All Forum Posts by: John Nachtigall

@Matthew Olszak

I think we are just going to have to agree to disagree on this one.   Way before Zillow, realtors had to give reality checks to sellers and buyers about price.   Zillow has made your life harder, but unrealistic expectations did not begin nor do they end with Zestimates.   Sellers were overestimating, and buyers underestimating, prices well before "online" was a thing.   So now they can add a sentence at the end that says "and I know I am right because this black box process on the internet called Zestimate said I was"   

And, it can not make your life harder on both sides at the same time on the same house.   It helps you when a seller is unrealistic and Zillow says they are wrong.   Or when buyers think they got a screaming deal (although they didnt).   So it cant be judged as always making your life harder, only 1/2 the time at most.  

I think you provide the best argument for keeping it, however.   The buying public does only buy a house once every 6 years.   So their estimation of housing prices would be off by well more than 20%.   If anything this is a service to make sure people stay grounded in some kind of data based reality.   Otherwise they are estimating based on zero data.

In the end, I dont think we should take away a useful service because a small minority of people think that everything published on the internet is true.   Think about how dangerous that precedent would be.   Anything that could be misinterpreted or misunderstood has to be removed.  

@Mike Cumbie

+/- 20% on an opinon is not bad at all.   People are not buying based on this number.   It is just a guestimate.

Plus you are assuming that formal appraisals have a better accuracy.   2008 mortgage crisis anyone?

http://www.slate.com/articles/business/moneybox/20...

Accuracy (and precision for that matter) is a subjective term.  If I am shooting a rocket to the moon and miss my landing spot by several hundred miles, but hit the moon, then that may be accurate enough.    If I miss a basket by 2 inches that is not accurate enough.

So in this case, what is your accuracy bar, if not +/- 20%.   What is the allowed accuracy before they could publish? 

How could any real estate deal be 20% off as a result of a Zestimate?   If they buy 20% below market then bully for them.   If you try to buy 20% above market then the lender is going to balk as soon as they see the actual appraisal.   And if you are paying cash for a house and spending $100k+ based on an internet page then you deserve what you get.    There is no way this can cause actual harm.   I would never sell my house based on a Zestimate and no one else should either.   That does not make it useless.  

You could make a Mestimate (tm) and if it turns out to be more accurate than Zillow I would say you have a new business.   But that is the point, it is an estimate, it is not a legal appraisal.   It is just an opinion.   And like all opinions it can be ignored or considered by each individual as they see fit. You ignore it, because you dont think it is accurate enough.   See how easy that was, no lawsuit required.   There is no harm here to sue for.   You might as well sue people who call your house color ugly on Facebook.   It is just an opinion.

PS.   I would drop the tulip part of the Mestimate because when you divide a number by 0 it goes to infinity.   So anyone with no tulips in the yard would have an infinite house price.   Just a tip.

@Matthew Olszak   

1.  No Zestimate can slaughter a deal.   It is an estimate, you can always counter with an appraisal.   It was never and has never been presented as the final word on values.

2. Accuracy is in the eye of the beholder.   Per Zillow they are within 5% of the selling price 50% of the time and 20% of the final selling price 86% of the time.    As an engineer I consider that pretty good accuracy for a method that has to work across the whole of the USA.  What do you consider acceptable accuracy?   Because formal appraisals are not 100% accurate to selling price.   So your bar cant be 100%.   How close do they have to be?   Or is your real point that only brokers have the keys to the information?

For my home it is currently 100% accurate because I live in a townhome with 50+ identical units around me that sell 1-3 a month.   So why should I be denied the information because you dont like it?

3.   It is not useless, it is data that you don't like.   Plenty of people use it, as shown by your 1st point where you claim it "slaughters" deals.   It is also no more negligent than me saying "I dont think that house is worth more than $200,000".   I am entitled to my opinion, regardless of my reasons.   Its a simple 1st starting point.   Driving around, asking How much do you think that house is worth?   

4.  I agree, it is not the proper was to appraise a house, hence they don't call it an appraisal

Your argument boils down to sour grapes.   You want to control the information and you can't.   It is better to have more information than less.   And in this case the information is within 5% almost half the time and within 20% the rest.   Nothing wrong with that.  

I think you are missing the point. Before Zillow you had 0 information. Even if they are off by 20-30% in rural area, you are providing better information than was available before. Not that long ago you could only get this information from a broker with MLS access and some time to evaluate comps.

Going from 0 information to information that is 5-20% off is by far a good.   Just the fact she cares what is written there shows how powerful and useful the information is.   If it was actually junk, she would not care what is written there.

It is a net good.  And it will become more and more accurate as time goes on, just like all technology.

This is simply a statistics and human behavior problem.   Not really a "problem" but the combination of two common and well observed phenomena

1.  The Bell Curve.   For any ability, from public speaking to basketball to real estate investing, the population lies on a bell curve of talent.   You can move up the curve (to the right) by providing yourself with education.   You can further move up the curve with hustle and work and experience.   But at the end of the day, when its all added up, its still a bell  curve.   And those on the lower end of the curve are not going to succeed.   

So while it may (or may not) be true that ANYONE can succeed in real estate, I can assure you that EVERYONE can not.  Be it access to capital, contacts, friends, intelligence or luck, some will be able to succeed where others fail.  

Side note, if you move everyone up 10%, then the curve remains the same and the same number of people succeed and fail.   This is exactly why poverty can not be "fixed"   There will always be a bottom 10% (and a top 10% for that matter).  

2.   Selection Bias.   Simply put, the BP forums are not a statistically valid sample.   Due to human nature, people who succeed will post more than people who fail, a lot more.   There is the occasional, "boy I messed up this property" post or article, but they are well outnumbered by the successes.   In addition, those articles are usually posted by successful investors and show the "bumpiness" of the ride, but they overall journey is still a success.     Don't think so, ask yourself when the last time you saw a post that said "I have lost everything, I am ruined, I am quitting real estate"?    Maybe there is one or two on  the site, but look at the ratio to "I bought my first house at 20" posts and "my official free from W2" posts.  

Now when people read the forums, they get the information, which is granted all true, but never the other side of the story.   Here is a simple way of thinking about this.   Ask 100 NFL starting players "Should I follow my dream" and all 100 will say yes and tell you all about how they followed their dream and it paid off, and its all true.    Now ask 100 current homeless people....are you going to get 100 yes answers?   

So combine the selection bias with the Bell curve and the answer to your question is yes, they set up unrealistic expectations. But I would argue it is not BP or any sites fault for that matter.   They provide information and share stories.   Any site that advocates anything from real estate investing to homeopathic cures to the benefits of chocolate, is going to suffer from the same phenomena.   You can't change human nature.

@Jeff Burdick

Can you enforce eviction and lease terms if you knowingly rent a unit that is non-complaint?   I am no lawyer so I honestly have no idea.   But I do know that contracts entered into with fraud are non-enforceable.   If the tenet refuses to pay the lease on a non-compliance unit what makes them?   Basically you like (and want to enforce) contract law, but not occupancy law.  That is the practical issue.

On the theoretical side, occupancy limits and zoning exists for a reason.   They are invariably created as a result of some tragedy, usually a fire, that results in loss of life.   Should anyone really not follow them?

I am not the experienced investor here, but if you are pouring a significant (possibly) all of your net worth into an asset, and the profitability of that asset is dependent on non-enforcement of established laws....that seems like an issue.

Why is everyone glossing over the most important thing...it is not legal

It is legal for 2 rooms not 3.   Seems like if your business plan relies on chronically breaking the law you have issues.

Patience

Warren Buffet keeps cash on hand and only deploys it when it makes sense.   If you think it is hard to find deal that make sense at you levels imagine deploying 50 billion dollars.

I think a study of successful people shows that not buying bad deals is as important as buying good ones.

My advice is to get comfortable with the idea that not doing anything is the best course.   Keep looking, keep hustling, but be at peace with your choice to wait only for the best opportunities.

Fair points to be sure. But what would you do with the property if you were to buy it. And to be fair, I did put in 10% for property management, so I would not be running anything. As I said in my original post, however, I am not going into REI to own property, I am going to invest money in real estate deals. But in learning the business, I am practicing on stuff like this to get the gist.

Even if you lower the rents to $300-350 per month, with realistic expenses running 50% it cashflows. I think your real competition is weekly/monthly hotels.   The cheap houses you see on Craigslist are not actually in Pueblo.   The Pueblo page includes everything in Colorado all the way to the Kansas border.   Those are homes in La Junta, Lamar, and other small towns hundreds of miles away.  

I did see stuff in Pueblo for $425-$475.   So at $400 are still are at the low end of the market.   Remember that $40 would be a 10% savings, so 350-400 is real possibility.  

I was thinking that maybe an additional "master" with a private bathroom that you make by cutting into the space for the living room.

@Bill S.   The small rooms only have sinks.   But from the pictures on loopnet, there is no room to put even a toliet much less a shower.   they are truly small cells with no locks.   Which is something you would have to change, new doors with locks.

It is not that I think my plan would be great, I am wondering what a great plan would look like.  Or better question is there a "great" plan for a property in this area of this city.

If real estate is about solving problems, what is the best solution to this one?