All Forum Posts by: Marc Uber

Quote from @Eric Fernwood:

Hello @Marc Uber,

You mentioned only properties. The problem with focusing solely on the property is that properties don't pay rent—tenants do. If your goal is financial independence, you need reliable tenants. A reliable tenant stays for years, pays rent on time, and takes good care of the property. Reliable tenants are the exception, not the norm.

A common mistake is assuming that all renters are alike so the property type is not critical. This isn't true. Below is a diagram illustrating the three main tenant segments in Las Vegas.

If you unknowingly purchased a property that attracts the Transient tenant segment, turning a profit will be nearly impossible due to high vacancy costs. Additionally, tenants in this segment have low-paying, low-skill jobs and are the first to be laid off and the last to be rehired, during economic turbulence.

We purchase properties that attract a subsegment of the Permanent segment. Our average tenant stay exceeds five years, and we've had just seven evictions in over 16 years out of more than 1,000 tenants. During the 2008 financial crash, property prices plummeted, but our clients experienced no decrease in rent or vacancies.

My point is that the tenant segment your property attracts makes a huge difference in income reliability.

What do I recommend?

Select the Tenant Segment First

Start by identifying a tenant segment with a high concentration of reliable people. Once you identify this segment purchase properties similar to those they are currently renting. You can target a specific tenant segment by matching the segment’s housing requirements.

Each tenant segment has specific housing requirements and is unlikely to rent properties that don't meet all these requirements. For example, in the illustration below, the tenant segment's housing requirements are listed on the left. On the right are four similar properties, but only one matches all the segment's housing requirements. The other three properties will not be considered by the segment.

So, focus on selecting a tenant segment with a high concentration of reliable individuals and purchase properties that meet their housing requirements.

How to Identify a Tenant Segment

The process for identifying the segment for income reliability is straightforward. Ask several experienced property managers: “What properties would you buy if you wanted tenants who stay many years, pay rent on time, and take good care of the property?” I did this, and most identified the same properties. These are the properties you need to buy if you want a reliable income.

Once you've identified your target segment, purchase properties that match their housing requirements. This approach eliminates guesswork and luck because you're buying properties that attract a segment with reliable people. If you buy a random property, you are just hoping the tenant segment the property attracts is reliable.

This is very interesting and I haven't heard or read about this yet. I will need to do more research on this for St. Pete. Currently, I know there is a market in St. Pete for small rentals near downtown targeting the young professional crowd (22-35). Seems to be a large number of single people in this range wanting to live in the areas we are targeting. Does seem like multifamily could be targeting a transient group but I'll have to see and connect with some other investors in the area that have small multifamily rental properties to see the vacancy rates. Unfortunately the public schools in St. Pete aren't highly rated so targeting families at a higher price point for single family homes doesn't seem possible to me at the moment since these house are more expensive and most families will commute to private, charter or magnet schools so location doesn't mean as much. Cash flow seems only possible with multifamily homes due to interest rates and high price of the properties but only if they can be rented out! Thanks for the info. I will add this to my todo but unsure at the moment on how to determine this. The small market research I did initially by looking at rental sites seem to show a low amount of options in the 1 bedroom and 1 bath range so unsure if that means that they are desirable or just not many in St. Pete.

@Jana Crum and @Jonathan Greene - Okay my plan is to focus on multifamily and house hacking initially then. Allow me to save capital from my current position to invest in more properties. Also I can qualify for FHA this way. Also thanks for the info and thoughts on the ADU. My brother and I talked this over. He wants to convert his main house and the ADU into rental properties. It sounds like we will determine the best path with a CPA to make sure we both have equal ownership in the property. While we are waiting for the ADU to be built and to obtain our first multifamily property, we are going to start renovating his current house to make it ready to rent out. Thank you for all the advice! I am sure I will need more once we get to the next phase.

@Jonathan Greene - Thanks for the advice! Financial independence to me is being able to replace some of my current salary (unless I am able to house hack or have little to no mortgage costs) and that number would dramatically decrease. Because I have two children I want to make sure that I am able to support them as well. However, I mostly want more free time to pursue other lifestyles. I want to open a restaurant in the next ten years because I thoroughly enjoy cooking for others and creating amazing dishes. I am probably similar to you where I never want to retire but want to have the comfort to know if I fail pursuing a dream that it doesn't harm my children. I would be okay on taking the risk if I didn't have others to rely on me. I currently have a very stable software engineer position and eventually hope to cut back hours or become a contractor that works 20 hours per week once I am able to hit some of my financial goals.

The ADU seems like a potential way to keep my mortgage expenses down since I would just pay for it up front with the sell of the property. Unfortunately, the house that I will be selling is still under construction and planning on not living in it... Also the ADU would be on my brother's property and we are looking into utilizing a trust. His main house would be potentially one that can cash flow for us as a rental when his daughter moves out in the next year or so. My brother and I will be running the real estate business together so investing in his property seems logically to me. What do you think?

@Ashish Acharya - Thanks for the advice! Currently leaning towards the ADU idea. It would be at my brother's house and we have talked about doing rental properties together. We are looking into creating a trust and eventually he might move into the ADU while renting out his three bedroom house (after some minor renovations). I really like the idea of starting with a fixer-upper. Would you recommend to start with live in flips to build some capital? I would rather play with the house money and build capital for a more expensive multifamily property that would cash flow. Thanks for the tax advice as well. I haven't looked into those yet but I will now. As for starting out, I think I want to stay near St. Pete initially and once I feel comfortable with the process, I can start to branch out to outside the area and even the state.

@Jana Crum - Thanks for the advice and responding! Some additional information that I should have mentioned is that I only have my kids on the weekends and holidays. We typically stay at my parent's house since they have the room for all of us. Luckily the grandparents don't mind and I am able to buy a small property just for myself so I don't need to fit all 3 of us in the potential ADU or primary residence. The budget I was planning on was between $150-175K for the ADU so I could use this as my primary residence as well as a chunk of money for a cash-flowing property. Would this change your opinion? I also was debating a live in flip since cash flow is hard to find but I will keep running numbers in the area to find potential opportunities and deals.

Hey everyone! New to this and looking for some advice. Recently started a new chapter in my life and just found bigger pockets, building passive income and the FIRE movement. Hoping to replace my income over time with multifamily units and utilize house hacking. Running the numbers in St. Pete has been tough and seems like nothing will cashflow.

Just looking for some advice to get started. I am in the process of selling a house and should have ~$250K to utilize once it sells…

One idea is to build an ADU at a family members house to get started with only some of the money and hope interest rates and prices continue to fall. While building the ADU, keep waiting for an opportunity to buy a multifamily property. If the ADU finishes before finding a property, I'll plan on living there till I can house hack in the future property. Thoughts? Should I just focus on single family homes initially? Should I look for invest properties outside of Florida to avoid high insurance costs? Since I am selling a primary residence, I don't think I can utilize the 1031 to save money on taxes. Also any property I buy will most likely be of lesser value but is there a different tax saving strategy to utilize?

I have time and the ability to fix up properties so not looking to buy something that is turnkey. My current job I work remotely but have two children that need to stay in the area so outside of St. Pete is possible but I won’t be able to dedicate as much time to it.

Thanks! Looking forward to any help and advice.