All Forum Posts by: Michael Zane

 @John DeRosa you're including all the right expenses. Good job there. I'm based in Union County, and we've been running into the same problem for the last few years. Generally, one of the problems with investing in NJ is that the property taxes are high and really eat into CoC returns.

Buy and hold investing, especially when you're looking at on-market properties, is hard here right now. We're still seeing pretty strong sales, especially for small multifamilies and most anything that has income generating potential. I know several investors who are still having success in the fix n flip space, but unless you have a strong process for sourcing off-market buy-and-hold or BRRRR deals, it's going to be difficult to justify that type of purchase in this area based on a CoC return calculation.

I have a few local clients who have decided to wait until mid/late 2023 with the hope that prices will soften.  I'm not convinced it will work out as well as they hope, but at least they can park cash in short-term Treasuries at 4.5%+ for the time being.

 @Jeremy H. if I'm working alone I can send about 200 mailers per month.  This includes building/maintaining the database and manually printing, addressing, and stamping envelopes.  It's a lot, and it's an obvious candidate for outsourcing if you're looking to scale up.  You just have to have your process nailed down so you can instruct others on how to do it efficiently.

Let me know how it goes.  I'm happy to compare notes on process.

I've had success running a DIY direct mail marketing campaign. I build out my own, targeted lists in the towns where I operate (NJ-based) because I feel that I know these areas better than any list provider. It takes a lot of time to build and maintain lists this way because it requires driving/biking/walking around my target towns or spending ample time on Google Street View. I also have to keep track of ownership changes over time. It's hard work if you're doing it yourself, but I can attest that it works.

It's also the kind of thing where you can establish the process you want to use and then offload the work to your team or a group of VAs. The key skills needed to do this are pretty straightforward - Excel for building a property database, Google Street View, and property tax records to gather ownership information.  If done correctly, you can pull together a proprietary list that might even result in a higher response rate compared to purchased lists.

Hi @Greg Miliatis

I've had success running a DIY direct mail marketing campaign. As silly as it sounds, I send out letters to the owners of multifamily and potential fix and flip properties, and then I simply wait for them to call me. The response rates on campaigns like these are typically below 10%, so it's all about sending a large enough volume of mailers to generate responses. Some people use postcards because they are less expensive, but I use letters because I like to introduce myself to the reader. I build out my own, targeted lists in the towns where I operate (NJ-based) because I feel that I know these areas better than any list provider. It takes a lot of time to build and maintain lists because it requires driving/biking/walking around my target towns or spending ample time on Google Street View. I also have to keep track of ownership changes over time. It's hard work if you're doing it yourself, but I can attest that it works.

I'll also add that there is a whole science around letter and envelop templates. As you ramp up the volume of mail pieces that you send out, it becomes possible to study what works best in the markets you are interested in.

The key skills needed to do this are pretty straightforward - Excel for building a property database, Word to create letter and envelop templates and do mail merges, Google Street View, and property tax records to gather ownership information.

Hi @Christian Requejo, I think you're on the right track.  A couple thoughts:

First, you'll want the properties to generate cash flow even during the life of the loan.  Everyone has their own cash-on-cash return hurdle, but no investors really want to shoulder negative cash flowing properties, even if there are strong prospects for generating cash flow in 25-30 years when the mortgage is paid off.

Second, there is a concept in fixed income investing called a "laddered" strategy.  It basically means that you try to match the terms of your assets to the terms of your liabilities.  For example, in real estate investing, you might use a 30-year loan to buy properties that you think will support your retirement.  I have also known investors who purchased properties around the time they had children.  They used 15 or 20 year mortgages with the idea that the loan will pay off around the time the child starts or finishes college.  Matching the term of the loan to big life events can be a useful financial planning strategy.

Hi @Karim Elahi 

I've had success running a DIY direct mail marketing campaign. As silly as it sounds, I send out letters to the owners of multifamily and potential fix and flip properties, and then I simply wait for them to call me. The response rates on campaigns like these are typically below 10%, so it's all about sending a large enough volume of mailers to generate responses. Some people use postcards because they are less expensive, but I use letters because I like to introduce myself to the reader. I build out my own, targeted lists in the towns where I operate (NJ-based) because I feel that I know these areas better than any list provider. It take a lot of time to build and maintain lists because it requires driving/biking/walking around my target towns or spending ample time on Google Street View. I also have to keep track of ownership changes over time. It's hard work if you're doing it yourself, but I can attest that it works.

I'll also add that there is a whole science around letter and envelop templates. As you ramp up the volume of mail pieces that you send out, it becomes possible to study what works best in your market.

The key skills needed to do this are pretty straightforward - Excel for building a property database, Word to create letter and envelop templates and do mail merges, Google Street View, and property tax records to gather ownership information.

@Greg Larson market values (ARVs in your case) are always a moving target.  That's what makes real estate investing so much fun!  A few thoughts:

I would not recommend looking at comps more than 6 months back, and truthfully I would stick to looking no more than 3-4 months back to capture the period of time when interest rates began to increase.

This is where the art of estimating ARV comes in - you might look back 3-4 months, but then you'll want to adjust your ARV estimate for future expectations. Speaking with a knowledgeable, local agent can be a big help here.

If you're willing to spend some money upfront, you might also consider hiring an appraiser to write up a report. You can explain that you're most concerned with the ARV, rather than the pre-rehab value. The appraiser should be able to adjust the valuation assumptions based on your guidance.

While you're at it, you should be studying rental comps too. This is critical to pull off a successful BRRRR. Again, having an agent who can provide MLS data would be a big help.

@Greg Larson, estimating ARV is a combination of art and science. Regardless of whether the market is strong, weak, or somewhere in between, estimating ARV can be challenging. To your point, you don't want to overestimate ARV and lose money on a deal you buy, but there is also the risk of underestimating ARV that could cause you to pass on deals that are actually viable. If you're struggling to find the data necessary to estimate ARV or want to understand local market trends better, the best thing you can do is find a local, knowledgeable, and investor-friendly real estate agent to help you. You'll find that many are happy to offer some input as an act of goodwill.

The interest rate environment and local market condition doesn't really make estimating ARV harder or easier. It's all about having the right data and keeping a pulse on the market. The first and probably biggest hurdle to making BRRRR a viable strategy is being able to estimate ARV with a reasonable level of accuracy. If you can do this, then the BRRRR strategy becomes an option regardless of geography, market conditions, or interest rates.

Hi Joe, I know a few investors/developers in my area (Union County, NJ) who have gone the extra mile on soundproofing during development or remodeling.  I've seen soundproofing insulation used with great success in rental properties (Rock Wool Safe n Sound is the big brand in the NJ area).  The other product I've seen is soundproofing drywall (QuietRock is a brand that you can find at big box retailers).  Since the cost of soundproof drywall can add up, I've seen some investors use it in specific applications (a wall facing a busy road for example).  Another practice I've started to see in higher end apartment buildings is increasing the depth of the wall and floor framing to accommodate more soundproofing insulation.  Obviously that's not always feasible in a remodel.

I walk through plenty of rental properties, and I've been so impressed by these soundproofing products that I installed Safe n Sound during a recent remodel at my property.  Soundproofing can definitely be an additional marketing point, and depending on location, it can be an important one.  In my area it's common for rental properties - apartments as well as smaller multifamilies - to sit close to train tracks.  Obviously soundproofing becomes a much bigger perk in these scenarios, and I believe it can help to draw higher quality tenants, provide a better living experience, and reduce turnover.

First, an investor-friendly agent needs to assume the mindset of an investor. This includes developing a two-pronged framework to guide the client during their decision making process: 

- The agent should understand the nature of markets (I mean this from a psychological perspective, in addition to the "know your market" adage).

- The agent needs to internalize the margin of safety concept - buying an asset for way less than you think it's worth. 

All successful investors understand these two things, whether they realize it or not.

Second, the agent needs to learn how to analyze deals, at least at a basic level.  Learning how to use the BP calculators would probably be sufficient.

Third, the agent needs to be a local market expert.  This includes knowing values for pre-rehab flips, ARVs, and rents.  It helps to have an idea of what common rehab items cost in the local market.  It's also important to have a strong understanding of local market nuances because an out of state investor might not.  For example, here in Northern NJ, it's common to inspect for in-ground oil tanks during the inspection process.

Fourth, the agent needs to provide excellent client service to out of state clients.  This includes things like knowing how to provide a *useful* property tour via FaceTime or how to record a video tour and email it to the client.