All Forum Posts by: Jacob Pereira

Ah, I finally went ahead and followed the link (www.wapo.st/housing). I still can't figure out where the numbers quoted above are coming from, but I can see that in their version of the analysis the 20002 area in D.C. is up 91%, which makes a lot more sense.

@Richard Bailey

The last 10 years includes the stock market crash of 2008, so people have absolutely exceeded break even at this point. If you were to only look back seven years, for example, the market gained 126%, and that's not including dividend payments. I sometimes wonder if many of the real estate investors on BP aren't comparing their investments performance to alternative investments and thus believe they are doing way better than they are...but that's a whole other can of worms.

Obviously I believe in the power of real estate as an investment vehicle, otherwise I wouldn't be here. I was simply stating my surprise that some of the top ten appreciating cities in the country weren't beating inflation (again, purely based on the information given above; it could very well be that it was inflation adjusted, pegged to some sort of index, etc.).

I'm curious as to why you wouldn't post on MLS. You'll definitely get a better price by selling retail rather than to investors, even when accounting for the +/- 6% you'll need to give in commissions. Any investor (especially on BP) is going to require lower than market rates to buy you out, even if they cash flow. Is it purely to avoid the hassle factor, or are there other reasons? Either way, keep us updated; I'll be very interested to see how this turns out.

I think it could potentially be great for you, but make sure he's insured. There are plenty of great contractors who are geniuses in their field but aren't great at the marketing/business/administrative side of things and thus have to make up for it in cost and quality. I don't know how much work your property needs or what your timeline is like, but if you have some leeway, I would start him with some cosmetic work before you have him moving load-bearing walls or replacing your roof. Monitor closely in the beginning and as you gain confidence in his team you may have a diamond in the rough.

I'm going to go against most of the advice here and say that D properties can be great investments, especially when you're starting out and money is more important than time. I invest in the few D areas left in Austin, and it has worked out well for me. That being said, investing out of state in tough areas is a different challenge which I would not recommend (although I've also never tried it). A few reasons I'm pro D class:

• Less competition: As you can see in the comment thread, many experienced investors don't like to go into D class.
• Better cash flow: D properties tend to give higher margins (also more headache).
• Additional value add propositions: There are a number of strategies you can use to actually pull up the entire neighborhood; these tend to take a long time and are difficult to implement, but can be very lucrative and good for the community in general.
• Lower barriers to entry: You can buy a lot more property for a lot less money
• More creative savings opportunities: broken appliances? Buy used ones off Craigslist. Ratty carpet? Replace with cheap, durable vinyl plank. Try doing that in an A-class neighborhood and you'll never find a renter.
• Experience: D-class will help you decide what you really want and how best to get it. You'll learn tenant management and who you really want as renters, repairs (if you're doing it yourself) or how to manage and negotiate with contractors, which kinds of property problems you're willing to deal with and which you're not, etc.

I'd love to hear other D-class investor's views on this as well. Feel free to add to my list (or tell me why I'm an idiot). Either way, good luck @Nik Krohn.

There aren't many qualifiers in those numbers so they're hard to interpret, but if my interpretation is correct, they're pretty underwhelming. For comparison, the S&P 500 gained about 100% over the same timespan. 

And yes, I'm aware that there are things such as leverage, depreciation, rental income, value-add, etc, that make real estate investments better, but 10% in 10 years is in the top 10? That doesn't even catch up to inflation. Am I missing something here?

Maybe I'm the strange one here, but when I see things like high vacancy rates and deferred maintenance on a building, I think MONEY! Our job as real estate investors is to add value by solving problems others are too lazy/scared/uncreative/etc. to take care of themselves, so when I see problems, I don't think whether or not I should do a deal, I think "what do I need to make this deal work?" It sounds like you're thinking the same way by looking at ways to fill your vacancy. 

That said, with the info you're giving, the deal seems slim. What I would do is a bit of market research (call the for rent signs and find out their vacancy and what their rental rates are, if you have a realtor, pull MLS comps for both sales and rents, gather demographic data, etc). Armed with that you can give them an educated counter-offer with an explanation of your numbers. Should they shoot you down, it sounds like there are likely a lot of other motivated sellers in the community that would jump at an unsolicited offer from you.

My first deal was worse than what you're looking at, and I would never consider it now, but it gave me a lot of education and I've been able to turn it around into a better-than-mediocre investment. Be cautious and conservative, but don't be afraid to make mistakes. 

Hi @Sean Tracey,

I couldn't agree more. Figuring out how things can work is the only way to survive in our business. Like I've said, I would love to hear the experiences of others who have gotten this to work so I can consider it for my properties. For the record, my farthest property is 20 minutes from my current residence so it's not the end of the world if I can't get it to work, but any task I can complete without putting on pants is a win in my book.

I love the idea, and I've toyed with it as well, although I've never gone even as far as to figure out implementation. How will you get connectivity to the cameras? You'll need some sort of connectivity, which might be difficult if you don't live there. I know there are some that can work with a cellular chip, but I think that's a pretty expensive monthly fee. I'd love to hear if anyone has good solutions to this, because that would help my situation as well. 

Grey. I like Benjamin Moore's Revere Pewter HC-172, which a few others have also mentioned. You're not only seeing the blue/grey trend in houses; take a look around and you'll see it everywhere. Heck, most websites (including BP) are moving towards a blue/grey palette with lots of white.