All Forum Posts by: Heather Johnston

Are you familiar with the Buffalo area?  What they say is especially true up here: location, location, location!  For example, the northtowns are generally nice areas, but if you go too far north, my concern would be lack of tenants (e.g., Pendleton has many new developments going in right now, and there's a big development in the Sweet Home area as well) or the wrong kind of tenants (e.g., Niagara Falls proper is not a nice place to live even though the park is a great place to visit).  Downtown is hit-or-miss (and a miss is a big miss).  I'm not as familiar with the southtowns; they seem to reflect the northtowns in some ways, but they're generally perceived as not being as nice.

I would recommend at least looking at the area via Google's street cam for the turnkey.  Look at the area around the one you're looking to buy.  (Google doesn't update images frequently; I see this as a perk as you can see what the area looked like before the seller made you the offer.)

I like numbers a lot, and I love playing in my spreadsheets, but I offer a word of caution on investing in Buffalo without knowledge of the area or at least eyes on.  Do you have a neighborhood class?  Can you look up the specific property?

How do you put together a team, especially if you're not going to meet them on site?  My expectation for flying in was, in part, to meet and vet an inspector, a potential part of a local team I'm working on putting together.  How do you vet members of your team?  And how is an inspection a waste of money given it's basically a 0.1% one-time cost that acts as a first line of insurance?

I did read what you wrote, and I went through the provided links and went through the full threads.  I commented on the linked threads, including your comments there, so if you "think" I didn't read what you wrote, then you're not reading what I wrote.  :-/

 
The "reluctant vote" comment was because you trash the use of LLCs in the threads you mention yet you use them anyway.

Thank you for the link!  That's the kind of information I was looking for!

He told me that I can do it because I can legally write "Esquire" after my name.  It's not my area of practice, but he figures the paperwork should be simple enough.  Also, I don't think he sets up business entities given he referred me to someone else when the topic came up previously; he specializes in taxes (planning, optimizing, and preparing for), knows what he's good at and likes, and refers out other work.  (For example, I trust that he knows the tax implications of the various business entities, but I wouldn't ask him about the legal protections they offer as that's not in his selected field.)

Are you referring to the Freedom Mentor program with Phil Pustejovsky?  (You can get a free digital copy of his book in exchange for your email via that website.)  The Freedom Mentor group offers a free course called Creative Real Estate Investing and Flipping Houses.  As for the apprenticeship mentioned on the main site, there is a pretty robust Bigger Pockets thread from ten years ago discussing the program.

Quote from @Pam Brown:

Hi Heather.  It's going to take far more "than a few extra thousand dollars" to buy new construction and make any money.
...                                           
Instead, you could get a good local Boots-On-The-Ground team, identify a property that looked to be in "good" move-in condition.  Get a full home inspection including a sewer scope. Then add on a Home Warranty for the big ticket items. That's my 2-cents worth :-) 

I am running numbers, and you're right, a new construction is a fair bit more of an up-front investment than a rehab property.  The properties I'm looking at all require a 25% down payment (likely because it is a negative cash flow with anything less) and the appraisal values are higher (so I'm looking at ~$80k down payment for a new build rather than half that for a rehab), I will be visiting prior to closing and will have an inspection (preferably while I'm on site, and even though it's already "been done" and will be a duplicative cost), and I have a plan to go after the principal early to protect the cash flow later on.  I also have a long-term plan to integrate rehab properties into my portfolio; I recognize the amazing potential for returns there, I'm just not there yet.

I do want to get to the boots-on-the-ground-team level, but I recognize that I'm not there yet.  (In all honesty, I want to be on the ground level, but I'm not in an area where that's feasible, and I'm not in a position to move to where it is.)  If I don't jump soon, I likely won't at all, so I'm taking out as many barriers to entry as I can.  (I'm prone to the "jump or stagnate" issue, and I've been researching for long enough that I'm concerned my brain is starting to consider running numbers in spreadsheets progress in and of itself.)  Once I get started, I'm optimistic that I'll keep going, learning as I trip and figuring out how to do things like find good team members.  I'm still digging through the forums, so if there are any threads in particular you recommend that help me to ask the questions I wouldn't even know that I don't know to ask yet (for example, I would not have thought to ask for a sewer scope before your comment - thanks for that tip!), please share.  :-)  I appreciate the help!

Quote from @Steve K.:

I thought this was going to be an update on the lawsuits. Anyone know what happened with those?

I dug around a bit and found there isn't much of an update (most recently updated article linked below): it seems that the Morris family is still in Portugal and purporting to be victims, some of the lawsuits have been dropped (or dismissed in part - the one I skimmed was partially dismissed because the claim didn't allege all of the elements of the asserted wrongdoings), and some of them seem to still be awaiting for Clayton to return to be able to serve him.

Clayton Morris And The Morris Invest Fraud Accusations
InvestFourMore
(Last Updated on February 17, 2022 by Mark Ferguson):
He still promotes buying out-of-state turnkey rental properties. He still lives in Portugal. He still claims innocence and shows no remorse.

Quote from @Lane Kawaoka:

... house flippers

... property management abuses OOS owners.

While turnkeys are a great starting point ... many accredited investors eventually transition to syndications and private placements where there is aligned interests with the GP but I would caution on working with those who have done at least 1B in assets.

with a demanding engineering job, I didn't want the hassle of managing everything hands-on and especially taking on the risk of BRRRR.

Your decision might depend on your current income and net worth. But... if you're looking to save a bit, maybe consider smaller providers over the big names. BUT if that $5k to $10k isn't a big deal for you, then go for a reputable brand for peace of mind.

Re: flippers - 
My risk tolerance level for messing up a rental for someone depending on me (e.g., something breaks on the tenant and I can't fix it immediately) is pretty low.  I would rather spend an extra few thousand dollars to get the legal guarantee that something will be fine (e.g., new construction warranty) than worry about things going wrong.  (I worry more than I would like as it is.)

Re: PMs abusing OOS investors -
Good to know!  Thank you for the heads-up!

Re: syndications - 
@Jim Pfeifer mentioned them as well, and @Chris Seveney is pointing me towards how to get past the accreditation hurdle.  (Thank you, Chris!)  I'll have to dig more into it.  It's looking more and more inviting each time I see the word.

Re: demanding job and risk - 
Yes!  There's a reason I'm only on for short stints late at night, and I don't want my tenants to feel the brunt of that.  (I likely wouldn't; I'd be more likely to tell my boss I was taking a long lunch and would work extra late to make up for it.  ...  And no, I'm not saying that would be wise for my career.)  And BRRRRs sound phenomenal... but not for me where I'm at right now.

Re: small versus reputable - 
I'm setting pretty aggressive goals, so $5-10k adds up quickly, and I'm very aware of that.  (I also have a habit of keeping a relatively tight rein on my personal spending, so I would notice missing much less.)  However, my risk tolerance given my newness to these waters and other factors demands a bit more capital up front, and I've made peace with that.  Starting with slim margins is better than getting scared off from getting any margins at all.

I also think I'd be a bit less hesitant to go with small providers if I intended to invest nearby.  I don't.  (NYS is not exactly landlord friendly.)  Maybe after I get my feet wet.  For the time being, I don't want to be tempted to worry about the solidity of the deal.

Quote from @Joe S.:

If you are going to be buying a property at full market value, simply find a realtor and make offers on properties that are move-in ready. After you have your property in hand handoff the keys to a property manager that has a good reputation.

Where can I send you the discounted invoice? :-)

I'm really only interested in properties that come with some sort of warranty right now (the new constructions that I've found all have at least a one-year warranty: no maintenance costs for the first year).  This eases a lot of my fears about getting in, effectively lowering my emotional barrier to entry.  Move-in ready doesn't necessarily come with that sort of thing. 

Already having guidance for property managers lowers another barrier to entry for me.  I spent a few weeks dallying on the research of, "How to find a property manager?"  I spent another few weeks looking into how to vet them.  And that's not even counting the weeks I spent just wondering if the property management company that I rent through would be willing to take on an external contract.  (That idea I shot down because I live in a very landlord-hostile area.)  Wrapping that up into the one convenient package of full-service actually allowed me to move forward, and I've also been a lot more diligent because I haven't been fighting invisible walls.

I want to get there, but I'm not there yet.  Right now, I'm not looking for a home run, just looking for a start.  :-)

Thank you!  I hadn't looked into syndications as I thought they were only open to accredited investors (and didn't offer the same tax benefits).  I don't know what passes the muster for "sophistication," so I still may not be eligible yet; still, I'll look into that option!  Thank you for the idea!

Thrusting fantastical terms out there like that - I vote it gets integrated!  I like the alliteration of the trippple-threat:

Cavendish-Hawthorne Regency Pennsylvania Parvenu Properties, LLC
doing business as
Penn Mansions, LLC