All Forum Posts by: George Azita

One last thought! I've went to Columbus Ohio two times in the past year to look at both single-family homes and multi-units.  Members have been claiming that Columbus is a hot market for more than a year and I never saw one property with good numbers. If anyone has a property that is hot I would like to see those numbers and how you came up with them.

Thank you!

Quote from @Adam Craig:

Quote from @George Azita:

Quote from @Adam Craig:

I am relatively new to commercial real estate with 4 buildings under my belt in 3 years. So I am learning as I go and would love you to critique what I am about to say.

In my 8 years of residential single family rentals I had 3 different property managers early on and non of them did a good job, at all. At some point around 2018, my involvement in my real estate business went from part time to nearly full time. I do not have a day job, just another business I own and I split my time up rough 80/20 (real estate/other).

This is when I decided to ditch my PM and self manage (with my wifes help). Since then, I am getting much higher rents, filling units quicker, and tenants are getting work orders resolved faster and for less. Not to mention saving 30-40k a year in fees. My goal is not to self manage much longer since I am approaching 65 doors. I want to bring on a part time employee to work in house as the PM in addition to other tasks. Not only to save money, but to have better control over things unlike when I hired out property management companies and I was just a drop in the bucket.

So far, I have taken this same approach to commercial real estate. I see SO many vacant units in and around my buildings that stay vacant, but we are able to fill our spaces up much quicker. The only thing I can think of is that I work much harder at finding tenants then a PM with dozens and dozens of properties. Know one is going to care about my properties/tenants the same way I do and I understand that. And for me to pay them a hefty fee to do a lesser job does not sit well with me. I feel I can train a part time employee who can nearly work from home to do a better job for less in the near future.

Thoughts on this?

 65 unit ain't nothing to self-manage and if you hire an in-house employee then you have to manage and pay the employee more than you paid a PM. So, what is the difference?

We own many times more than 65 units. They are is several different states and we self-manage every unit. We went many years without a PM and did very well. A few years ago, we hire a PM for our rentals in Las Vegas and we lost a lot of money and the strange thing is we spent more time and had more aggravation dealing with the problems with the PM. It was easier and more-profitable to do our own management.

I find that the problem most self-managers have is they do not have good systems in place, no good set of policies and guidelines to adhere to and no good philosophies. While I find that most landlords hate being landlords and they hate dealing with their tenants with a passion, we actually enjoy dealing with out tenant's complaints and issues because we have policies and guidelines that we follow and we understand that dealing with tenants is exactly the same as every other business has to deal with their client's and customer's complaints and issues like the airlines and restaurants have to deal with the surge in anger and physical abuse, or like employers have to deal with employee issues and lawsuits.

There is nothing better than being 100% hands-on and have 100% control of every penny spent. 

Good to know someone who has scaled and has properties all over the country is self managing :)

I do not feel the in house employee would cost anywhere near as much as a PM company since I can set the salary and not fork over an entire months rent for new leases plus 6-10% of the rent. I can train someone to do things how I want and have much better control. I also plan to outsource more day to day tasks to this employee as he/she learns. 

My wife handles the leasing stuff and I handle the turnover/work order items. My long term vision in real estate is not me answering tenant phone calls and emails about repairs and headaches. I have been doing it for 5+ years and I do enjoy getting to know some tenants. But I would much prefer dealing with high level items as I scale. 

So is my vision of "getting out of the weeds" unrealistic? 

I think everyone has dreams of sitting on a beach drinking Mia Tais or living in a white house with a picket fence without a care in the world. The strange thing is; most of the rich people I've ever met who have far more than enough money to fulfill those dreams never do because there is this strange phenomena where most of the people who become rich do so because they are hard-working people and the second phenomena is that the people who work harder and who earn high incomes constantly have more business tasks on their plate. While it may sound like hard-working people and high-income earners live a stressful life, those things are offset by gratification for their achievements and money is secondary to them.

The above paragraph is to point out that it appears that you want to own real estate only for the money and it appears that you already have a mindset that you don't want to manage your properties and you don't enjoy all facets of the business and you think you can buy properties and have an expectation that you can eventually turn your business over to some strangers who have their own personal agendas and then you will allow those strangers to make decisions you should be on top of and allow them to manage your properties and have ultimate control of your fate.

As for your saying that you can train and hire someone for less than the cost of a PM, I don't believe you can. If you hire even one decent person in today's world you will need to pay that person no less than $40 per hour and at $1600 per week that is still a very low wage and barely enough for a person to rent or buy a decent place to live. Then, you will have to match payroll taxes and pay for worker's comp insurance. You will need to provide someone with a work vehicle, pay for the insurance, gas and maintenance and then you will need to constantly worry about being sued for overtime pay, sexual harassment, retaliation, age or race discrimination and a thousand other possible issues that could result in a civil lawsuit against you, personally. So, since there is 4-1/2 weeks to a month, you will be paying $7,200 per month for wages plus all the above mentioned costs and one employee will cost more than $10,000 per month and that is more than the 6% a PM charges. And... I never paid a PM one month of rent to rent an apartment. I think my PM charged something like $300 for signing the lease plus advertising costs and my advertising cost to rent an apartment on zillow.com is usually $10 to $30 to run an ad for 1 to 3 weeks.

Everyone has different philosophies! Some people invest in real estate for the money and some invest because they enjoy being an entrepreneur and actually enjoy the highs and lows that come with running a business. Everyone has their own personal mindset! I am 72-years old, get up every morning at 5 am to deal with my 20+ employees. My wife and I get 2 to 3 text messages or telephone calls from tenants every day. We've had more than enough money to retire 30 years ago, can never spend all the money we have and we give away more money every year than most people earn. We are 
entrepreneurs and we don't work to earn money. We work because we enjoy doing working. enjoy dealing with tenants, enjoy employing people and we actually enjoy dealing with complaints and even enjoy handling lawsuits when we get sued because there is a sense of self-satisfaction or self-gratification to know that we will get sued, occasionally. We are well-prepared and never ever let a business problem make us get emotional. I've had 21 lawsuits filed against my company since 2015, sleep very well when being sued and I won every lawsuit because my businesses are super organized and I am always prepared in advance with good documentation to beat lawsuits. I actually enjoy putting documents together and sending the documents to attorneys.

Quote from @Adam Craig:

I am relatively new to commercial real estate with 4 buildings under my belt in 3 years. So I am learning as I go and would love you to critique what I am about to say.

In my 8 years of residential single family rentals I had 3 different property managers early on and non of them did a good job, at all. At some point around 2018, my involvement in my real estate business went from part time to nearly full time. I do not have a day job, just another business I own and I split my time up rough 80/20 (real estate/other).

This is when I decided to ditch my PM and self manage (with my wifes help). Since then, I am getting much higher rents, filling units quicker, and tenants are getting work orders resolved faster and for less. Not to mention saving 30-40k a year in fees. My goal is not to self manage much longer since I am approaching 65 doors. I want to bring on a part time employee to work in house as the PM in addition to other tasks. Not only to save money, but to have better control over things unlike when I hired out property management companies and I was just a drop in the bucket.

So far, I have taken this same approach to commercial real estate. I see SO many vacant units in and around my buildings that stay vacant, but we are able to fill our spaces up much quicker. The only thing I can think of is that I work much harder at finding tenants then a PM with dozens and dozens of properties. Know one is going to care about my properties/tenants the same way I do and I understand that. And for me to pay them a hefty fee to do a lesser job does not sit well with me. I feel I can train a part time employee who can nearly work from home to do a better job for less in the near future.

Thoughts on this?

 65 unit ain't nothing to self-manage and if you hire an in-house employee then you have to manage and pay the employee more than you paid a PM. So, what is the difference?

We own many times more than 65 units. They are is several different states and we self-manage every unit. We went many years without a PM and did very well. A few years ago, we hire a PM for our rentals in Las Vegas and we lost a lot of money and the strange thing is we spent more time and had more aggravation dealing with the problems with the PM. It was easier and more-profitable to do our own management.

I find that the problem most self-managers have is they do not have good systems in place, no good set of policies and guidelines to adhere to and no good philosophies. While I find that most landlords hate being landlords and they hate dealing with their tenants with a passion, we actually enjoy dealing with out tenant's complaints and issues because we have policies and guidelines that we follow and we understand that dealing with tenants is exactly the same as every other business has to deal with their client's and customer's complaints and issues like the airlines and restaurants have to deal with the surge in anger and physical abuse, or like employers have to deal with employee issues and lawsuits.

There is nothing better than being 100% hands-on and have 100% control of every penny spent. 

I purchased a 6-unit all 1-bedroom unit property at $291,000 per unit in March 2021 for my son and it is the highest-priced property I ever purchased. The profits are super low compared to the past and there is little room for rent increases, but we figure the property will net about $1.4 million in 10 years. We paid $1.75 million cash, but even if we got a loan we would have put down about $700k and still would have netted about $1 million in 10 years, or $100k per year.

I see two things happening with investors; one is bad and the other is good. The investors who don't do a totally thorough set of number crunching cannot figure out which investments are good and the investors who have super spreadsheets and do extensive calculations are doing well. Their philosophy is that they will buy, hold for 10 years and make a much better return that the stock market, or any other investment.

For those who wrote posts saying they are waiting for the prices to come down. Lots of luck!!! I've been seeing sellers getting more-desperate to sell and actually see prices coming down, but prices will never come down significantly where the profits will be like the old days.

Here is my version of a breakdown for 3877 SW. Broadway. I went with what I think are more-realistic numbers than I did for 1210 Mount Vernon.

What is interesting about this property is I predict you will earn $104,000 in 10 years if the property appreciates 4% annually, but with no appreciation the next chart indicates that you will earn only $26,000 in 10 years and that is IF you can increase rents $40 per year, but if you don't or can't increase rents you will earn $22,000 with no appreciation. I invested in Idaho about 15 or 20 years ago, predicted that properties would increase about 4% every year and they did not. With housing prices so high today I think you are taking a risk if you predict that properties will increase 4% every year and that is taking a huge risk when 4% hardly keeps up with inflation. The problem is; investors are stuck with a bad investment while the tax collector and every other government agency has the god-given right to increase their fees every year far higher than we investors are allowed to increase our rents.

WITHOUT APPRECIATION 

Quote from @Blake Ramsey:

@George Azita @Joshua Janus

@Joshua Janus

https://docs.google.com/spread...

@Joshua JanusHere's a handful of the properties within about 7 miles of me that I was interested in. I recently started organizing them on this spreadsheet.@Joshua Janus@Joshua Janus

Attached, are some images for a breakdown for the first property on your list. I noticed that BP no longer has the ability to enlarge images with you click on them.

I went with very low predictions for this property and much lower than the numbers I use for annual maintenance i.e plumbing, roofing, heating, appliances, yard work, etc and I went with a much lower number for cleaning when a tenant moves and a lower number for the vacancy rate. Personally, I would never look at a property with a rental income of $400 per month since the costs for repairs and cleaning is so expensive it can take several years of rental income to make one repair where collecting $1500 per month can help you to recover in only a few months. I don't look at any properties in any part of the country when the rents are less than $1500 per month and that is why I stay away from the supposed hot markets like in Ohio where college kids in Columbus can rent decent apartments walking distance to the college for $675.

Everyone has their own idea of what a good return on their investment is and maybe I am spoiled and greedy, but my theory is that I prefer to stay from properties when they are not a goldmine and would rather keep my cash on the sideline in a stock trading account so when the market crashes again like it did on March 2020 I can buy stocks with great value for 20 cents on the dollar and if a hot property falls in my lap I can pull the money from my stock trading account and jump on the real estate deal. Otherwise, if I get anxious to buy a property I won't have the cash when either the hot stock or property deal pops up. I did buy a 6-unit for my son in March 2021, but my personal investment capital has been on the sideline and building for about 7 years. But, when I do pull the trigger I will make bank and I won't be stressed out worrying about nickels and dimes.

Analyzing a property consists of no less than a conglomeration of 30 to 50 numbers that need to be entered onto some sort of paper form, spreadsheet, or database that can do the calculations and every calculation can make a significant difference in regards to whether or not a prospective property will be profitable. Leaving out one or more of the calculations makes a significant difference and without a few of the calculations you may end up buying a property that loses money, or you could not buy a property that is a goldmine.

The next serious problem and mistake I see investors doing is they refuse to enter realistic and true numbers in their calculations so their analysis is skewed and not accurate. For example, there is a huge difference between an annual maintenance rate and the cost to clean and put a rental unit together every time a tenant moves. So, for my calculations, I may use something like $1500 per year for repairs like a water heater, furnace, roof, plumbing, exterior painting and maintenance and then I put into my calculations the cost to clean, paint and put a rental unit back together every 5 years when the average tenant moves and that cost is $5,000 to $8,000 depending on the size of the unit, whether it is a house, or an apartment and the size of the yard and number of plants and trees.

The next most critical numbers that have to be considered is the principal pay down when you have a loan, tax depreciation over a number of years, some sort of inflation rate, annual rent increases are very critical and my favorite calculation that makes breaks many deals is property taxes and annual increases. I always stretch my numbers out for 10 years and if my annual return is less than 15% I scrap it.

The next most critical thing investors need is a good business model. If you don't have a business model to follow then you are shooting in the dark. My business model is to double my investment capital every 1 to 2 years, or to earn 50% to 100% on my investment capital every 1 to 2 years. If you don't have this business model then most-likely you will not achieve this goal with the exception of being very lucky.

While shooting for a return of 50% to 100% every year sounds unrealistic it is actually quite simple. Suppose, you have $50,000 to invest. All you need to look for is a property you can purchase with $50,000 down and then, using simple math, you only need to get that property for $25,000 less that what it is worth and you just earned $25,000, or you earned a return of 50% on your investment capital the day you close escrow, or if you purchase the property for $25,000 less than its value, increase the value by $25,000 by doing a little cosmetic work and increase the rent you could easily earn 100% or 150% on your money in less than 1 years. Again, if you don't use such a business model you will not achieve that goal.

So, to answer your questions in regards to why you are crunching numbers and they never make sense, I would love to see the numbers you have been crunching and then I will present a spreadsheet that does all the calculations I mentioned and maybe some BP members have some good calculations to add to the spreadsheet.

Maybe, you should post a full set of the  numbers you crunched for properties so we can see how you came to your conclusions and maybe we compare and help.

I would like to see you post all your numbers to see if the property will make you a profit vs. just asking for opinions with no hard numbers. To get you started, I am posting some charts that show how we analyze properties and maybe you can post your numbers and I will put them in my software. As stated in another post, the charts below were for an investor who claimed he would earn $500 cashflow on the property and my calculations show he will earn only $90 per month. There is always a huge difference between what people think based on mis-information, failure to include all the necessary calculations and that truth really hurts a few months after you are stuck with a long-term commitment. 

Quote from @Jonathan Greene:

@George Azita you just haven't found the right one. Plenty of us don't need the money, we like to help investors and regular buyers and sellers move to the next step. Not all real estate agents are after commissions. Many of us had full careers and like to help other agents grow. I run a team of 30 agents and my job is to help them all reach their goals. I do think realtors in general are bad, most are after the money, but I wouldn't down the whole group because of the majority.

 I think there are three places in my post that say that not all real estate brokers are bad.

Throughout my entire real estate investment career of about 60 years, I met only one broker who watched my back and actually spend maybe 100+ hours going over all the sellers books dating back three years. We had a 20-unit apartment building in escrow and my broker called me at 3 in the morning to tell me to back out of the deal because he was going over the books and the seller had rented to about 6 tenants with no security deposits and that raised a red flag. My broker was willing to give up his commission and was not sure I would ever find another deal for him and he is the only broker I ever met who seriously cared about his clients and if his clients could not make bank on a purchase he told me to keep looking. As stated in my posts, brokers like him are super rare and finding a broker who will tell a buyer not to buy a property when the buyer shows interest is unheard of.

The goal for most of my posts is to point out the fallacies of investing and not to rag on any professionals. Otherwise, if everyone tells everyone that every and any broker is equal then a high percent of investors will be relying on the wrong people for sound advice. 

I have a lot of respect for agents and brokers and they possess a lot ok knowledge and expertise that is critical to ensure that transactions are processed properly. I always recommend that buyers use brokers for representation vs. being cheap and making grave mistakes.

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