All Forum Posts by: Allan C.

19 buildings are a lot of different taxes, insurance and accounting to keep track of, on top of PMing. You don't need to make big decisions right away. How about finding a PM to start taking some of your units off your hands. You can test them out and increase what you offload after determining their reliability.

also consider selling your poorer performers to consolidate. All businesses do this at one point in their cycle, so this also applies to individual investors. Your unit count isn't necessarily the issue, but it's the number of buildings you have.  

figure out what you want to do with your time and outsource the rest. 

Does the current owner hold it free and clear?  Is the property older than 30 years?  Have you investigated insurance costs for this propert?  Commercial insurance is way harder to obtain these days, especially if the building is older than 30 years. I suggest you look at all operating costs before jumping into the deal since your perceived $200k discount can evaporate quickly to taxes, insurance and interest. 

also, when was this property last appraised?

32 units for less than $2M sounds like a property that will require heavy effort. Either a lot of maintenance of time managing challenged asset class tenants, or their issues during evictions & turnovers. Are you prepared for all of this?

analysis paralysis is real and an investment killer, but it has nothing to do with robust underwriting. If you have a detailed tool it actually helps you make better informed decisions quicker. 

it's bad advice telling someone to wing underwriting if they're considering a buy and hold for an 8-unit. 

I suggest you define your end goal first and then work backwards. Do you plan on having 5 doors, 10, 20+?  Also what do you value more - higher risk/effort with potentially higher yield or lower risk/effort? How much capital do you plan to ultimately deploy?

higher returns is fundamentally a function of risk, efffort or barriers to entry. Since there is plenty of liquidity in the world, there is practically no more barrier to entry for residential real estate. Therefore returns are a function of risk and effort. Higher returns = higher risk/effort. Sure you can find a smooth patch for a few years with many asset classes, but if you hold for the long term you'll find the return vs risk/effort equation to be true. 

Your initial goal of targeting A/B asset classes suggests you are less risk adverse. If that is the case, don't compromise and target a lower quality asset just cuz those pencil out better - you'll likely regret it. Once you define your end goal, you can hone which markets fit you best. 

Suggest you really stay away from 5+ unit properties. Seems you're still on the learning curve for MF investing and 5+ has different lending, insurance and permitting requirements than 4 or under. 

I have similar background to you and my strategy is to focus on high quality assets in diversified markets. I have commercial and residential MF assets in Midwest and west coat. The west coast assets have high capital basis, thus strong depreciarion offsets any net earnings from Midwest markets, thus I don't pay taxes on net income. 

I'm levered up decently (but maintain high reserves), which is fine for now since I use W2 income for daily living. When the debt is paid down in 15 years, I can use future cash flows to offset W2 when I retire. Since I work a demanding W2, my goal is to minimize unit count while maximizing equity growth.

i get the appeal of looking at Midwest markets, but if you can acquire higher value assets then I recommend you do so. Returns are a function of risk, effort and barriers to entry. Cheap properties usually come with higher risk or higher effort, otherwise institutions will crowd out all the retail investors.  Sounds like you're focused on the long game, so think through how risk and effort factor into your strategy. 

Note OP that you'll have to wait 2 years between Sec 121 exclusion, assuming you don't have qualifying event to shorten timeline on the second sale (ie job relo). 

I only invest in markets with populations greater than 1M and have economic diversity. While these markets have greater risk of temporary over-supply, they have fundamental support to sustain a stable renters market over the decades. 

I also believe I can operate my rental business more effectively than the 90th percentile, so investment returns should meet my underwriting expectations. 

I know you didn't intend for this to be click-baity, but this is a click-bait thread. Your original statement premise is a very broad generalization that has basis flaws. 

I suspect this thread will get traction with blue vs red debates, but many opinions will miss fundamental drivers of asset growth and appreciation.