All Forum Posts by: Erik Hitzelberger

@James Wright  KRS 324 forbids Property Management for compensation by unlicensed people unless you meet one of the exceptions detailed in KRS 324.030.  (In my very non-legal opinion, you won't meet them).  

Whete do I sign up?  Seriously, this is a great opportunity for someone. I hope you get some takers. 

@Clay Smith gave you some excellent tasks to accomplish. Much of REI is exactly that, developing and executing the right plan. Before you begin though, I'd challenge you to think about 1) Why are you doing this? and 2) What are your goals? If the answers are anything along the lines of 1) it's easy or fun and 2) to make lots of money, my advice is to stay in school, get a job and forget about REI.

Real estate is one of the easiest and best ways to achieve financial security and wealth however, it is not easy.  There will be bad days.  You may even lose money on one or more deals.  You will likely want to quit.  Many people do just that.  The only way to persevere is to focus on your Why and on your Goals.  If these are sound, you'll look forward to getting up every day, you'll work when others play, you'll power through tough times and ultimately, you will achieve your goals.

When making your goals, be very specific.  For example, "I want $10,000 per month of passive income generated by 10 or fewer single family houses by the time I am 35."  A goal like this will help you stay focused.  It helps generate tasks such as learning where and how to buy houses that generate more than $1000 per month.  More importantly, it helps keep you on track.  If this is your goal, you shouldn't be looking at multi-family or storage units or tax liens or cheap houses or any of the other multitude of shiny objects that will come your way.  Stay focused on the goal and the results will come. 

Good luck!

Amanda,

Your goal of $10,000/month in passive income is very achievable.  As you start to build your portfolio, consider the risks (controlled and uncontrolled factors) that will cause variances in achieving this goal.  You really want $10,000 per month every month not $12k, 9k, 10K, 8K, 10K....    

The most important factors you can control include 1) whether the property cash-flows, 2) how you finance the purchase, 3) the type of property (SF vs MF), 4) the type of tenant and 5) whether you accept deferred maintenance, 6) the your ability to offer (or hire someone who offers) world-class property management service to the tenants (and you as the owner).

Everyone spends a lot of time on the first 2 items and possibly number 3, but few think through the last 3 well enough.  This is a long-term investment as such we must think about years 10-30 as much as we think about year 1.  If one invests in a market with a declining population, one must expect minimal rent and value appreciation if not depreciation over time.  If one invests in a 'hot' market with proven wild swings in growth/decline, one must expect wide variance in their month-to-month performance over the years.  Neither of these are risks you should accept for a long-term buy-and-hold investment.  The securities market offers plenty of opportunities for this type of investing. 

Landlord laws are what they are.  If you do this long enough and have enough homes, you will have an eviction.  If it takes 6 weeks rather than 2, that certainly affects your vacancy rate.  However, minimizing turnovers will have a much bigger impact.  Providing great homes and great service to great people is the best way to get consistent returns. If tenants are proud to live in your house and you are responsive when things happen, they will not want to leave voluntarily or otherwise.  This will not only make your returns more consistent, but also more profitable.

I wish you the best of luck as you get started!

Lee,  KREIA meets this Thursday at Woodhave Country Club.  It's our annual holiday party.  You (and your wife) should definitely attend.  The meetings are always a great place to network and learn, but this one is predominately about socializing and getting to know other investors. 

As far as attorneys, I recommend you speak with Harry Borders (Borders and Borders), Brad Lammi (Henry Schildnecht Law), or Michelle Rawn (Rawn Law Office).  All three are members of KREIA and have been working with investors for quite some time.     

@Steve Milford  I like the line, "anyone can get lucky once or twice but this industry takes tenacity to succeed."  No one is more of a danger to himself/herself than the person who's had tremendous success on the first deal or so.  If not careful, that person will (very mistakenly) believe this business is easy and he/she is untouchable.

@JD Martin  I agree that it would be foolish to assist competitors in houses you are interested in.  But what about when you see a posting and say "I'd never buy that house because.."  If the reason has nothing to do with money and more to do with the quality of the neighborhood or the fact the city just approved a plan to build a new highway in the backyard or ...  would you ever share your knowledge on the post?

@Jay Hinrichs I completely agree with you that new investors need to hire an agent or mentor to show them the ropes.  The concept (often promoted on this very site) that you should never pay for expertise is ludicrous to me.  The mistakes you detailed at the auction show just how expensive DIY can be.  

BP provides a platform for investors to share knowledge and to conduct deals.  Many (especially newer) investors often ask for help in evaluating deals.  My question is do you ever provide answers to the unasked questions?  Specifically, do you comment on posted deals that are not deals because of information that may not be obvious to the buyer?  Should we do so or is due diligence entirely up to the Buyer?  Here's a couple of examples..

1) The ARV and/or provided comps are significantly incorrect.

2) The property has a stigma that is publicly known, but isn't advertised.  (I recently saw a house posted in a neighborhood that had 5 murders in the last 6 months.  The Buyer had no idea how tough the area was). 

3) The property has non-conforming features that a buyer may not be aware of.  An example would be one or more "bedrooms" in a basement that could not be legally classified as bedrooms at resale. 

Everyone has different goals, rehab costs, standards for livability,etc.  So, I see no reason to get involved at that level.  But, are we obligated to help others properly evaluate risk or are we obligated to not interfere?   

Hi Eric,

I also recommend you get involved in KREIA.  It's a great place to meet people and network.  There are a lot of investors who have been managing properties for decades that you can learn from.  

Regards,

Erik

Jeremy, 

Welcome to BP!  If you are looking to purchase houses and rent them via Airbnb or some other service, you can do it in any of the markets you mentioned.  Gatlinburg and Asheville are going to be better destination markets for traditional vacation rentals though.  Make sure you understand your management costs though.  The rate for short-term rentals is much higher than long-term due to increased marketing and turnover activity.

Good luck!

Erik