnel to help with their money raising.  Podcasts are being used the same way.  That doesn't mean that the people doing them aren't good syndicators, just try and realize that a lot of it is marketing.

In my opinion, an active investor who can source good deals is going to beat most syndications, plus you have way more control of the situation.  But it requires a lot more work and effort, and that may not be worth it.  I've done both and so far have been happier with my active stuff.  That may change over time though.

Good luck to whatever you choose.  Research and education is key either way.

 It's not terrible, but it's not great either because it looks like you have to do the property management as well.  Obviously it's tempting, but with the population declining like that it's probably going to be difficult longer term to rent, and probably will be hard to sell too (if it's not selling fast in this market, imagine a down market).  

You never mentioned how old things like the roof, furnace, etc are.  That in itself could push it one way or the other...I've seen several properties which look great until you see that they need a 10k roof and all the furnaces are 20 years old.

I would be careful on the 4-plex with the stuff included.  Typically on a 4-plex you have these expenses:

trash (typically owner)

water (depends on meters)

mowing (typically owner)

snow removal (typically owner)

gas (typically renter)

electric (typically renter)

cable/internet (typically renter)

You need to make sure that you have an accurate gauge of how much each of those is and who's paying it.  Some of these things can look like great deals on paper and then you find out that the property owner is paying so many bills that there's no cash flow at all.  I looked at a 5-plex for $150k that had $2500 a month in rent...no brainer, right?  Well they were paying for everything, so they had $1k a month in bills to pay for, making the 5 unit a bad investment.