All Forum Posts by: Jonathan Streufert

Is the property currently occupied with a long term tenant, or are you going to need to find one right off the bat?

The fact that the property is <15 years old does help reassure that it won't (or shouldn't) have any major issues, but there will be issues regardless eventually. 

That COC return doesn't look terribly promising (don't forget about closing costs) even excluding any vacancy or repair costs. As it is, the margin seems pretty thin.

Hi Jordan! That's a very open ended question. What do you want to get out of it? What are your long term goals? Do you want to invest full time by wholesaling or flipping? Or perhaps more of a part time gig while working a full time job? Do you hope to eventually be in a position to live off the passive income from buy-and-hold investments, or just work a standard W-2 job and use REI as supplemental income?

Your first real estate investing move should be to get educated. Learn the terms, and the different kinds of investing methods there are for real estate. There are a lot of them, and it can be overwhelming. There is no "right" way to invest. Read books, listen to podcasts, and perhaps if you feel brave enough join a local REIA (real estate investors' association) to get to know your local investors. Invest in yourself first and the rest will come with time and effort.

Good luck!

@David Dachtera

My local REIA recently presented real estate numbers over the last decade or so showing how numbers in 2016 compared with ~2006, such as inventory, average home value, sales price to buyers' income ratio, etc. All in all, the conclusion was that the situation now is a lot different than it was 11 or 12 years ago, so as you say there is no "bubble" to pop. The explanation you gave as to why inventory is so low right now makes a lot of sense, though. Thank you very much for that!

Hi @Joe Prillaman

I'm just about in the same boat as you. I'm 25, have a stable W-2 job, and my market in SE Michigan is a booming seller's market, too. I'm reading books, listening to podcasts, and going to my local REIA monthly meetings while saving ~20-30% of my paycheck to eventually jump start my investments.

I'm torn between the two options of getting into the market NOW, or waiting to see when the bubble pops and deals become more plentiful, as they are currently very scarce. My primary concerns for the time being are to network locally, find a mentor, and continuing to educate myself. Ideally, finding a mentor will come naturally while networking, but that will come with time.

I'd encourage you to get to know the players in your market. Continue saving money and increasing your knowledge through books, podcasts, and networking so you're ready when the time comes to actually jump in. Best of luck when you decide to take the plunge!

Hello @Wes Woodhouse

I currently rent an apartment with no income properties. That will change in the next year or two, don't worry! I'm still educating myself and getting to know the local area.

Holding it as a rental when you move (if you can afford to not sell it) could be a good idea! You already own it, and don't have to look for it and acquire it with a real estate agent. One word of caution, though: make sure the numbers work. I've heard of horror stories where someone's in the situation you will be in in a few years, where they move out of their primary residence and rent it out instead of selling it. Make sure the numbers work. Don't try to force the issue if the numbers don't work. More than likely, you originally bought the house based on things like proximity to your workplace, size, personal convenience, etc. You probably didn't look at the potential income/expenses you would be looking at if you rented it out (unless you did, in which case, good for you and disregard my suspicions!). Some houses just will not cash flow, especially if you didn't originally buy it with renting it out in mind, and the income you get from the rent won't cover the various expenses and mortgage (if you still have one). Work out the numbers before deciding which you do. It would be great if you made $200 in cash flow a month, but would you want a $200 cash flow loss every month with a lot of your cash still tied up in the property?

Either way, I think it's a great idea if you can make it work. Good luck!

@Scott H. I'm still in the process of getting started but do have a significant other of my own to convince that I'm not crazy in my bid to start real estate investing.

Neither of us knew anything in real estate investing to begin with, other than it was only multi-millionaires that were successful, and that any average Joe off the street that tries his hand at it loses all his money and ends up worse off than when he started. Of course that's not true, and with the right education and preparation, anyone can succeed.

Now, one thing that you have to concede is that real estate investing involves risk. If you claim it doesn't involve risk, you're lying to yourself. However, the key in being successful is being educated and taking calculated risks. The more you read and learn how the numbers really work (such as calculating all of the expenses, which bites a lot of people in the butt when they don't account for vacancy, repairs, CapEx, etc.), the more likely you will come out on top.

I would suggest going to https://www.biggerpockets.com/renewsblog/2013/04/1... and checking out the books that Brandon recommends to get started on your education. A few I would highlight as very informative are The Book on Investing in Real Estate with No (and Low) Money Down, The Millionaire Real Estate Investor, and Rich Dad Poor Dad (of course). See if you can check out any of the books from your local library, or bite the bullet and buy one or two of them (the education a $20 book will give you can pay for itself a thousand times over). Read them during your lunch break or whenever you have some free time. Listen to a real estate investing podcast on your drive to and from work, such as the BiggerPockets podcast with Brandon and Josh. Practice analyzing deals you find on one of the listing services like Zillow or Realtor. Encourage your wife to do the same. She doesn't have to be an expert, but the more she understands about real estate investing, the easier it will be to convince her and yourself to pull the trigger when the time comes. 

Real estate investing is risky. And it can be scary. But holding on to your money and allowing it to lose its value because of inflation is even more risky. I'm a pretty conservative spender myself; I'm a saver at heart. But the more I learn and the more people I meet while networking and the more practice I get at analyzing deals, the more confident I am to pull the trigger and get into the game. I wish you luck in convincing your wife that you're not crazy in this whole real estate investing thing, and also in your future investing endeavors!

Thank you all for the warm welcome!

@Dmitriy Fomichenko I appreciate the helpful site information, thanks!

@Ariana King It's nice to meet you! I'm the other way around; I used to live in SW Illinois just across the river from STL but now live in Michigan after graduating from college. As far as where I'm planning to invest, I'm looking more into the suburbs. Not that I'm necessarily "afraid" of the Detroit market, but I've lived in the suburbs for a while now and so am more familiar with their markets. Either way, I wish you luck in your investing endeavors as well!

@Jeff B. Good points, though I would not advocate outright lying to them if they ask whether I'm the owner. I see myself getting into a bad position if that happened. Good communication is key for sure, as you say.

Correct me if I'm wrong, though: wouldn't property managers sign the lease, serve notices, and make oral agreements, even one that was not also the owner?

@Penny Clark If I lived in one of the units while renting out the other(s), then yes, that may change things. If they know I'm the owner and live a 15 second walk away, I might be afraid of a constant stream of concerns in the middle of the night that in reality could wait until the morning. However, as you said, if all the details concerning service/repair requests, rent payments, etc. are outlined at the start, this shouldn't be an issue in the first place.

@Nicole A. I agree; even if everything you do or say is not what the tenant wants to hear, if a professional distance is maintained a lot of the personal grief may be avoided. Business is business, and if the tenant can see it that way and not take it personally, everyone is typically better off.

@Corey Arnemann That is all very good advice, thank you! Starting the landlord-tenant relationship on the right foot is certainly appreciated by both sides, and encourages trust early on. Also, that note on compromises to make both parties happy is ingenious. Saying an outright "yes" might make you unhappy, saying an outright "no" might make the tenant unhappy. But if everything is a compromise and both parties get what they want, there may be no need to "hide" behind a different title.

Thanks for all the comments, everyone! Certainly all great suggestions!

In a book I was reading, the author made a point to say that calling yourself the "landlord" or "owner" of a rental property in front of a tenant can lead to some rather unfortunate scenarios. Rather, letting the tenant know you are only the property manager can make your life as the landlord significantly easier. More specifically, the reasons this might be advantageous include:

1) Tenants won't expect you to be able to answer a query immediately since they won't know you're the decision maker. If a tenant is asking you to waive the late fee because a personal emergency came up, or whether they can have a small dog despite the fact that the lease states that is against the rules (because it's cute and a rescue and won't make much noise, they promise!), it can be a lot easier to just say "sorry, I'm just a property manager, but I can ask the owner and get back to you in a few days" than risk having an emotionally charged response that you'll regret later. I do understand that one of the most important tips for being a successful investor is having the ability to say "no", even if you want to be the nice guy that everybody likes.

2) It might lead to fewer bad vibes between you and the tenant afterwards since it was the big bad owner's decision to decline their request, not yours. This could put some protection between yourself and a potentially angry or vengeful tenant if they don't think they're getting treated fairly. I'm not suggesting this means you're able to decline perfectly reasonable requests, rather that having this separation between yourself and the title of "owner" or "landlord" may help avoid some of the emotion involved when having to tell a tenant "no".

3) Calling yourself the "landlord" has connotations that you have deep pockets, are evil, and try to milk as much money as possible out of your tenants. This can lead to frustrating exchanges between yourself and your tenants since they may believe that you absolutely do not have their best interests in mind when you make decisions. I know not all tenants don't feel this way, but some certainly might.

Now, I wouldn't consider outright lying to the tenant if they flat out ask if you're the owner. There are ways they can find out who the owner of the property is, and if they find out that you lied to their face about not being the owner, that may end up with you in a worse situation than if you had been honest from the start. However, introducing yourself as the property manager of a property and allowing yourself the flexibility of not needing to respond immediately as the decision maker could be a good situation to be in.

What are people's thoughts on this? Are these points worth separating yourself from the "landlord" title, or have you generally not found these to be much of a problem?