All Forum Posts by: Larry Turowski

@Matt Sora you’ve got some excellent responses here, especially by @Nathan Gesner. As a rule of thumb, the fewer units you have, the more you need and reserve per unit.

Think of reserves as being self insured. And Insurance is about probability. If you have one rental, a single family home, there may be a low probability that you’ll need to dip into reserves to cover non-payment or major repair on any given month, but obviously a 100% probability that if you do it affects all of your rentals, that is, your one rental. If you have 45 units, like I do, there is a high probability that I’m going to have to cover some non-payment or major repair expense every month, but it is highly unlikely that that is going to be true for all my properties, let alone more than 2.

@Jason R. Besanceney Two things can make a deal, price or terms. Generally it is either or. Either you get a good price but you have to offer cash or strong financing, or you get great terms, like seller financing or sub-to, but you buy at full price or even a premium. Occasionally you’ll get both but you’re already looking for a needle in a haystack looking for one or the other.

For seller financing, the owner will have to have equity. Often these are D class, lower value, high cash flow properties. Beware! And they are probably going to want a down payment to show you have skin in the game. They’ll sell at a premium to you and basically be the bank, holding the mortgage. 

I never liked these because basically you are married to the property. You may be able to refi out at a better interest rate but you’ll have to hold onto the property for years before you can sell high enough to get your money back.

Quote from @Breanne Lemons:

@Larry Turowski do you mind sharing what state this is and what small regional bank you are using?  I would love to find somewhere that could do this.  

I invest in the Rochester NY area. Savannah Bank

This is actually a timely discussion as I have a number of acquisitions that I’ve needed to fill this fall.

I haven’t done anything different except wait longer for the right tenant. Home sales are 1/3 what they are in the spring. And similarly the tenant pool is about 1/3 what it is in the spring. It is temping to take a less qualified tenant and I’ve done that in the past and learned from my mistake. As long as it is competitive in the market and an attractive property, there is no reason to make any other changes. It just may take longer to get the right tenant. 

@Breanne Lemons it depends on the pending institution. Many has “seasoning” periods if six months or a year. Smaller and local institutions often do not. I am buying a property tomorrow and will refi out of it within two weeks with a small regional bank. The legwork of the refi was begun almost immediately after going under contract for cash purchase. Even better, this bank does loan to value, so I’ll be getting back over 90% of my purchase price. 

@Samantha Mosquera It’s always price.

If my flips are not getting on average one viewing a day, I’ll drop the price at least 5%, sometimes up to 10% within a week.

I’ll repeat this process until either I get a good cadence of views and now I’m looking for one offer for every ten views, or until I decide it would make more sense for me to refi out and rent it.

You’ve controlled the variables that you can control. It looks great but is abutting an eyesore. You should have dropped the price right away. Now the listing is stale and that too might be scaring off would-be buyers. Drop it now, at least 10%. 

@Emma Powlin sellers are basically going to generally take the highest offer, unless they are close, then they are going to go with the safest offer. So if someone made a similar offer but had a conventional mortgage contingency or better yet, made a cash offer, they'd go with that. They only way to compete is to offer at least 5% more.

And you are not competing with investors.  These deals don't work for investors.  You are competing with homeowners, some who may be coming from more expensive areas like NY City for whom 200k cash is nothing.

If you are ready to buy you are welcome to PM me.  I have a couple of houses coming up in that range and selling without using a realtor would make your offer a bit more attractive.  

Quote from @Dan H.:

Quote from @John Matthew Johnston:

I recently watched a video of Grant Cardone predicting that when all the baby boomers die off there will be a large surplus of houses which will drive down prices across the board. You hear a lot about shortage of houses but don’t really see much predicting excess housing. What do you guys think?

https://fb.watch/gOI2Ev7At9/

 There are already many markets with declining populations.  In general these markets have long term RE appreciation below the inflation rate (so price has declined in inflation adjusted dollars). The Midwest has many such cities (some of which have done ok over the last 5 years). Look at neighborhoodScout at various cities and you can see that cities like Detroit and Cleveland are cheaper today than the were in the year 2000 in inflation adjusted dollars.

At BPCon the closing speaker indicated only 2 states had natural (not including immigrants) population growth (Utah and North Dakota).  I have not attempted to fact check her statement but I am assuming it is factual.  This implies that 48 states do not have natural population growth.  This implies before immigration, there should be no need for more housing. 

The US does not have a housing shortage.  Certain areas in the US have a housing shortage.  

The extent that boomers dying off will dictate a shortage of housing is largely dependent on the number of immigrants admitted to the US.  If no immigrants are admitted to the US (not going to happen) we would have an over abundance of housing as the boomers die off (based on 48 states not having natural increasing population.  If an abundance of immigrants are admitted to the US, there will continue to be many cities with housing shortage.

My market has a long history of long term appreciation far in excess of inflation.  I expect for my market, this will continue as the baby boomers die off (regardless of the number of immigrants admitted to the US).

This is absolutely the best answer. Immigration policy will likely loosen up as the population plateaus. If it doesn’t, you’ll see a slowly declining national population. Already declining areas like mine will experience a steeper yearly decline and growing areas like California will slow or possibly plateau.  Though I do believe this all would be reflected in real estate values.

But values won’t crater and I think we are looking at 4% inflation for years to come, meaning even in areas like mine that generally don’t keep up with inflation, even if they appreciate at half the inflation rate, leveraging with 25% down means your 2% appreciation will leverage to 8% appreciation on your invested cash.

This is a VERY slow moving fender bender, not train wreck. Nothing to get too anxious about. 

@Aldrin Meneses Quijada short answer: 70% of ARV (after repair value) minus the cost of repairs is a formula for the maximum allowable offer (MAO) on a prospective investment.

Long answer: This is outdated. You are not likely to find many or even any deals that fit this formula (though I sometimes still do). A formula or rule of thumb is just something to help you filter. You can not possibly analyze every deal. Formulas or rules provide a shortcut to deciding where to focus your attention. That’s it. They are not a guarantee of success. Think of a walk signal at an intersection. You don’t cross the street without still looking both ways do you? Otherwise one of these days you’re going to get run over. You still need to do your due diligence. Conversely, we will miss opportunities to cross the street when it is safe and the walk signal is not shown. This is where the analogy breaks down because there isn’t much analysis needed to figure out crossing the street. Real estate investors will tighten their criteria if more deals are passing through their funnel than they can possibly consider or broaden their criteria if too few are passing through. Ultimately you got to “look both ways” on any particular deal you and decide if the numbers work. 

@Bruce Woodruff just about all these posts are about how to make your house better, more appealing, and that is great but that doesn’t really address the issue. I’ve seen two basic suggestions for getting your weeknights filled: longer minimum stays and some sort of pricing advantage (4th night free, lower rates, etc.)

What research have you done? Are others filling their weeknights? If so is it because their house is different (the house itself or location) or because of their pricing and marketing? Who are their target customers? Have you spoken to other hosts in your area? Have you determined there is a STR market that includes mid-week stays (I'm sure there is but have you researched the hard questions)?

On a side note, I noticed you’ve only been on BP since April of 2021.  Is that right?  And you’ve made almost 7,000 posts?  Booyah!