All Forum Posts by: Billy Zhao

Everything is possible. It's almost certain there will be crashes. We simply don't know when.

The real estate market has traditionally gone through up and down cycles every few years. There's no reason to believe that it won't happen again. A correction of 20-50% in real estates value in certain markets can happen without much warning. In fact, New York City is already seeing a correction and probably a bigger fall out in the next 12 months. 

The real question is what to do:

1- mitigate the risks

2- getting ready for opportunities to come

I think have a long term plan will help a lot. 

Super, this will be my first!

It seems that every successful real estate investors say that an effective property manager is the key. And yet, I haven't seen a comprehensive metrics to measure what makes a PM better. I've seen countless anecdotal evidence of a bad PM. 

I was thinking that I need a standard to screen for a good PM. Perhaps starts with asking for references from other real estate investors who used the same PM, and maybe a list of interview questions to see if the PM answer them correctly. 

Are there any such metrics that exist? Or should I compile one and share it with everyone?

If you don't mind, can you share a couple of properties for me to study? 20% below ask is a significant drop. I was wondering if a lot of NYC investors are local or from outside (even the country). How many of them are trying to hold on to them with no cash flow right now.

I have a slightly different perspective, especially from my own dealing with the police department and their lack of efficiencies in dealing with property crimes. And I am not going to take a strong judgment on politics of it all since I am strived to not be ideological.

The real issue with Austin is minor property crimes and the Police, in general, is ineffective in dealing with them. 

Many police are military veterans with a 2nd career after the military and 2nd pension. My experience with them is that they tend to be paid very well (with overtime) and I am not sure how to measure their performance really. I am kind of underwhelmed with their response in the last few times I needed help from them. 

My take on the defunding issue is that I feel it's part an ideologically driven thing also part of practical appeasement to calm certain populations that are boiling with anger and despair. I'm not entirely sure if this strategy works but I would try mitigation before going all-in with confrontation (use force against force). It's a classic conflict resolution in my opinion. 

Police are necessary and their presence provides a sense of security. Their actual crime prevention ability is highly questionable. 

Read a lot of bad news about NYC especially Manhattan, which has a serious problem with vacancies and declining rent (as much as 25%). 

Do you think this is just temporary (I'm pretty sure it will roaring back, just not immediately)? Any bargain to be had? I'd love to own a piece of big apple...

Of course, this could be a pipe dream as I can see that there are a ton of investors with hot cash ready to decent like a bunch of vultures... 

Why not do a 3,6,9-month term? 

What I usually tell tenants is that month-to-month rent will be somewhat higher due to the turnover risks. One year or longer will get to lock the rate of rent. But I guess many people here think that long term lease is pointless and provide no protection to owner whatsoever. I learned again.

This is very interesting. Rent control essentially created a government-induced scarcity of supply that virtually guaranteed that you will have a minimum vacancy rate (rent them out quickly). This is a hidden benefit that is hard to calculate. And it legitimizes the automatic increase of rent as well, which makes PM's life easier. I can't say I don't like it. After all, I've never raised my rent for more than 4-5% anyway.

People often complain about government interventions as if it's always detrimental to business. I think it's much more complicated as government intervention tends to reward a group of business owners and suppress competition which often is detrimental to some business but beneficial to others. 

Thanks for all the comments. It seems the consensus is to sell it for better cash flow. I understand the need to generate cash flow however, the market I'm in is nearly impossible to find anything that gives the kind of $200-$300 cash flow after all the expenses. I was wondering if this is true in all expensive markets like California, New York, Seattle, etc. On the flip side, is it true that in a lower-priced area like midwest, appreciation is low and price tend not to grow as quickly?

By the way, the 7.6% growth is compounded growth, by pure dollar and simple division, the value of the house appreciated 150% over the last 13 years. It generated a lot of equity in the last few years that compensated the low cash flow needs. Obviously the tenant loves the house and is taking good care of it. That reduced my need to spend more from cash reserve. 

My current thought is that I definitely need to add some cash flow positive properties in areas that are less costly, for diversification's sake though I really can't tell what is a truly diversified real estate portfolio.

Here is a high-level description:

It's SFH in a pretty decent neighborhood. The cash flow is about <$100/mo. The home appreciated very well in the past 13 years since I owned the property, averaging about 7.6% per year increase. It probably will continue to appreciate for a while.

I did a cashout refi on the property but still have a substantial amount of equity in it (45%) thanks to the appreciation.

Should I do a 1031 and find some other better cashflow properties or keep this one? If the tenant is asking for seller financing (assuming he has the ability to pay) should I try that to make some more money on the interest side?

If you had prior experience please let me know. Thanks!