All Forum Posts by: Dan Bryskin

@Isiah Ferguson

D area? Why not?

• 1. Worst the neighborhood, better the cash flow. Here, around Minneapolis, house in D neighborhood can be  purchased, fixed and rented for under 100k.  Same house in A would be 400k. In D, I'd get $1300 and in A $2200. Rent increase in going from D to A doesn't justify a price increase. 
• 2. The only way you have to go is up
• 3. Appreciation: Pick a neighborhood up with the chance of gentrifying. Or work just outside a little better neighborhood. If you get it right and if you stay long enough, benefits can be huge.
• 4. Inspect a property you are purchasing for the bullet holes. Don't worry about BB holes, some people ignore .22s. Personal rule - house with the bullet hole(s) is nothing i want to hold long term. Thats a joke with the hint of truth btw.
• 5. Resilience. 4 100k properties will do way better in case of crash / correction then 400k property
• In the crash, people who can't afford their homes rent. People who can't afford rent - move to lower tier. Low tiers are safe as there is always a demand. At times landlords resort to incentives to fill expansive appartments, but there is always a section 8 waiting list.
• 6. You will learn quick
• Not for everybody. They will scare you with "professional" tenants. They got nothing on professional landlords :)

It is all about finding your comfort zone ... Some people are outside of the comfort zone the second they leave Manhattan :)  Good luck.

@Ken Wang

Looking for tax shelter? 3 parts: 

1. Investment strategy: 

Look at accelerated depreciation / chattel appraisal/ cost segregation study. The basic premise is: Let's say you have purchased 20 units app building for 1,000,000. It is depreciated over 27.5 years, for yearly depreciation of 36k. Cost segregation study will allow you to say my windows won't last 27.5, my cabinets won't, my carpet won't. As a result, about half of value of the building will be on accelerated schedule allowing you to have a depreciation of about 36k*2. Done properly for 5-7 years not only all income is tax free, but you cash flowing investment may produce a schedule K loss. 

Tax credits (historic & low income)

2. Holding Strategy

Appropriate holding structure to minimize liabilities. - Talk to your CPA / Attorney

3. Disposition strategy

Depends on the 1st two.

@Rich V.accessible. Figure out the passable model and get started.

@Jay Hinrichs

I have kids and hobbies. I don't run boarding houses, I invest and create opportunities for people :)

@Philip Hy

It is all about strategery man. As our former president sad once. Real estate is a funny game. Once you learn something, door closes. Another one opens, but you got to be up for it. Example: say I was buying single families for 40k, 6 years ago, spending 10-15 on rehab, renting them to make 10k a year. Was a beautiful model with 15-25% return. To do the similar thing today I would have to doge bullets in Milwaukee for smaller returns. So what do I do? Keep buying same houses for 120K - 175K a pop making same 10k for a whopping 3.4% return? Why? Why not to play high margin game? More on it in a sec. So what is the conclusion people are arriving at? Oh, single families don't work. Better way to go is to get 100 units at $100 a door and life is great. Where are 3 problems with this argument: 

1. Multi are a lot harder to get.

2. I don't think it is time for them yet

3. Why the heck would I want to make $100 a door * 100 doors if one can make 10k a month from 3 doors?

Single vs multi: ( caveat, I am speaking about my market)

Think of real estate as a watch dial. Singles are on 12 and multi are at 6. Enter 2005, mortgages are loose, demand for singles is through the roof, vacancy rates are up, multi sells at discount. 2010 - wheel flips. Glut of singles they build in 2002-2005, they are dime a dozen. In multi, vacancy rates are 0, they fetch a premium. So why buy multi in 2010 and pay per unit as you would for 2-3 single families? Or why would one buy single families in 2005? 

Traditional VS High Margin

If I work, I like to get compensated for it. 100 dollars a door does not work for me. Nor do returns below 15%.  If this is what the market offers I look for another opportunity. 10k from 3 properties? How? Easy. Think outside of the box everybody else seems to be in. How about providing housing for ex inmates? 500 a bed a month, 2 per room in my area? Take a 4plex in the worst part of town like the one I was looking at. 4 x 4 bedroom units. 16 bdr, 1 for house mom, one for office, say 12 rented. Housing 24 people at $500 a head for 12,000.  You don't like ex inmates? How about sober housing? Do you prefer battered women to ex drinks? How about women shelter? You want me to keep going? If you do, you may have to invest in one of my ventures :) At some point tell me how syndicating mulit's is working for yeah :)

Oh, and to answer your original question - of course buy and hold makes money. Question is if it makes you a lunch money or a substantial amount of money :)

@Bruce Runn 

I started at the different end of town. For obvious reasons. You want cash flow - worst area of town will generate a biggest return. Plus from there I am at, the only way is up :) Although, looking today I shocked myself. The most expansive house listed in N Minneapolis just got reduced to $499K from $524K or so. 6 years ago that much would buy me a city block and a half.  So, of course you won't get hurt on your rentals you have purchased 4-7 years ago. And of course your quality portfolio is as as resilient as it gets. My question is: are you buying now, and what is your strategy for new acquisitions?

@Patrick M.

Tool from HD? Designed for the job?? Why??? What are you, looking for an easy way out or something? You should have used a home remedy of 1/2 snake oil +  2/3 of holly water mixed with 19/143 of vinegar. My granny swears by it :) Glue must be cheap in NC. Next time you have a question like that, start with the pic. I even see patches  of concrete :) Good job on the floors man. 

@Philip Hy

Here is your big picture answer :) It is capitalism man. Ether you work for money or capital works for you. If you want to live off the capital, you need to have it in the 1st place. Question is how are you going to get there.  Everybody is looking for "passive income portfolio" purchased with bank money, managed by professionals. Say you invest in stocks. You contribute x, and in 30 years you got a cool 1,000,000. Fantastic. In about 3,000 years you will become Warren Buffet. That's your 100 or 300 a door. It is a better / faster  way to accumulate wealth then stock market let's say. But unless you build a well run, well capitalized business, you are looking at living from the cash flow once your houses are payed off. Please let me know if you find an easier way :)

@Trevor Burbank

Here are a few reasons I stay away from condos/ town homes / associations

1. HOA. Not only you are paying fees. They can change rules. Not allow rentals for example, or come up with the pet policy or smoking policy or what ever someone things off.

2. Capital calls. Would you like to receive a letter from association stating they have decided to replace siding and you need to contribute $15k?

3. During the crash / correction they often become a desert towns with the few units occupied, no dues means differed maintenance

4. Some HOA's are run well and some are not. Some times you are paying 3x for someone's nephew to clean the snow and 5x for someones brother to paint.

5. It seems like people come to HOA meeting to complain.

Why would you pay money to let other people control your property? But hey, some people think they are a great. Good luck

@Joe Splitrock, @David Moore and others :)

Nothing wrong with rentals. Buy them right, make sure they will be profitable in the downturn and enjoy. Interesting question is how to lock some gains in the market. Here is what I came up with. Say I have a property #1. 2 Bdr in the one of the dicier neighborhoods. Bought years ago and on the books for free. Say it is rented for $900, a bit under market because once I find tenants I like, I don't bother with increases. Say I can get a property #2, 3 Bdr in a hair better neighborhood for $110k. Say it needs 20k in rehab. Say I can have property #2 online for $130k. I can get $1400 in rents from 3bdr.  Now I take property #1, spend 15k on paint and flooring and may be I can get $130k for it, as time has passed and market went up.  Here is what I did. I have sold existing asset for top $$, replaced $900 of rental income with $1400 and went from 0 upside in asset #1 to 15%-30% upside in asset number two. Now if I am lucky I will also end up with some lunch money, but even if transaction ends up cash negative say 5-15k, it is still a good deal. Welcome to the concept of time delayed flip :) Anybody has better ideas?