All Forum Posts by: Andy D.

Why rhetorically? There is no obvious yes or no.

The additional question, or rather definition, required to answer this question is, in my opinion: what does "recession proof" mean? We are not in manufacturing, nor in the service industry in the narrow sense (i.e. such as consulting, import/export and the likes). These are typically hit in a recession. Our service, as landlords, is to provide a roof. Apart from from those poor people who will no longer be able to afford even this (and they are a minority, thankfully), landlording is like selling toilet paper. Everybody needs the service / "product". Any given time. Maybe they buy less fancy toilet paper (= renting cheaper places) but they will buy it nonetheless. Short of an entire region being driven into the ground with a massive amount of people losing their job and no longer able to afford "normal" rent (Detroit in the past?) I don't see how any "proofing" is required. At least not beyond common sense, i.e. having wiggle room / sufficient reserves should tenants default on rent + eviction costs.

So if you consider this to be "recession proofing" then, well, there you go. You can, however, extend this to the ability to collect lower rent (due to adverse market conditions, see above) and still being able to afford all associated costs (whatever they might be, such as mortgage, PM, repairs etc). For some real estate business owners this could be a bit of challenge, from I read here... (3.5% down, i.e. high mortage + MI)

"Are there any other steps you're taking to prepare for what is to come?"

Jup. Slingshot with lots of decent sized bolts. Baseball bat. Not yet sure whether I should get a wodden one or metal. And at least in the beginning, while there is still enough amunition around, my side pistols, one revolver, one semi-auto. And no, shotguns are too clunky.

And apart from that obvious reply (d'oh!): common sense. I just passed on a 4-plex as the numbers simply didn't work. Although they barely ever hit the market it was. too. expensive, considering the market (rent) and even comps. But I'm sure it will be sold for list price as some "poor" chap is desperately trying to get into the (small) multi-family game no matter what. Possibly with an FHA loan... :-o

I'll be standing by to pick it up when it defaults in some two-ish years or so. With a 20-30% discount at that point. Thank you very much. Until then I collect my monthly rent checks and somewhat comfortably bed my financial buttocks on 30+% equity. Sometimes a little more, sometimes just a tad bit less.

All in all: I pretty much agree with you. Although I'm not sure that the repeal (in parts?) of D-F will make that big of a difference. Banks, as a business, have been burnt during the crisis. At this point I still think they remember that, not to mention their shareholders. Looking forward, another 10 years or so, not so sure...

My experience is positive. At least when it comes to my PM who is awesome. However, as has already been said: communication is key. I have had too many situations where it was - apparently - a problem that I was not physically present to kick a person's behind to get things going. They didn
t react to email for instance. Real estate agent/broker, insurance people, mortgage brokers, lenders... you name it. But since you own properties already with such aspects in place or no longer relevant, the only thing you will be concerned about is tenants, repairs and the PM. And if you have a good PM then things shouldn't be an issue. Email is working for me, and if push comes to shove there is still the phone, even with a (significant) time difference.

Just make sure you make your needs and situation clear when interviewing a PM.

Good luck, and enjoy your retirement! Life is too damn short...

@Michael Perry Forget zillow (my5c). When I occasionally look at some of my units on there I typically have to laugh fairly hard. The information is completely off, both with respect to the rents as well as property values. Sometimes only the one or the other, sometimes even both. I would, therefore, ask local people dealing with this: your broker/agent and/or property management companies.

realtor.com might be better with respect to getting more accurate rent figures as they at least show you what's available for rent. And that is generally the market rent, especially when you find several comps that show similar figures.

@Joe Splitrock has an excellent point. And I can very much confirm this, having bought my first unit in 2009. It is about timing as well, yes, but there is much more to it. It's also about buying right. Which can happen at any point in time. Every investor should know what they are investing in. And with real estate it's about location. Therefore about local circumstances which encompass a variety of aspects as we all know.

And I still believe that "turnkey" can also be when buying from individuals/direct in the market as Joe calls it. It's a matter of definition, see my initial post.

And as everyone should also know: you cannot get reward without risk. Real estate is risky. As is driving in a car, or even walking, to work. Yet most of us still do it every day...

Unless you are really into taxes and don't mind reading up on all this (devil's in the details!) I would seek assistance from a tax advisor/CPA. Reason is on the one side the income aspects and the associated topic of deductions from costs (which ones, how much, any need to depreciate etc) and on the other side the aspect of getting your cost base right to derive at the correct depreciation. All doable (I did it) but since Turbo Tax and all these programs barely consider all things related to real estate, especially in a year of purchase and/or sale, I would make that investment. It's not that expensive. It will, in all likelihood, save you quite a bit in taxes, offsetting any costs for the advisor easily. You will need one that is knowledgable in the area of real estate investing, though, or you might as well use Turbo Tax and the likes (yikes!).

@Michael Perry Sure, shoot me a PM, although with respect to "companies" I can only provide you with a property management company for a spefic area which is not going to be much help for you unless you plan on investing there as well. Also, I have never bought from a "company that does turnkey". Only from a developer and there it's obviously again dependent on the location. So, really, I can't give you anything now that I think of it. :-o

This is exactly why I am using Excel so far. Simply because I have an excel-tax-spreadsheet/file as well. I can simply pull in all the relevant figures for e.g. Schedule E into there.

With Airtable this won't work anymore, at least I wouldn't know how to do it. Nonetheless, I don't mind a bit of redundancy as it's also somewhat of a backup to a certain degree...

Airtable seems to constantly add new features. I would check in again after some weeks, maybe they have added something you can use. Then again, if you don't need the collaboration features and/or the inter-device usability then I don't really see how Airtable would be better. Because, you know, optics isn't everything. ;-)

@Tomer Ravid I basically do what you do, being in the same situation, albeit with more units/properties. It's sufficient for me - so far - as I "pimped" my Excel to the point where I can easily aggregate data and have things available as an overview with just one or two mouse clicks.

It's a bit more involved when using several excel files for each property (which is what I do for certain reasons) when you want to get an overall-overall view of expenses, income or generally cash flow, as you have to pull the data in from different files which sometimes creates problems with incorrect links etc.

I have, very recently, started to look into Airtable. It's pretty nifty. It's basically a database tool with the focus on collaboration (which of course is optional) and cross-platform usability. I like it. It's not exactly "live" yet for my situation but I'm working on it. Considering the fact that nowadays one wants to access one's data irrespective of the device one is using I guess that this is the way to go for such a situation. Because trying to read, not to mention work, with an Excel file on a phone is just not feasible.

@Michael Perry I (only) do "turnkey". My definition of turnkey is: no need to do any work for it to be put into service (when buying from a developer) or remain in service with an existing tenant in it (when buying from a non-developer). If there is work needed, it would be only cosmetic such as some interior paint here and there, maybe, maybe a new carpet, replace a ceiling fan or something like that. Minor stuff in the grand scheme of things.

Having said that: why would this not cashflow? As others have stated already, if you buy right (i.e. don't overleverage; I have voiced my opinion on this topic recently here on BP in a few posts) and the building is in good shape and tenants are ok with low vacancies then there is no reason for such a "turnkey" property to not cash flow.

I would even go ahead and say: why and how would a "non-turnkey" cash flow any better? Because if it's not turnkey then you need to put money in it which will give you an ARV which then will have to be put into relation to the rent (and the associated mortgage/costs).

With respect to @David Song's post and him saying that this is all a scam: don't agree. At least not when it comes to buying from either a developer or a private person/investor. While there might be people/institutions out there trying to sell you a property priced (way) over its value: yeah, so? If the buyer buys it then that his/her problem, not the seller's! Are people buying Louis Vuitton handbags because they are actually worth that money? No, they don't. They want the damn thing and are willing to pay what the seller is asking for. Their problem, not the seller's/manufacturer's. The market dictates the prices. Supply and demand.

As regards David's statement: "If the property is priced good enough with high cash flow, with enough appreciation potential, without all the trouble, why don't I just keep it. Why would I offer it to someone else?"

Because there is an immeasurable amount of situations and reasons why someone has or wants to sell. How does this make the sale a scam? It doesn't. What David is in essence saying is that every flipper is a scamer. I don't think that will bode so well with them. ;-)

So don't be frightened by all these "buzzwords". If you want to invest into real estate you need to find the right property. Whatever someone is calling it. If you do, it will cash flow. If you don't it might still cash flow and yet still be a bad deal. Heck, it might not cash flow initially but still be a good deal! Everything is possible.

Do be careful, or rather: prudent, when getting into this game but don't over-analyze things, especially not with a Townhome/Condo. And make sure you have enough equity in there initially. Leveraging is great, but it turns against you if things go south and you don't have enough other reserves. Good luck.

@Richard Anderson thanks for posting. While it's somewhat interesting to read I don't actually consider this to contain any interesting information, frankly. If at all, it tells us that the professionals are slowing down their investing and the lemmings are picking up that inventory. Not a good sign, but very typical for a toppish environment (generally speaking). You can see this in the stock market every time as well.

Irrespective of that, it's something I have said and seen for a long time: more and more people need to rent (vs being able to buy themselves), for a variety of resons. Someone will need to be their landlord. This entails to have a property that one can be a landlord for. Therefore someone needs to buy this property. This person is then called landlord. What a surprise.

And I totally agree with @Alex Chin's post here. Investors taking away properties from (first time) owner-occupying owners? Yeah right. That would be a rare exception. And if so: it's called competition. ;-)