All Forum Posts by: Dori Arazi

So I’m exploring strategies on how to identify leads. I’ve started playing around with listsource. I’ve put down the cities I’m looking for, narrows the criteria (obviously not enough), and ended up with a report that was quoted at $1.6mil. Heh, I’m obviously doing something wrong. Can anyone help me with some pointers on criteria?

I'm finding some conflicting information about this. At what size do I (or the bank) start evaluating an RE deal by generated cash flow? 

Is it the moment the property is considered multi-family commercial (even if its 6 units), or only on the larger 50+ units scale? 

I've been wanting to get deeper into REI for many years, and I have finally lined up enough equity and cash to where I'm comfortable taking the dive. While I have some sensibilities already in place from managing a property I won, I've been reading a ton about REI, reading many of the posts here and listing to the podcasts, honing my big picture understanding of the industry.

Some “rule of thumb” figures keep coming up. “2% rent to value”, “15-20% cap rate” …

I've been scouring the field nationally (calling brokers, meeting with agents, looking on MLS) and these figures seem close to sci-fi. I'd be mostly lucky to find half of that. And when I do, I get outbid at far beyond asking (which I'd be open to do if I were buying a primary, but seriously eats into the already small margins from an investment standpoint)

I’m from California, and I know the market is in a major upswing here, do you guys feel this is the case nationally? I’ve mostly focused looking in Tennessee, Oklahoma, Texas and Florida. I’m trying to keep away from the rust belt.

The last thing I want to do is start a portfolio at the peak of a market. I have a full time job so I have limited hours to develop and support a fully fleshed out marketing campaign. Should I ease up and wait for the markets to cycle down and get a stronger start position? 

 It’s not as rough as it used to be. But still has a bit of a way to go. 

@Bjorn Ahlblad, thanks. I’m starting to reach the same conclusion. Go with what’s comfortable and with where you can find the good deals. Move along with your comfort level and with your intuition as it gets honed. 

Appreciate the insight. 

@Ali Boone, I’m not buying in Nashville city itself. More around Antioch and Manchester (coffee county). The “under $200k” market is still showing positive cash flow. Though in that range properties are locking in offers in 24-72 hours. 

@Joel Owens, are all these properties nation wide? If what you're referring to as quality being quality neighborhoods/locations. I am not fooling myself. I'm pretty sober about the locations I'm targeting. Though one must start somewhere. And I can only start with what I have ;)

Risking letting my newbie colors show, Dollar General? Title Max? I did a search and not sure how to apply what I found. 

@Joel Owens, thanks!

I can be more specific about my scenario. First off, I am not looking to re-invest in California, from what I'm seeing, I personally feel that that at this point there is more to lose here than there is to gain (not that there is no gain to be had). I am also not looking to share ownership unless I am pushed into a time-crunch corner which I really hope I can avoid.

The earlier figures you mentioned are roughly what I'm going to be dealing with. Something around the $400k (depending on the sale). I have no ego attached to this, it's purely a numbers game. So I don't apply any emotional aspects to my "scale in the market". 

As for setting up the 1031. I am not even planning on putting the house on the market before I've identified my target purchase market, established the relationship with a potential management team, identified the agent I wan to work with to find the property and I am also starting to speak with potential financiers. I am currently identified 2 markets and am working on building teams there. 

My main concern is the "financial clout". I don't have 1 million liquid or 3 mil net worth. If this is a fools errand I'd rather not waste the energy. I can try to figure out a different method of lining up out-of-state purchases within the allocated 180 days. This property is currently generating great cash flow in comparison to my out of pocket cost for get into it. Though considering the overall equity it has its a terrible investment. I'm trying to find a way to leverage the full equity in that property within a market that has more potential, before the market corrects and I loose the equity leverage. 

@Dave Foster, I've considered that option as well. My worry is that monthly vacancy fees on a $1.5-1.8m SFH can be $6-8K. My portfolio is not robust enough to soak that. I'm looking for a way to 1031 around $400k in a more diversified manner (unless I misunderstood your suggestion). Even though commercial is currently outside my wheelhouse, it seems like the safest way to go considering the 1031 timelines. My cash-in-hand investments can still be SFH.

Thanks @Dave Foster, that's very helpful. Definitely provides some clarity.

@Amit M. Those are very good points. Another thing to add to the equation is opportunity and leverage. I'll give you an example. I'm currently sitting on a property that is over 50% equity at this point ( in a northern suburb or San Diego). Projections show this area will likely  be experiencing a downward correction or at least a long sideways period. IF I want to 1031 exchange this property  I need to first identify the target real estate. It will be a small nightmare to try to break that down to multiple targets in an emerging market out of state. It might be more straight forward to just do a 1:1 on a commercial property. 

I'm personally a big fan of the SFH model, its financially simpler. Though the question is, how to I leverage the equity in that model. If I go 1:1 I'd have to go into the luxury home market which does not tend to show a good returns, is susceptible to market swings and will put all my eggs in one basket on a property that can floor me if its vacant for a short period of time. Would have been simper in a buyers market. I could easily diversify with a 1031 on other SFH.

@Chris Mason, does this mean that there may be an issue applying 1031 exchange to a SFR that used to be a primary? Is it no longer "like kind"?