All Forum Posts by: Alan Grobmeier

@Bjorn Ahlblad, you may want to 1031 sooner than later.  Our new president is considering getting rid of the 1031 exchange or massively modifying it.

https://www.accountingweb.com/...

@Duncan Hayes, I am in a similar situation as @Cody L., I get calls and texts daily.  

I have put my phone on do not disturb.  Supposedly that limits my received calls to only ppl I know.  It appears that some wholesalers have found a way around that 'trick' as well.  :-(

Now I don't bother answering the phone unless I know who it is on the other side.

It appears that these lists are handed around to wholesales from time to time.  I am now on property 34xx that gets all the calls.  I understand it is a 'game'.  The more contacts made, the more possibility of a 'win'.  I just don't want to play.  If you were a LL instead of a wholesaler, you would find these calls inconvenient & a waste of my time in addition to yours.

I'm not sure which calls I get the most:  Wholesalers wanting to steal my property, or someone telling me my car warranty is expired.  :-(

@Tushar P., I think they are dazzled by the glitz of 8-10% cash on cash returns that are usually touted in these types of pro forma.

But they never come to fruition in the long term.

Some of them, I have seen, are educated ppl that were drawn in by promises.  

Cali properties offer, at best, a 3-4% return, before expenses.  In many cases a property in Cali will require 50% to even cashflow!  As a result, the 'hoods of Ohio (and elsewhere) look financially attractive.

These types of properties are not for the faint of heart.  Many are old, not well maintained, have constant turn-over, or other issues.  There are reasons they are 'cheap'.

I think, in most cases, the investors are clueless.  

In the Clayton Morris situation the investor was never encouraged to come out, get a appraisal, a loan, or even a home inspection.  Just pay your $50k+ and see what happens, they will take care of it all.

In my case I ALMOST sold 1 of my properties to buy a 'few' in the midwest.  But then I started looking at the quality of the properties, quality of the schools, neighborhoods, etc., from a distance.  I didn't have to travel to figure out it was probably a bad deal & not my business model.

I think this is when you become 'friends' with the local biker gang.  Free beer, pizza & food on Saturday night, since there is no longer any 'squatting' law enforced.

I wonder how fast your non-paying tenant would move in those circumstances?  Yikes!

We used to be a country of laws, but we are quickly become lawless.  I wonder how they think this would turn out? 

@Mike Adams, gonna be longer than that if the moratoriums aren't stopped.  Personally, I thought this (March 31) was it.  Obviously the govt has other ideas.  

Don't they understand ALL the real estate eviction attorneys they put back on the bench, waiting for their turn?

Housing, at least in my area, has experienced significant inflation.  Both on the sales and the rent side.  I can't help but think the rent side is more of a 'covid surcharge' like we now find at our diners.  

I've seen some super crazy rental requirements that I didn't see a year ago. Example: 3x rent = income AND 680+ FICO. If you don't have 3x rent, deposit doubles. If you don't have 680, then they have a sliding scale based on DTI. If you don't meet those requirements, security deposit is increased. Yikes!

Renters are ALMOST having to have buyer-like qualifications for RENT!  And the longer the moratorium lasts, the worse that is going to get, IMHO.  

I can't even imagine what is like in NY or Chicago where the moratorium has been abused by tenants.

@James Wise, 'Alan clearly has a problem with buying low income high risk rental properties.'

Before I get into the rest of this post, I would like to commend you on an entertaining YouTube channel. :-)  I realize I do not have the number of properties you manage and never will.  But I have not gone thru, as an owner, even a MINUSCULE fraction of the problems you encounter and post on YouTube.  I have yet to encounter a dumpster fire or other calamities you have posted.  I guess it's 'dumb luck' on my part, but I think it has more to do with business model. 

Many of your owners, or perhaps even yourself, encounter tens of thousands of dollars of damage on some of these properties.  That has to eat into YEARS worth of profit margins, no matter the price of the property.  In some cases the damage MIGHT be more what the property cost to purchase.  Yikes!

I apologize if I offended you with regards to the CM contrast.  It is my belief that CM could be YOU, if he was an honest person & operated with integrity.  Obviously you are making money doing what you are doing or you wouldn't be doing it.  ;-)  

There is nothing wrong, ethically, with running D/F properties.  After all, somebody's gotta do it.  A friend of mine has 32 doors in what I would call D class.  He could write a book on reasons rent is late.  I can't write that book.  That's not my experience.

The 'problem', however, is that many of these investors, even newly accredited ones, really have no idea of the real risks they are signing up.  Add in, what I would call a low return for an elevated risk, & I don't see these types being a bargain for the first-time Cali landlord.  

They'd be better off buying their stock options with cash and selling covered calls.

@Jay Hinrichs, the pandemic has seen rents AND appreciation skyrocket in my area.  The purchase price is one thing, but I think the added risk of non-paying tenants will impact ALL renters as we move forward.

The increase in rents, over the last 2 years, is so much that my rents are woefully behind IF any of my properties were to be marketed today.

Obviously there are a FEW differences.  For one, ALL of my tenants have been with me over 3 years.  One has been with me 7 years.  I was not impacted by non-paying tenants except for one that I put on a payment plan.  That family is now caught up.

There is a greed/fear factor involved, as usual.  I did not raise ANY of my rents in 2020.  In good faith I just couldn't do it.  

I told my tenants last March we would get thru this together, but we needed to work together if there were any issues.  I count myself fortunate as there was only one minor non-pay.  On a personal side I experienced my own job loss, but was only out of work for 4 weeks.

At the end of the day I decided to 'dance with who brung me' vs 'what's behind the curtain'.  ;-) 

@JD Martin, either the govt doesn't know what they are doing or doesn't care.  I think it's 'doesn't care'.    

In the past a person getting ready to retire could buy an extra house or two for retirement income and a hedge against inflation.  The risk of a non-paying tenant was ALWAYS present, but there was a process (eviction) to remedy the situation.

Moving forward, due to the moratoriums, renters will find screening much tougher and prices much higher.  There is price to pay & most renters don't understand this fact.  In my area NEW rents have skyrocketed because of this added risk.

@Brad Fausett, personally I am surprised that a 'local' would use @James Wise.  I have found his YouTubes to be entertaining, but would never set foot into one of his turnkeys.  

James' business model looks like a 'honest version' of Clayton Morris.  James will tell you the property is in the 'hood, where as Clayton was trying to peddle D/F properties as C.  

I'm not saying they aren't right for someone else, but I don't feel they are the right thing for me.  And I view them as probably being unprofitable from an ownership point of view.  I want to be where things are appreciating and the only thing I see appreciating in Ohio is taxes. :-(

And there are easier ways to make $$$, if that is the goal, with much less risk/headache.  The stock market, right now, is like shooting fish in a barrel.  Pick one, any one.  ;-)

In my estimation, you will be 3rd or 4th on the list for 'profits', if there are any.  The 'pecking order' is as follows:

1.  State of Ohio, property taxes are high.

2.  Company that maintains the property/fixes things (Not sure if H/W does that in-house or contracts it out)

3.  H/W for Property Mgmt.

4.  You (maybe).

I have watched a number of James' YouTubes. Dumpster fire, house fire, trash heap, scary tenants, appear to be the norm. Not sure why anyone would want to 'invite' that type of chaos into their lives for a sub-5% COC return.

@Account Closed, let's say I'm a landlord with MANY properties and ppl STOP paying rent.  I have reserves, but do you seriously think that cash reserves, with NO INCOME, can last 1.5 years?  

Oh yeah, no end in sight on the eviction moratorium which equates to more indecision by the govt.  If I'm a LL with non-paying tenants, I'm keeping as much cash to myself as possible.

If you think having a "covid fee" at your local diner is bad, just wait a couple of years and see what your RENTS look like!  There will be a huge price to pay.