All Forum Posts by: Juan Pardo

@Stella Xu, I'm also in financial services (formerly) based in Manhattan, now based in my spare bedroom. I agree that we're going to see a lot more options for employees to WFH and/or commute less. I strongly disagree with many of the assumptions being made and impacts being predicted, both here on BP and in the press more widely.

• People are going to live where they want to live. Yes, people are drawn to urban centers for jobs, but they are mostly drawn there for the culture, vitality, education, and the intersectional opportunities of those places. I don't care how cheap Jacksonville is, there's no way you're dragging me down there. This impacts quality of life just as much as cost of living.
• Don't assume that if you move from SF to Tulsa that big, fat SF salary is moving with you. Facebook has already announced that it will cost adjust salaries for employees that move from the Bay Area to areas with a lower cost of living. I bet this becomes de rigeur across the board.
• BTW, these areas don't want fat SF salaries coming to their towns. It is a shock to the system and completely skews the economics of the town. The Marketplace podcast "Make Me Smart" had a great exploration of this several weeks ago.
• There will still be an organizational disadvantage to living outside your company/industry's hub. I see all the people that get promoted to Managing Director at my company each year and the vast majority of them are based in NY or London. Even though those cities only represent a small fraction of where our total workforce is. 
• There are potential negatives for smaller, cheaper cities where (up until now) many companies were moving jobs. Large companies had struck a kind of bargain with the devil. Due to much lower salaries and fixed costs, they were willing to move jobs to cities like Dallas, Tampa, and Phoenix. The compromise was much shallower talent pools. The numbers made that compromise work, up until now. If the high cost of Manhattan or Silicon Valley office space is off the table, it's to a company's advantage to pay the higher salary of a WFH person in the Bay Area (or Greenwich, CT), if that means appreciably better talent from which to choose. I've already heard rumblings about large companies contracting their footprints in secondary and tertiary cities.

@Jay Hinrichs, my CPA explained it to me differently. I pay income taxes in NY (where I work), my home state of CT levies income taxes as well, but gives me a credit for what I already have paid in NY. Since NY taxes are higher, I never have to pay anything to CT. Perhaps this is a local thing? NY-NJ-CT have their own system in place?

As far as scattering, we're seeing exactly what you describe here in Greenwich. My realtor friends are busier than they can remember. The coop where I Iive has had 2X as many closing in the first half of the year than they did in the entirety of 2019. New Canaan home prices are up 29% year-over-year. Darien is seeing the same trends. No surprise that these are the three wealthiest towns in SW CT, with the best schools, and lowest taxes.

@Todd Goedeke great point, but BP favors those asset classes to a certain extent, plus the fact that the requirements for NNN ownership are a little higher from a capital and sophistication point of view limit the number of people who can/want to take that on. It is still a great option if you have the cash, they are very close to the passive dream everyone alludes to.

@Will Gaston that is awesome to hear! Congrats on the success, which has come after lots of years of hard work no doubt. You demonstrate a great point; you don't reach your goal by just sticking to one asset class or style of investing. You have moved around as different opportunities present themselves. You counter the too common dogmatic approach here on BP of "I buy C Class SFRs and they are the best thing ever, anyone who doesn't own these is a moron". 

If you don't me asking, how many hours a week do you spend working on your 75 units and how many growing the portfolio? 

@Juan Pardo great point, but I think the study a bit more general, kinda in the vein of all else being equal, someone likes their $60k/yr ultrasound tech job a lot more than a $25k/yr housekeeper at a hotel. 

@Joe Splitrock valid critique, but how do you get the cash? 1. Have the capital to invest from somewhere else ( savings from W2, inheritance, other investments ...) or 2. wait the 15-30 yrs to pay off the loan. or 3. some hybrid or 1 and 2. If I had to get to $100k/month in revenue, I'd take the hybrid option, save my W2, do some value add rentals that I sell/refi over 10-15 yrs to take advantage of appreciation and debt pay-down in addition to cash flow with the goal of having the ability to buy the exact assets that fit my lifestyle in cash, but unfortunately I don't think that's a super popular strategy, more for psychological and cultural reasons. 

@Steve Vaughan Big moves! congrats on the 11 unit and dipping the toe into the PM world, willing or not. Maybe it fits your lifestyle and personalty, maybe it doesn't, but you don't know unless you try. 

"What kept us going was knowing we were front-loading and it would end. We knew once stabilized, the assets would perform for years to come." 

THIS IS AWESOME, probably the best thing I've read on BP all month. You know what drives you and have found an investing style that suits who you instead of going with the herd. This outlook/method, would solve lots of people who want out of the cube's problems better than loading up on SFRs yielding $200/door/month FCF.  

Successful investing has much more to do with psychology and personality than people realize...

@Jay Hinrichs

You nailed it. There is indeed a massive undercurrent of subliminal marketing via social media and other channels pedaling GRQ (get rich quick) ideas many of which include RE as the ticket to nirvana and a 9-5 career as a loser convention.

I don’t speak for everyone but most wealthy people I know worked other professions and found themselves in RE as investors because it offered them a great avenue to invest the wealth they earned from their jobs, ventures etc. I am talking Wall Street bankers, Tech execs, Doctors, Attorneys or entrepreneurs.

Many if not all got their start in the 9 -5 / cubicle world. Also most are highly educated who painstakingly went to college for many years.

So at least the world I see counter argues with the world many “gurus” (guys who lecture to sell their books, videos etc) preach which looks down on the cubicle/ 9-5 culture and higher education (not to mention home ownership) but tells people to skip all of that “nonsense crap” and get right into RE as their fastest ticket to the country club. Makes it all look like the modern day Amway / Quixstar story.

OK,@Bill F.

Let me clarify that every time I hear "best and fastest way" in this business, I'm really hearing "get-rich-quick." There is no best and fastest way to do ANYTHING in real estate, as far as I can tell. There is a small group of higher-probability ways to do something and a much larger group of lower-probability ways to do the same thing. The one great standout way, the royal road, simply does not exist.

The question, as I'm reading it, is how to go from taking home $120,000 a year FREE AND CLEAR (FCF= Free Cash Flow), to taking home $1.2M FCF.

Imagining that it's going to come from ONE WAY is a mathematical wet dream. So many single-family homes or so many apartments in apartment buildings equals net operating income for each minus capital expenditures for each equals free cash flow). Adding up, scaling up, zoom-zoom-zoom in the one way I'm using to make money off real etate.

By the time you get to that point, you're always buying assets with one hand and selling assets with the other. You're never just ringing the same gong over and over. If you're in my space, cheap rental SFR in low C-class neighborhoods, well before you get to $120K FCF per year in any given year you're renovating one or more to sell to the retail market and acquiring one or more for additional rental income. It's never just a simple math equation of real estate income from X number of houses that you're renting.

So there's never going to be a straight line in real estate investing from $120K a year to $1.2M a year. If it comes at all, it's going to come from multiple, diversified sources of income within RE, not just straight rental take. In single-family rentals, you would make money renovating and selling appreciated properties, you'd make money in rent, you make money wholesaling, you'd make money renovating and selling new acquisitions. It's all going to work together. We're talking a large operation, with a number of employees. And certainly by the time you get even close to $120K/yr FCF, you're also diversified into multifamily, commercial, moneylending, etc. That's just the normal order of things.

So I'd stop looking for the "best and fastest" straight lines. What's going to work for one person with one skillset isn't going to work for another person with another skillset. And then in the worst kicker, the ones that do the best in the beginning are often also the first to lose their shirts when thins go belly-up.

@Justin Thorpe and @Jim K. interesting insight, so maybe I'm asking the wrong question too...It its core maybe this is about why are so many people so desperate to leave their job? 

 I do have the time to do a ton of research, but of the two links I clicked on (told you I didn't have  lot of time) this Pew report seemed interesting, it is four years old, so COVID has had an impact, but we can roll with it. 

Big take away, the majority of Americans are happy with their jobs. Some big factors that make you more likely to be happy in your jobs: 

-Income: makes sense the more $ you make the more you like your job

-Education: Probably correlated with Income to a degree

-Work Schedule that you like

-Full time vs part time

-Getting Benefits. 

-Viewing the job as a steppingstone in a larger career. 

Interesting, self employed people have the most sense of identity from their job of people not working in government or Non-profit: 

So maybe the push to get out of the cube is more about agency and meaning than we give it credit for..

In the book How To Invest In Real Estate, the author claims that a property that doesn't meet the 1% rule will never be cashflow positive.

Here is a proof against it. Buy a property for 500K cash, rent out for 2.5K, subtract 1.25K on operating cost, and you're left with 1.25k in cashflow.

Is the author wrong or am I misunderstanding something 🤔?

I’m a real estate investor based out of Los Angeles. I have been doing it for ten lovely years. However, what I am about to say truly pierces my perpetual LA pride. You couldn’t pay me enough money to invest in Los Angeles moving forward.

Recently, our governor extended the COVID-19 related eviction moratorium until September 30th, 2020. Meaning landlords cannot begin the eviction process and tenants cannot be legally evicted until September 30th. And to make matters worse, tenants have a year to pay back the rent owed for rents unpaid during the COVID-19 pandemic. 

Say what?

I unfortunately have one tenant that has not paid since March 2020. She pretty much gives me the finger when I ask for past due rent and paints my face with the eviction moratorium, telling me that she has the law on her side. In this case she does, and as a law abiding citizen my hands are tied.

Assuming the eviction moratorium is lifted on September 30th-which I doubt-she essentially has 12 months to pay the rent owed before I can evict her. This is nuts! Talk about harming capitalism. Talk about harming people that are risking their capital to earn some financial growth. Talk about the city being anti-business, anti-investment, anti-growth.

Who in the right mind is going to invest in this type of business climate that is pro tenant and anti-landlord? I believe in fairness but right we have wackiness. I love my city, but as an investor I’m certain I no longer see myself investing in Los Angeles Real Estate.

let me add some perspective on distressed real estate assets a space I have worked in virtually my entire 45 years in the industry. And or my personal opinion for the FWIW file.

I wont go into the tulles on this.. However the 07 08 to 2011 2012 real estate crash was the big one.. and many investors who started their investing were able to pick the low hanging fruit.. So they were right place right time.. But then as it relates at least to SFR small multi rentals what happened towards the end of that phase.. WALL ST. Big players.. Buffet coming out and saying he would buy 500k houses right now.. So a pretty decent amount of those great deals started getting scooped up by the big money.. I know I was buying court house steps in ATL in 2012. And once the hedge funds came in the opening bids got bid up 100% the screaming deals became no deals.. or small margins. And this continued through out the country in the major markets .. Now granted some of these hedge funds did a lot of C class or lower value assets most left that asset class as they too learned what many on BP find out those are tough to manage so they moved up in asset class then dominated.. You also have the current VC money creating these I buyer companies that are working on small margins or really just listing commissions IE buying their own listings..

So in my mind just like the average US investor is thinking about stock piling cash to get these great deals.. So is the big money.. And in quality assets I don't believe the competition for these assets will let the prices fall 50% in most markets.. In markets that have no Hedge funds or other large well capitalized investors maybe.. so that's one thought.. there will be a price point were big money just jumps in and takes the cream right off the top and will pay more money than the average investor just based simply on their cost of capital and their scale.

We are also starting to see the foreclosure rescue companies fire up again.. although highly regulated and illegal in many states the way they do business.. they will cream a lot of inventory before it gets out to the investors as well.  think pre foreclosure transactions..

@Chris Gawlik I agree that the US (and probably world?) economy is currently being negatively impacted by covid19, that the aid in the form of unemployment and stimulus has masked the depth of the problems and that the economy is likely to get worse before it gets better. So I'm going to rub on my crystal ball and take a few guesses.

I believe there is likely to be a long slow decline as we struggle along while politicians try this and that to make things better (and purchase votes for their team).

I think that the suffering is likely to be very uneven, The most initial suffering will be (has been) in high cost of living, dense, urban areas as entertainment remains "on-hold" indefinitely.

Out here in the hinterlands of "flyover country" people in rural areas and small towns have been on the "dollar general economy" struggle bus since the last recession (depression)-- there is no tourism, not much of an "art scene", and most people get their football fix on tv or at the local high school. Working people seem to be inured to the struggle. In the likely event that congress continues to prop up the working poor with unemployment, in the short to mid term, the people that are going to be hurt next and probably the most in "middle america" are the people that drive job growth: the self-employed and small business owners who always struggle to compete with the big guys in our "free market" where the rules are made by the big players. These are the people that are going to lose their life savings as small businesses close permanently as they will not be able to weather a sustained slow down. Finally in the later stages, after many small and even medium size businesses are permanently shuttered and the government is unable to continue support of unemployed workers long term, we'll all end up in even worse shape, competing for fewer jobs.

So to sum it up: the clowns on the right are going to work on giving big corporations all the handouts and unfettered power they've ever asked for and the clowns on the left will throw money at poor working people and both sides will continue to do exactly what they're doing right now: screwing over the small business owners that really drive the economy so we're ALL going to be screwed in a couple of years.

Geez that sounds bleak. I sure hope I'm wrong :(