All Forum Posts by: Account Closed

@Josiah Cooper

If they seem receptive to it, you might try paying them to leave the property.  An eviction will likely cost you in excess of $5K so if you can get them out for less than that, it might be worth a try.  There are lots of pro deadbeat renters who work with deadbeat attorneys...they pay YOUR rent to their attorney to fight you in court, while living rent free.  Then they move on to the next unsuspecting landlord and do it all over again.

@Darren Budahn

 Yes, I do. And no I don't need to...Because I've invested for over 12 years in many markets nationwide and I have a good understanding of how and where most 4plexes are developed.  You're may be an exception, which is why I included the work "likely".

@Kelly N.

SFRs or multifamilies over 30 units... Nothing in between.  There are lots of reasons for this, but primarily development history and management issues.

Question: What is the American Dream? Why?

Think about your life and the types of structures you've lived in during each phase (high school, college, first job, 30s, etc.)? Why?

@Jay Hinrichs

I generally look for working class neighborhoods.  My preference is to be in middle and upper middle class neighborhoods where families with kids live.  If I see foreign family vans that's a good sign!  But you're right people in lower class neighborhoods often invest money in the wrong assets (vehicles not real estate).

A new research paper was recently publish that examined and explained the reasons for Warren Buffett's investment success.  Here's a brief summary...

Warren Buffett's Success is mostly attributable to:
* Use of leverage
* Focus on cheap, safe, quality stocks
* Returns come more from stock selection than quality management
* Wholly-owned companies perform the best

“Berkshire Hathaway has realized a Sharpe ratio of 0.76, higher than any other stock or mutual fund with a history of more than 30 years, and Berkshire has a significant alpha to traditional risk factors. However, we find that the alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett’s leverage is about 1.6-to-1 on average. Buffett’s returns appear to be neither luck nor magic, but, rather, reward for the use of leverage combined with a focus on cheap, safe, quality stocks. Decomposing Berkshires’ portfolio into ownership in publicly traded stocks versus wholly-owned private companies, we find that the former performs the best, suggesting that Buffett’s returns are more due to stock selection than to his effect on management. These results have broad implications for market efficiency and the implementability of academic factors."

Here's a link to the full paper:
http://nber.org/papers/w19681

How can we apply this to the investment in real estate?

I suggest, as I have done, diligent use of leverage balancing this with not taking on too much risk, focus on acquiring cheap (below average cost of housing) properties, in safe/quality neighborhoods.  Then developing an efficient low-cost property management strategy in-house. Finally, be very careful about partnering and have a preference for "wholly-owned" properties or owning 100% of all deals you get involved with (control).

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Feel free to connect with me or learn more about my investment strategies/philosophy on my blog (link below).

There are exceptions of course...Example: you can still buy and cash flow in the markets you're in.  Most U.S. markets now are approached PEAK territory, so I'd be cautious... 

Now is a good time to improve your business, lower expenses, and hoard cash for the next buying opportunity.

To develop real long-term wealth, especially in this economy, you MUST own.
Gordon Gekko from Wall Street said it best:

"The richest one percent of this country owns half our country's wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It's ********. You got ninety percent of the American public out there with little or no net wo...rth. I create nothing. I own. We make the rules, pal. The news, war, peace, famine, upheaval, the price per paper clip. We pick that rabbit out of the hat while everybody sits out there wondering how the hell we did it. Now you're not naive enough to think we're living in a democracy, are you buddy? It's the free market. And you're a part of it. You've got that killer instinct. Stick around pal, I've still got a lot to teach you."

Buying a 4 plex was likely your first mistake. These are generally developed in "4 plex neighborhoods". If you're lucky, you may have acquired one in an SFR neighborhood, but unlikely. That said, you will likely not be able to attract the top quality tenants because those types of renters do not want to rent in 4 plex neighborhoods.

I'd start evictions immediately after the rent is 5 days late.  Get them out ASAP!

Despite your hopes, they will not turn into good tenants.  You must screen and attract good tenants.  If they pay late, learn your lesson and be more diligent in your screening process next time.

It's an expensive lesson.  Hire a lawyer and evict them.