All Forum Posts by: James DeRoest

I don't mean this to sound rude, genuinely don't, but what do you expect?

There are so many people, gurus, websites (including this one), expounding the fact that real estate is easy money. Buy for $x, hold and flip and sell for $2x.

We had one a couple of years ago, a 2 house lot for $19k. We bid $23k (it needed work), and it sold immediately for $23.5k. That guy instantly without doing anything with it put it back on the market for $80k. He must have been laughing that day he stitched us up with his realtor.

Two years later he's still stuck with it, last I saw, still couldn't even shift for $42k.

Should be part of public records.

How do you mean? If it's anything like my county (and the surrounding ones), just go to the local property appraiser website, key in the address, and it's the first bit of information they give you.

Property appraiser online will tell you the value of the land. Should be broken down as Land and Improvements.

Umm, no. It's not actually as nice as that. I have the same problem with a couple of tenants. They actually broke the bottom of the first toilet off. Spoke to a PM friend of mine, who had had similar experiences. We do not know if this is true, feel free to disagree:

Essentially, really fat people have a lot of difficulty passing waste when sitting on the toilet. Because of their size, their gut isn't as 'streamlined' as say a normal weighted person.

And because the gut isn't streamlined, they have to 'manipulate' the waste through themselves.

And this involves them rocking around on the toilet, trying to push the waste down a largely compromised bowel. So they rock back and forth on the seat, eventually loosening the bolts (or in our case, breaking the toilet off the bolts).

And it's exactly that that is not being drummed into new investors (and many seasoned investors).

There are too many gurus out there preaching to noobs that this is easy money, run the numbers and you can't lose, leverage leverage leverage, never use your own money*, debt is good because it's in an asset and not a car.

But none of it revolves around the real world issues of actually being a landlord and what it entails.

And it doesn't matter how good your cash reserves are when the market turns (which it will one day) if you are massively leveraged, which you will be. Cash will be eaten in a heart beat.

* I especially despise the mantra "never use your own money".

The disclosure is worthless. Wouldn't even waste your time with it.

If you are seriously interested in the property get each unit tested and make an informed decision from there.

The problem is, and you and so many others fail to talk about this is - tenants.

These houses do not come with guarantees about income. If that income should drop, eg tenant decides not to pay, that mortgage payment is coming out of your pocket.

People sniff at the idea of say 3 properties in a portfolio becoming empty at once, but if you get a trashed house (or two), then it's incredibly easy to have a house down for a month or three. And the double whammy is getting the house ready again as that's more $$$.

And that's when you are now forced to underwrite the payments yourself.

I've seen this happen to landlords.

I remember a several years ago, we had 5 units rented, and whilst I was away working for 3 months the wife evicted every single tenant for non payment (or they just did a runner). Dont ask me why, they just stopped paying for different reasons. We had one hell of a September/October getting everything rented again! But as they are all paid for assets it didn't hurt us.

So these apocalypse moments can and do happen.

In my opinion, and this is a personal opinion, no one has learned any lessons from the Noughties (2000-2009).

As the economy is struggling back, we seem to be slipping back into debt again, and it didn't play out very well last time. It's like no one has learned anything. Full steam ahead to leveraging again!

And it's only a matter of time before the underwriters start weakening their stances about lending. That's inevitable.

The amatuer cash investors will be driven out sooner than later. Being a landlord is more than owning a house and unsavvy investors are just prey to contractors. You watch people flee the business as your investment home is destroyed by a tenant.

I'm already seeing cash investors that came in with us, selling up, and buying a beach condo "to keep the wife happy". Never underestimate the power of a wife to change someone's investment plans. 

Yes. 

We've done a few owner finance deals, but they are all 4 year mortgages where 100% is paid off (apart from one). In the short term we are making no money on them. But after 4 years, BOOM, full cash flow and a paid off asset. I'm free of managing mortgage payments, I'm free of ensuring that it stays fully rented to make sure I'm not having to pay the mortgage myself, all that hassle gone.