All Forum Posts by: Jake Wiley

@Jason Orr. You got some great advice from the group here, @John Casmon, @Chris Levarek,@Colton Hahn, @Evan Polaski, @Brock Mogensen, @Bryan Hancock.   There's not really much to add along those lines.    

However, I start with the question, what is it that you think you'd get out of a syndication or being a sponsor?    Assuming, for most it's about bigger deals, more economic potential, etc.    If that's the case, I'd encourage you to dive into the economics vs. the obligations of being a sponsor to make sure that realities align with your vision.  There are a lot of amazing syndicators on this site that could chime in too.     For many, I think the answer might be surprising.    

I agree with the above comments about networking. Charlotte is a booming area, so things are moving fast. I just sold two SFR rentals up there due to the current market conditions.

Something to keep in mind is that there are hold period expectations with most deals that are syndicated thus that 5-7 year clock is always coming up for someone out there. As mentioned above, your job is to be in a position to be a known quantity when those clocks start expiring.    Plugin, be consistent, speak up.   When you first jump in, the universe seems very large, but you'll find the world of real players; the guys/gals that continue to show us is tiny.    

@Daniel Kil There are some great reports out there that focus on the positively trending markets and are free.    

PwC has emerging trends in Real Estate reports.   

CBRE - has Market Outlook reports.  

There are many others, too if those don't provide the level of detail you require. 

With Cap rates the way they are now, in all of the conversations I've had with buyers, finding a deal that checks all of the boxes from an underwriting perspective is very difficult.  Thus broker and in-market relationships are paying a bigger role than ever before in finding great opportunities and deals.   

So with that said, it might mean that you need to marry the research on the markets that could be good opportunities for you with markets you can be in-market to build those critical relationships, which may further mean you are already in the right market; to focus on that aspect!   

Alternatively, if you've got equity or access to capital to put to work, I'd highlight a couple key markets you believe in and the data backs up, then keep leveraging this and other groups to find a few relationships with operators in these markets to partner up with.   

I think you've got most of the salient points covered, understand the laws, use a legal lease in your state, then follow all of the rules and timelines as per the lease to ensure it's valid.    

The two points I'd add are about 1.  Stories. and 2. Self Managing with a property manager.   

1) Stories - When a tenant moves in with a story about how good the relationship is going to be for whatever reason you might be looking at a professional tenant that knows all the rules and how to work the system or someone that is used to telling stories.   If you have a contractor (meaning they've got the actual licenses etc for their trade)  at this moment in time that is not extremely busy and doing well enough that they would need to consider a trade (work for rent) type of relationship, I'd be wary that you have a storyteller on your hands.      Understand, this might not be the case, we don't know the full "story" here, but word of advice is any landlord/tenant relationship that starts with a story, why they are moving, just started a new gig on their own, they were in a bad relationship/partnership and are starting over, they can help you in some way, I've found the stories never stop.   Rent's late because...., 5 people moved in with me because they are helping me start this new business, I am moving out suddenly because of my health (don't bother trying to enforce the lease because it's your fault).    My great tenants don't have any stories, they have the income and like the property.   

2) Self-managing with a property manager.   Unfortunately when you have one to a few houses and hire a property manager you are more than likely going to be pretty involved.   Yes, they may find you a new tenant, this is where they typically earn a good portion of their money and sometimes on renewals too.  However, you will likely need to push them to make sure they are pushing through annual rent increases because it's super easy to get a tenant to sign a renewal for the same terms as last year, but can create some work when you are asking for even nuisance increases and the return for their time on the effort isn't so aligned with your interest.    Then on an ongoing basis if there are any issues that come up they are going to call you and bring you into the solving of the problem.    For small stuff, if they've got a handyman on staff that can knock it out, no problem, but I've found for anything that involves a licensed trade you are going to get called in, and likely should get involved.      For bigger projects, HVAC, Roofing, Hot water heaters, make sure you know what you are getting and check out the contractors.  I've spent big dollars assuming the PM had it covered and would do a great job, only to chase the fix for years down the road because of less than stellar performance by the contractor they used at that time.    

The moral here is that even if you have a property manager, expect to be involved.   With your first property, you should be anyhow so you learn as you go, ask questions, find out who they are using and check references/review.    Good luck and let us know how things develop.   

@Ryan Kenneth CapEx is somewhat interesting in that it is driven by tax definitions and policies at the beginning of time. In your case, if you are doing a complete repaint and replacing floors that would meet the definition, but if you are just making spot fixes it likely wouldn't. However, you could also have a policy that says that you'll expense items under a certain dollar threshold so that you are not capitalizing lots of little things that then need to be separately tracked and depreciated because it's not simple and obviously compounds over time. You'd typically see CapEx being applied when a unit is not just being turned over but updated and part of a programmatic upgrade program.

The how is important for sure, but the most important thing is to get out there and make the offer.   When making offers it's almost always going to be more of a volume game.  My advice is don't overthink it make it happen, and keep moving.   

From a how perspective, if you've spoken with them and you think they'd be receptive get them a written offer as quickly as possible to show you are serious.   Time kills all deals.   I've taken unsolicited offers myself several times, but been approached countless times.   The people that broke through the noise for me, brought a legit offer, meaning the numbers were in alignment with the market and they backed it up with a written offer the same day.     

Agreed with the comment on the tax appraisal site numbers, they aren't always in line with market reality.   I'd look on a Redfin or Zillow to get info on recent sales in the area, price per square foot, etc to make sure you are in alignment.   If you make an offer that is offensive directly to a property owner you are done.    

Good luck.   

The world starts to seem very small when you jump into a group and network of real estate investors, and everyone has their own style and ideas of what has or could lead to their success, however the world is much smaller when it comes to those that are doing this full time and have had rapid growth.   I've had the opportunity to talk with quite a few successful investors that have eclipsed the $100m transaction mark but would love to hear your thoughts on what you'll find in common with all of these investors.   

A couple of interesting trends

Uhaul releases migration trends based on their one-way truck rentals that is pretty accurate. 

PwC - Releases an emerging trends in Real Estate report every year that is really strong.   

Believe it or not, Airport infrastructure spending is a leading indicator of market growth.   

 The past year and a half have been crazy here in the Charleston area.   There have been a lot of relocations from other even higher-priced areas in the Northeast that have put a lot of pressure on the housing prices and inventory.   

Like everyone else pointed out, there are a lot of restrictions and regulations on STR all across the large county that is Charleston. The bad news is that finding something STR eligible is not automatic and in many cases you'd have to apply for a permit after you bought, adding a layer of risk, however, you can call ahead of time and understand if permits are available and the property qualifies, so it's not a big gamble.

On the flip side, the restrictions are a benefit in that it creates scarcity in the STR market, so if you have one it's really good for you.

It all comes down to the number crunching, as you are competing to buy with some seemingly ridiculous money at times, but persistence and patience pays off. We looked all the way across the country to 1031 into an STR and ended up finding the best deal right down the road in Kiawah because we were the first in the door when it fell out of contract for some simple issues that scared off someone looking for a move-in ready home.

I agree with Evan - we'd need a little clarity on what's driving the opex.   However, one other point that I think is worth lobbing in there is that if the 58% is supported by actual/historical data and it's not readily curable by the value add strategy then it could be a warning flag that you will be chasing issues with this property in perpetuity.