All Forum Posts by: Jonathan Greene

I've been reading so many posts by new investors looking to close their first deal, but what they talk about the most are the calculator projections and constant analysis that they are doing from home. I wanted experienced investors to weigh in and remind all the new people out there that you can't learn about REI without seeing hundreds of properties. I've been doing it for 30 years and I still look at a minimum of 7 properties a week just for fun and to stay on top of the local market. It certainly helps that I have a RE license and can get into properties whenever I want, but I also operate a separate off-market investment business. You can't get a feel for real estate investment as a career, hobby, or side hustle if you aren't looking at properties every day and having discussions about how you can help sellers or other investors. You should never buy your first property until you've seen 50-100 ones that didn't work out. Thoughts?

You have to think outside of the calculators and formulas. They only help you so much. How many properties have you analyzed using these methods? Of those properties, how many did you see in person? How many properties have you done a full walk-through of? If the answer is 0 or less than 10 percent, stop analyzing properties from a computer and go see them in person. No first-time investor should buy anything without looking at 50-100 properties first so they know what they are getting into. Agents may not want to show you 25 crappy multi-family houses, but that's what it takes to learn. A calculator on BP won't prepare you for house hacking, neither will these forums. Because until you are in your first investment, it's all what could happen, what the costs should be or could be. Then your sewer line breaks and all of that pre-analysis you've done doesn't matter. Use the formulas to help your mind, but go see as many properties as you can to help your real-life confidence in how it will work.

I always lead with occupancy laws for the city or town based on the bedrooms so it's off of me and not just focused on the lease. It's always hard with overoccupancy, but it is very common. I try to think of all the good possibilities when a situation like this arises, but it's harder to know if you aren't local. Like, since the dad moved in does the original tenant have to take care of him more? And if so, might it help the upkeep (not the wear and tear, that is surely aggravated by more people) to have this new boyfriend there? Sometimes when a tenant has more people we have a knee-jerk reaction as landlords that it can't be good, but once in a while, that new tenant may be better than the old tenant and may provide more help which means less calls and less maintenance. Of course, they could be worse and make it more of a sh*tshow, but it's at least worth seeing if there is anything positive about it. But in the end, the occupancy is too high and a hazard.

I don't see the need to turn it into a wholesale deal if both parties are unlicensed and just acting as investors. There is no prohibition that I am aware of in granting finder's fees for an off-market transaction where all parties do not have a real estate license. I am a former attorney, but this does not constitute legal advice. If there is a seller, a third party and you, and no one has a license, what precludes you from paying them 1% after closing on your own? I don't think anything.

Echoing a lot of what others said, but the foundation is most important especially the basement walls for cracking and of course, the support systems and ceiling for any give. Knob and tube is huge if there have been no renovations and can also be coupled with outdated boxes from Federal Pacific which are a hazard in an of themselves. In regard to the sewer (hopefully not septic), you can get a plumber to do a sewer inspection with a camera down the entire line to check for cracks and to see what it's made of. If clay, you are in trouble and there will likely be breaks and need a full replacement from the house to the street. I've done it, it's not cheap. Asbestos around heating systems in the basement and residue mold from untreated leaks. Once you can identify black mold, in particular, you can trace it to its source. Your main concern is that it is not behind the walls or between floors growing.

@Shane Craig if we bought it now we would have done more research on the wetlands and tried to get something cleared by the town, but we bought it at a foreclosure sale a LONG time ago. Obviously, for the tanks, we do scans now, but these ones were buried at the far edge of a property, not connected to anything. Buried back there for a reason. It was weird. It can always be worse.

It can always be worse @Shane Craig. I have a five-unit commercial strip mall in Westchester, NY that backs up on protected wetlands. 10-15 years ago, the town made us regrade the entire rear-drive area because they felt the run-off was impermissibly going into the edge of the wetlands. With other things the town dropped on us, it was $100,000. Five years later they made us do it again. We had lawyers, everything, nothing worked. I've also found three abandoned oil tanks on one property, with one leaking into a water source. Jackpot.

This is why I frown on all the advice out there for new investors to gather units, all with small margins. Because when it hits the fan, it hits all over and if reserves are low, it can be a disaster. If your units are solid and maintenance good over the years, you are just in a dip. It will all come back. Slow and steady.

Go to San Antonio, learn the market there, and find the soft spots where you can do well instead of deploying out-of-state money for a second and third investment. It's silly to buy properties in a place you know you are leaving and not intending to come back to while paying property management. I especially wouldn't buy out-of-state properties in snow states like Michigan due to the extra repairs even if the spread may seem better than San Antonio.

All I mean is that there is too much advice for first-time investors telling them they can invest in real estate no or low money down. There are books written about it everywhere, but it's not safe at all and it varies greatly from market to market. The thing I see the most on here is formulas and calculations from first-time investors who don't have the experience so they use a canned formula from the internet that won't apply the correct numbers in their area. This may not be true for you, but is for a lot of people. When I say reserves, I mean everyone needs to have like 10-15k available just in case at all times at a bare minimum. You can't survive, repair-wise on $100 gain a month and a little reserve. I've been investing in real estate for 30 years. The only way the spreadsheets work as you wish is when you have seen enough properties to really know what everything is going to cost. And then still add 10k to your budget for something that will come up.

Here is the major problem with how you are evaluating this, at least from what you wrote. Your entire expectation and future profit is based on a spreadsheet calculation, correct? Spreadsheets are fine for overall evaluation, but the actual return will always be less if you haven't done it before and can fully explore which items in the unit are closer to end of life and what the repair cost will be a when. Repair reserves are all well and good until you need a new roof and a furnace breaks in the winter. Then you can take the spreadsheet and throw it outside with the broken furnace. You have to think and learn outside of the computations.