All Forum Posts by: Will Barnard

Mike,
I agree with your statements on specualtion, however, this thread was not based on the landlording business alone. It was about speculation itself, unless I am mistaken. Many, many investors have made more than sufficient profits from buying and holding for the future appreciation (speculation). Many have taken on poor cash flow or even negative cash flow and still came out ahead at the end of the investment.

That said, there are many ways to make a profit in RE, not just the landlording business. That is your business, not everyone's. You know and agree with this, just pointing it out for everyone else.

I also love the point mentioned that we are all specualting that we get up the next morning! Great point! :lol:

Originally posted by "krlovill":

I appreciate the info have you every used realestateabc.com. Nationwide what does the title company do exactly. How can they help me and what do they charge.

The title company has access to ownership details, outstanding mortgage debt, property profile, etc. They have the most up to date and accurate info. As for getting them on your team, there are two ways that come to mind.
1. Request the service and pay a fee for said service.
2. Let them know you are a professional RE investor and do deals in their area. On occasion, you need to pull specific info/reports on properties and would like them to do so for you. In return, they will receive the business on all your closings. For this option to work, you need to have credibility as anyone can tell a great story. You should either, give them business upfront to create the relationship, or have an agent or other professional who already has a relationship with them, give your credibility to the title co. via the agent's referral. Of course you should follow through or that agent will never recommend you again!

Not to worry Josh, I can not speak for everyone, but no heat or drama here. I do not believe anyone is getting heated over this. It is a great discussion and multiple points of view.
Again, I do not see how a comment of 25% vacancy factor is applicable on any residential investment, but everyone is entitled to their opinions.

Thanks for keeping an EYE or two on us Josh! :lol:

Triton Wrote:

Not necessarily true. I have dealt with seller's agent's on my own, without an agent and have been able to negotiate better deals. The bottom line is, if the seller has only one agent to pay, then that seller can come down on their price that much more. That said, if you are not an experienced investor/negotiator, it may be more beneficial for you to use a buyer's agent.

James, here is a copy/paste of the PM you requested. The 30% new home reduction is on all residential homes and not based on multifamily units as mentioned below.

Thank you for your response. The 4-plex in question is more suitable for the passive investor, however, we have had seasoned investors pick them up. We do have a great system and team in place. Everybody always says that, but we really take care of our own.
As far as new build over-inventory, I am not sure what the situation is in SC or other areas, but I have been all through Fort Worth, and there is not excessive inventory. The new builds are selling very fast, and unless a builder has built a poor product, they sell. I know this because I have seen it with my own eyes on multiple trips to the area this year.
As you also mentioned, investors like MikeOh, Tim, etc. have a different type of landlording business as this property does not fit their profile. Just the same, their properties do not fit in my portfolio either. Although I like the strategy, I feel that strategy requires the investor to be THERE hands on rather than rely on a team. As good as a prop. manager/mainten. team is, I would not be able to trust that they take care of everything required as MikeOh does on his own. I agree that in his business, he must be local.

The new builds I was talking about were multifamily. The article you referenced is new home sales which is an entirley different product then what I have. Yes, new homeownership is down, but the multifamily units are geared towards renters, not homeowners. That market is very strong and I do not base our decisions to invest or market on "gut feelings" rather, the due diligence we perform. That would be careless and irresponsible as I am sure you agree.

You are confusing performance with risk in the vacancy factor

real estate markets are fickle beast
here today, changed the next day
lets see some results.... 1040's
why dont you just buy them, if they throw this kind of cash flow?
If this kind of cash flow is really present, you should keep it.

I am not confussing anything. You may use any language you want to describe RE markets in generalities such as your fickle comment. Yes RE can be fickle in nature. No, I don not have nor do I feel that 25% is a reasonable vacancy factor or assumption. If you do, feel free to use that. That is your persoanl choice. I am confident that if 100 investors here on BP were asked what factors they have used/encountered, 99-100 of them would not say 25%.

As for your why don't I just buy them comment, I have. I have purchased in the majority of the projects I market. For example, the last duplex project I had in Peaster had 12 lots. I bought two, the builders RE agent sold several at the full retail price, and I sold the remaining to my investors at the discounted price. I wish I had enough capital to buy them all, but I do not, so I buy what I can and market the rest. As a business man, I certainly would not do all the work I do to purchase for myself, and not take advantage of being paid by the builder on the ones I can not buy.

Realtor.com and Dataquick are helpful. I have a membership to dataquick which allows me to search for comps, property profiles, as well as outstanding mortgages. Some states have disclosure laws, so I can not get all the info necessary at times.
A title company on your team is very important as well as an agent to run comps.

the vacancy comment was no joke

25 percent is a good number to use.
New Construction units for investors did well in the mania. Not so well now. I am now going to due some DD into this. Are you assigning a interest in these propertys?

25%?? Be real. I have never had a 25% vacancy rate on any residential property nor has any of my investors. In fact, I do not know of a RE investor who has had an average 25% vacancy factor. Perhaps you need to evaluate your investments better if you operate with that type of vacancy.

No I am not assigning an interest in the 4-plex unit in question. I am simply offering the last two, which is now the last one to an interested investor. The mania has nothing to do with the rental demand of today. In fact, the rental demand is higher now than it was during the boom. Remeber that FL as well as CA, Las Vegas, AZ, etc. had huge booms and TX did not. It has shown steady growth for the last 40 years+. You are in an entirely different market than TX. I suggest you do your due diligence before jumping to invalid conclusions about an investment you obviously know nothing about.

I have attended a NR meeting at a hotel near me as well as had contact with some of their reps. Most of the reps selling the NR program do not know squat about RE investing nor do they own any investments. This is not to say that all of them fit this category.
I do think that the materials and education at their college is well put together, particularly the written stuff, but the potential re investor at the end of the day is still unsure what to do to make their 1st deal. That is the same problem with most of the guru education. Too much generalities, too much "making it harder than it really is", and not enough assistance/mentoring once the education is complete.

They also have what they call their "investor concierge" which is "click a mouse & buy a house" Not only are the deals not good, most of them are very poor. I scame across an article in regards to their investments they offer which was written by CNN Money back in August 8, 2007 by Patricia B. Gray. Do a search for the article as I do not have the link anymore.

Originally posted by "Wheatie":

I believe you are correct that it is impossible to buy new construction, rent it, pay out 50% of the rent for expenses and turn a profit. That's why I can't see buying new construction for a rental.

Profits will be seen from the longer term hold (5-10 years), as they appreciate as well as offer the tax advantages for passive investors.

Originally posted by "Wheatie":

Capital expenses may be different from an IRS point of view but they're still money out of your pocket as an investor. They're worse than expenses because you pay them all at once but can only deduct them based on their depreciation schedule. If you do your projections and neglect these expenses, you'll have a very unpleasant surprise when they do eventually come due.

Yes, cap expenses are depreciated over time, but the funds do not have to come from cash, simply having a reserve is all that is needed and recommended.

Originally posted by "Wheatie":

Most expenses, like property management, vacancy, legal expenses, evictions, tenant damage, taxes, and insurance have little or nothing to do with new construction vs. existing houses.

New units have very little and often no repairs the first year or two, while older units will often have immediate and ongoing repairs/deferred maintenance. Vacancies will be lower on new units as renters prefer a new unit over an old one. As far as the rest of the fixed expenses you mentioned, I agree it makes no difference between new or old.

Originally posted by "Wheatie":

I'm new to the rental game, and don't have enough data to really know. I've spoken to a number of experienced landlords, including one who has about 30 rentals and has had them for a number of years. Consistently, they say expenses are not as high as 50% of rent. I've never actually gotten a specific number. But, I do get more of a "yeah, maybe" for 40%.

I agree that 40% for an AVERAGE is fair for a screening tool, but again, each individual property will have it's own numbers. They may be 36%, they may be 44%, etc. The other factor often left out is that the higher the rental rates get, the lower the expense ratio (percentage) becomes. Fixed expenses do not increase just because one unit has much higher rent than another, so using percentages should be a screening tool only.

Originally posted by "Wheatie":

I've also been led to believe that southern climates have a lower expense ratio than northern climates.

Although I do not have units in the cold climates, I have heard this as well. I believe that the colder climates have additional expenses like snow removal, higher utilities or special utilities, etc. that the warmer climtes do not have. Perhaps repairs of heating systems, water pipes, etc. are also more expensive.