All Forum Posts by: Michael Ealy

Building permit filings - compare it with market absorption - if more permits are being filed but the market is not absorbing it, it could indicate a market is being overbuilt so not good to invest there

Foreclosure filings - this is a leading indicator of price decline (if there's a huge uptick with this metric I will be worried)

How real estate developer friendly is the city - so watch press releases from local goverments or call them to find out their 5-year development plan

1 Vote

Originally posted by @Leslie Ray:

Let me preface this by saying, we have an appointment with an attorney to ask these questions as well but wanted to reach out to the group for your thoughts/ suggestions...... My partner and I have been thinking about how to structure our partnership to purchase Multi Family Buildings and have been told that we need to each have a California LLC (holding company) and Wyoming LLC operating under the California LLC. Would we need to create another Wyoming LLC to take ownership of the property we purchase and we use our individual Wyoming LLC's to be the partners in that deal? Also, if we are creating a website for credibility purposes together, what entity should we have own that site? Thank you so much to ANYONE who answers this......

Leslie,

I am not an attorney but I specialize in multi family apartments (50+ units) and hotels.

Depending on the deal, I might open an LLC to hold a property in it. But I buy bigger deals so it's good to limit the liability of one 50-unit apartment in one LLC.

My suggestion is to keep it simple when youre starting out.

Just an operating LLC for now and when you find a deal, you can decide if you want to have a holding LLC to hold the title under.

2 Votes

Everyone here will say their market is a good one to invest in. :-)

But, the answer is always: IT DEPENDS. On what?

Are you buying single family or multi?
What is your exit? Rental, rehab or flip? BRRRR?
Time horizon: long term or short term?
How much cash do you have to invest?
Are you capable of building a team, managing a rehab from a distance, etc?

If you're in the LONG game of rental properties and you want cashflow, MIDWEST is a good market to invest in. Property values are lower with respect to rent.

If you're in the short game of appreciation or you want to flip, the COASTS will be good.

2 Votes

Originally posted by @Joseph Schreiber:

Hello,

I am 25 years old and I live in Bellevue, Washington.

I have around 600k in cash from one of my businesses that I just sold. I want to get into real estate and increase my monthly cash flow as much as I can. Would love some help and opinions on what I should do with the money.

Should I invest in the stock market, rental properties, flips, etc?

I also have my real estate license. However, I do not do much with it. More focused on building my other businesses.

Thanks in advance for you help.

Hi Joseph,

Of course everyone here on BP will tell you to invest in real estate!

My suggestion as to where to invest your money is: IT DEPENDS.

What are your goals? (capital appreciation, cashflow or yield, both?)
How willing are you to spend time managing your investments? (hands off - totally passive, hands-on or somewhere in between?)
How willing are you to learn the ins and outs of rental property investing? How about rehabbing or developing?

If you want to be passive and have no time to manage or learn rental property investing, you can participate in a syndicated deal or you just invest in a REIT. There are REITS paying 8-11% dividend but very little appreciation.

My suggestion if you want to be passive though is to DIVERSIFY your investment.

If on the other hand you want more control and willing and able to spend the time to learn and find good deals, then you can find your self a 4-unit building to start with. With this, you have to FOCUS your investment and watch that investment like a hawk.

Like what I did on this deal:

https://www.biggerpockets.com/forums/311/topics/64...

0 Votes

Originally posted by @Ricky Nigro:

View report

*This link comes directly from our calculators, based on information input by the member who posted.

Hi All, me again! I need help understanding why this deal would be bad. A similar deal discussed raised some valid points but I am not understanding the inherent issue of a "bad neighborhood".

These deals are easy to find in the Cleveland OH neighborhood. I assume, a "rougher" area might have greater turnover (accounted for at 10%), probably more repairs during turnover (accounted for at 10%), need good local property management (10%).

The property exceeds the 2% rule with worst case assumptions (2.38%)

The property meets the dollars per door, $175

Cash on cash hits 22%

Fully refurbished (actually quite nice) and clear inspection report including large items.

I am not looking for appreciation, simply cash flow. Demand seems high in the area so exiting shouldn't be difficult. I am not living there so a "rough" neighborhood has no impact on me.

What am I missing? Seems like great cash flow all things considered.

Also, this would be my very first real estate investment. Low cost of entry, I figure I will learn a great deal.

Help BP!

Ricky,

I made money in rough neighborhoods...like this one:

https://www.biggerpockets.com/forums/311/topics/64...

But, I watch it like a hawk and I am very hands on.

With you doing it out of state, it's going to be tough. You have to factor in 20% for property maintenance and repairs instead of 10% just to be safe. My suggestion is to build a cash reserve of 6 months of the property's repair and maintenance (and if you can, include the mortgage payment too) before you buy.

Also, before you buy, inspect the property. Walk the neighborhoods. Talk to the police department in the area and see if they patrol the neighborhood. Double check the numbers by talking with some people in the area, like other property managers, real estate agents, contractors, even renters. Don't take what you get from the turnkey provider at face value. Assume he/she is lying unless you prove otherwise.

If I were you, I will build a team in Cleveland before you buy a deal. A team you've vetted carefully.

The numbers seem to work but you have to be careful...really...really careful with out of state investing because investing is NOT just about the numbers.

A good deal becomes a bad one when the investor does not know what he/she is doing. A mediocre deal can become a good deal with an expert investor.

3 Votes

Originally posted by @Tyler Erickson:

As many of us are aware, millennials are more apt to renting rather than buying real estate. They (we?) are replacing baby boomers at a rapid rate, and are right behind Generation Z... Of course, Generation Z still has a while to develop before they are able to buy real estate or rent, so in the very near future, Millennials are going to be the largest generational demographic.

From CNBC: "The homeownership rate among millennials ages 25 to 34 is around 8 percentage points lower than Gen Xers and baby boomers was in the same age group."

The Urban Institute did a study and reported that Millennials getting married later and less often plays a major role, as well as Millennials typically deciding to rent in higher income areas instead of the poorer areas. High rent + single incomes + median credit score of 640 = less homeownership.

As investors, does this information change your perspective on investing? Or have you implemented a plan to adapt and flow with the changing real estate market?

As a whole, to the more experienced and economics-minded investors, could lower homeownership lead to more instability in the market?

As @J Scott likes to say, there are always ways to capitalize on changes in the real estate market... What are your methods?

This is good for landlords. That's why I love real estate because people will always need a place to live. Whether people want to live or buy, real estate investors will always make money.

5 Votes

Originally posted by @Account Closed:

I bought a property in Lakeland recently (3/1 925 sqft) . Asking was $85k, after inspection we agreed to $64k.

The house was in rough condition but seemed manageable. The AC was working during the inspection but was old. After the purchase seems like my AC died and I'm in for another $3000-$4000 for a new AC.

The repairs are about to cost me aprox $17,000 including the new AC and my total is about to be roughly $81k for a rental property that will make around $850/m before management services, taxes and insurance.

My calculations put me in about 8-9% annual return on investment. Did I get a really bad deal or should I just learn from this and not eat myself so much and just be happy with my 8-9% ?

As everyone here told you - it's not great but not a bad deal at all even with you underestimating the repairs.

I've done this mistake so many times it's embarrassing. Here's an example of a deal that I've done that in fact but I made over $1 MILLION on:

https://www.biggerpockets.com/forums/311/topics/64...

One solution to your dillemma is sell the property on a Rent to Own basis (3 years, jack up the price 15% and also increase the rent 10% because you're selling it 3 years from now).

By doing this, you get more cashflow, and a higher sales price and therefore more profit.

Downside is: you sell a property making cash.

If the area where this property is at is a good area and is a highly appreciating market, then just hold it. Otherwise, rent to own it.

0 Votes

Originally posted by @Steven Greenspan:

What’s the best way to find syndication deals? Interested in being a part of one to learn more.

Steven,

To participate as an investor in a syndicated deal, you have to be an accredited investor.

I am assuming this is the case?

0 Votes

Originally posted by @LeAuna S.:

I'm a wholesaler in Atlanta and I'm working on writing down a spreadsheet of how much per sq feet a rehab may cost by category.

Here are my numbers:

Where are the numbers?

I am in Cincinnati.

0 Votes

Cincinnati, Ohio

All Forum Posts by: Michael Ealy

Michael Ealy has started 68 posts and replied 1506 times.

Post: Benefits of a Assumable Mortgage??

Post: What do you look for when looking for new hot/upcoming markets?

Post: Purchasing A Multi Family Apt Building With A Partner

Post: Unlimited opportunity to find out-of-state market

Post: Starting out and need some advice.

Post: Bad Area, Numbers Work - So What? Help Me Understand!

Post: Millennials aren't buying homes - good or bad?

Post: A good deal I suspect is becoming a lemon

Post: How to find syndication deals

Post: Trying to wholesale a 8 unit in cincinnati