All Forum Posts by: Account Closed

@Brad L. all good points that I agree with. Never really something I worried about either. I'm just curious, now, what the community here (being a bunch of RE investors) thinks about our oh so opportunistic nature. 

Then again, the millionaires on here are nothing compared the people who really have money. I'm sure they've forgotten the critics completely. 

@Doug Pintarch absolutely. 

What if you encounter the elderly seller who is seemingly competent and about their wits and says "I don't want to talk to a realtor, or an attorney, or anyone. I just want to sell you the damn property and here's my price!" Then what is a buyer to do?

@Todd Rasmussen thanks for the input there. Elderly abuse is real. A normal transaction in which a mutually agreed upon outcome is completely legitimate as well. When it happens to include an elderly person, then the matter of question is was there abuse?

What if I had encountered this seller, he appeared completely competent and about his wits, and he wanted to sell this property to me.. but didn't want to consult with an attorney, or a realtor, or a family member before proceeding? Should I have declined the deal under those circumstances? Or does the standard "consult you advisors" clause in the offer letter suffice? 

@Jay Hinrichs

Definitely not on the hook. The matter that comes into question (because I don't see any illegal or unethical practice here) is greed. As we strive to & finally reach the point where we make a lot of money the matter of "it's more than you really need though" becomes a frequent sentiment of others. Whether it's from random people online, or people that you actually care about. 

It's something I'm learning to deal with as relatively young, and growing business owner. Especially one who relies on using his voice to advocate for his business. 

@Doug Pintarch and that is the interesting question here. Should the detractors be offered the same opportunity... would they decline? Perhaps counter offer a higher amount? I have a hard time believing they would handle the situation as righteously as they would expect others to. 

@Jeff D. A 2% ROI offered by a provider that then calls you a tire kicker? That particular property provider sounds like a joke to me.

We may be comparing apples to oranges here because I tend to like the C+/B- asset class... but I'm looking for a 10 cap in the midwest and southern markets. I have taken a peek at buffalo a few years back and I would imagine something similar is attainable there. Maybe a 7-8 cap if you're looking for a nicer, solid B asset class. 

Apparently, I'm guilty of elderly abuse for getting this great deal. 

I recently posted on my real estate investing IG page about a 3-plex that I was lucky to purchase in late 2018 for $25k, with $2100 rents. It didn't really need improvements. This is one of many deals that I've purchased at less than 50% of market value. Pre-covid, I could've sold it for 125k-135k within my private network of buyers. Mannnnnnn, did I get some social media hate lol. 

Here's the story: The seller was in his 80's, and contacted me from a direct mail letter that I had sent him. He had asked for $25k, citing that another investor had offered him $20k but would no longer return his calls. After discussing the condition of the property, I quickly accepted his offer contingent upon my property manager walking the building. The seller seemed very about his wits- age did not seem to slow him. Nonetheless, the property was in a trust. His son was the trustee, and handled all communication regarding the transaction thereafter. My offer letter was reviewed by an attorney of the seller's trustee's choosing. They had accepted and I closed under the conditions described in the offer. 

Honestly, I saw a great deal... but the comps in this area ranged from $500-$35k, with a duplex next door having sold for $3,200. There was an environmental crisis in the area that was being remedied by the EPA, which I researched thoroughly and was willing to bet would be resolved. I knew rental demand in the area was strong and I could find reliable tenants despite of the low values and challenges the area was facing. 

So did I take advantage of this 80 year old man?

Most of my following was pumped to hear about this deal. Naturally, there were some ignorant comments from those with no understanding of the situation. But one commenter went as far as to suggest that I should have had the seller quit claim the property from the trust to another entity, pay more for the property, and have the other entity deposit funds exceeding the basis price into a term life policy as a loophole method to not compromise the seller's medicare benefits. He also went on to insult, and said he will be contacting the local DA to report me for elderly abuse. Ha. 

Look, there's nothing even slightly illegal or fraudulent about the way this transaction was conducted. 

I don't think it's unethical either. Do you? 

What about every other real estate deal purchased under market? Is it wrong for us, as investors, to be opportunistic when presented with a discounted property? 

@Taylor L. the overexposed multifamily assets will suffer as they always have. And with any asset there is risk...

But the fed has explicitly said they're willing to print until their fingers bleed to put money in peoples hands lol. So if you're housing the working class, I am willing to bet on your portfolio unless the investor is highly imprudent.

@Jeff D. well. Were you dragging your feet? Lol. There are always good deals. I'm surprised you can't find higher cash flow in Buffalo than in Texas/Florida

@Jordan Meyer This isn't necessarily directed at you, but the topic. Which is an interesting one! 

TLDR: I've seen a C class rust belt market appreciate more from 2018 to 2020 than any city here in California has.

Let me build up to this.

On population growth: I hate statistics sometimes. The methodology used to gather the data can be unclear, and peoples' application of them is often, for lack of better words, garbage. A county with a 1.2% decade over decade population decline overall does not tell you anything about the neighborhood by neighborhood trends.Growth (either in property value, or market rents) occurs when demand exceeds supply. You're probably saying duh. Well, a market with a lot of population growth with a lot of new housing starts is likely to experience the same demand growth as a market with less population growth and proportionally fewer housing starts. 

Here's where it gets interesting.

Let's say you have a midwestern market with high rental demand, but low property value and low purchase demand- characteristics of a performing affordable housing play for OOS investors. Rental demand may grow due to some event, but property values are too low for builders to justify new construction to add to the supply because of the relatively fixed nature of construction costs. 

Enter the huge and relatively new popularization of out of state investing. Because cap rates in a viable albeit undiscovered market with high rental demand (my experience is with an Indiana market just outside of Chicago) are so much higher than the market expects, as soon as the INVESTORS will bid the market up until the assets reach a cap rate where as many investors are selling as they are buying. Supply will NOT increase to ease the demand surge until property values begin to approach their replacement costs. 

The result? The right cheap market can become a haven for appreciation. 

I bought a 5plex in said Indiana market for 77k in January of 2018. I did nothing to it and flipped it to an investor for 125k in April 2018- it appraised for 128k. The investor reached back out to us to sell it in November of 2019 so that we could help him sell it. We sold it for 255k (at a 10 cap) in December of 2019 and it appraised for 255k.

This is NOT the case for most of these cheap markets. But the savvy investor who understands how to assess undervaluation and path of progress and hedge their risk with high cash flow can make monstrous short term appreciation gains if they pick well. I'm sure I'm not the only active investor in "cheap" markets who has experienced this, and I've actually experienced this in more than one market I operate in.