All Forum Posts by: Jonathan Greene

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.

I'm sorry to say this all sounds bad. You don't have any idea how to assess investment properties, but you want to partner with two people who are giving you their money to assess investment properties for the potential profit. Sure, contractors can help, but they have a distinct stake in the game and are not experts in evaluating the investment. They can give you an idea on repairs, but you can't be the point person, with a fiduciary duty to your money people, if you don't know the metrics. You are setting yourself up for a mismanaged partnership.

What's your plan to find properties? If it's on-market only and you lack the requisite experience, what are you really bringing to the table for them in this deal?

No future buyer will buy your house later with a nondisclosed past sales price. You might as well tape a sign to the front that says "Shady Business." If you are paying too much or too little, that's just part of the deal. The fact that you are trying so hard to hide it should send up red flags all around you and the transaction.

It doesn't matter if it's not disclosed on the MLS anyway, anyone can find it online once it closes via tax records or a million other sources. Trying to withhold the sale price on your own buy seems very strange. Would you rather the next buyer know or wonder why the price is being hidden from them?

There are deals in every market, they just aren't on the market. If you don't know a market, neighborhood, and block very well why buy site unseen there? Have you ever direct mailed a confident list built on ListSource focused on who and what you want to buy in your area? Have you tried your own off-market mailings at all? When people say there are no deals in their area, it usually means they don't know anyone who can find them or they don't want to spend the money or time to find them. @Ryan Evans nailed it. If you are beating out locals, they are laughing.

In regard to the auction, what you are experiencing is common place. You win, you lose and need to re-bid. I have closed several deals for clients on Auction.com, Hubzu, but you have to be persistent and tough. When I bid for myself I just put in my bid and wait to get outbid. Getting outbid is usually a gift when you are at your top number or close. The process should go find once it's done as most of these auction sites are linked to the MLS and an agent so more rules apply. They will be slow, but not as slow as you would think. By the time they hit an auction site they could have been sitting a long time and the bank is ready to get rid of the asset.

@Chris Toedter send me a message. Part of what the agents are saying is true, but 99% of the agents don't understand investment at all. If you are looking to hold, it doesn't matter if they can get you more than asking because there is no asking. It's a hold. But if you want holds you can do much better by not overpaying and finding lower-tier properties that are walkable to trains that can be upgraded. This market is hot, but a lot of it is BS and when the crash comes it will weed out a lot of the investors and agents who don't know what they are doing.

I have mailers going out all over Essex Co and in 07013 in Clifton. We can discuss.

I can confirm what @Chris Toedter is saying about this market is accurate. I had a three-family listed in West Orange a couple years ago that got 19 bids. Most properties in the area, especially multi-family units, get 10+ bids if they are attractive, but the prices some of these people are paying won't continue to pan out. Chris, there are off-market options in the area and deals to found on the MLS surprisingly. The MLS deals that can work in this area when you are financing the deal are multi-family deals that were Under Contract, but fall out. Most old bidders forget about it and it can be a good time to swoop in.

My best advice for here is stop overbidding and giving away your rights. There are too many abandoned oil tanks in this area to risk waiving everything with a mortgage contingency. You just need to connect with people who can find you deals off-market.