All Forum Posts by: Jon A.

I think most people would be pretty disappointed with 6%-8% CoC returns. That's in the general ballpark of current cap rates (i.e. your CoC returns if you used no leverage).

I don't have a specific number I use when looking at deals. How I look at the numbers depends on the deal/strategy but rarely includes CoC returns. Occasionally, though, I calculate CoC returns on completed deals just out of curiosity, and they're always double digits. If I was getting 6%-8%, I might as well invest passively and spare myself a lot of time-suck and headache.

My guess is that most everyone is still looking to buy, just with more conservative underwriting. As a result, it's hard to get deals done. Buyers and Sellers are at a bit of a stalemate.

As others have pointed out, there do seem to be people out there who are bidding aggressively, as if rates are still at 3% and 4%. I can only guess that they're banking on rates returning to historically low levels at some point in the next 2-3 years, which seems like a huge risk. I would not sleep well at night having made that gamble. However, there are plenty of people out there using OPM who charge fees and thus make money simply by doing deals, regardless of how the deal turns out.

Someone told me that the smart passive investor money is leaving real estate amidst rising rates. I guess what we're seeing rn is the dumb money.

 I wouldn't rush to pay off any mortgage at 4%. Keep in mind that with the increased tax flow you'll have increased taxes. Imo you're better off reinvesting. Yeah, you may cash $1,800/month less. But you'll benefit from appreciation and principal pay down on two properties, instead of just one. Leverage is a benefit, not a burden, of real estate ownership.

I live and invest in NYC which has rent stabilization as it's form of rent control. My general opinion, and I believe it's supported by most economists, is that rent control is bad housing policy for a number of reasons including that it does nothing to actually address the root cause of high rents.

That said, I don't see a "national rent control" as being a threat to residential real estate as a sector. First, if you look at the proposed Bill of Rights, it doesn't contain anything radical, unless you're in the habit of, say, using unclear leases.

Second, nationwide rent control would have to be approved by Congress. I don't see that happening anytime soon. Further, rent control is extremely hard for the government to implement. In NYC, you have numerous cases of landlords disregarding rent stabilization laws for years and years before getting caught. Who knows about the people who don't get caught. The state just doesn't have the resources to keep tabs on so many buildings; certainly it would be impossible for the federal government to keep tabs on every rental property in the nation.

I suspect that you're probably going to end up paying the inspector and appraiser. The major lesson here is do as much due diligence up front as you can. Going forward, go down to the buildings department before investing money in the deal.

It's not just the tax benefits imo. What LTV can you get on stocks? Can you buy a stock, add value to it, then refinance to pull all of your cash out of the stock while retaining ownership of it?

Yes, the tax benefits in real estate are better. But also control and risk. In terms of control, you get to make all decisions related to the asset; whereas, if you own a minority position in a publicly traded company and the CEO does something stupid, what can you do about it?

In terms of risk, there are company's that go out of business or their stock price declines for good. Unless you're buying property in a declining region, this is unlikely to happen with real estate.

That's my argument.

@Nick KenrickYour questions are legitimate, but you're probably not going to find much sympathy for your ideas on this site. I will say this - the impact that you and your three homes have on your local housing market are rather insignificant wrt housing affordability. But if you're seriously concerned about this issue, you should consider starting a non-profit that fixes up houses and sells them to first time homeowners. There's nothing that stops you from doing that.

 What is the advantage of showing the income as coming from property management as opposed to from the rental properties themselves? As others have said, you've overcomplicating things. You're better off focusing on acquiring more properties.

@John Christodoulakis It sounds like the numbers work for you but you would just like a better number. In that case, it may be that the seller is right. My position has always been that if the numbers work for an asset in a location/market that i believe in, i do the deal without haggling over relatively small numbers. You being slightly intimidated about doing a bigger deal than usual is not reason for the seller to come down in price.

Considering the numbers work as is, I would consider giving the seller his top line number and negotiating on other terms. Maybe try to get the seller to hold paper at a favorable interest rate while you're fixing the place up, before you can refi. Maybe get a closing credit for some work that needs to be done. Etc.

 No, I never accept negative cash flow post-stabilization. That's too much risk imo. I do usually leave a little money in the property when I refi post-stabilization. And unlike some folks i know who invest in low cost markets, I never cash out for more than my all-in costs.