All Forum Posts by: Michael S.

@Asa Ifill

You are certainly entitled to your opinions, and are certainly not required to agree with mine whatsoever;  that's what makes these message boards quite interesting to read.  You are quite enthusiastic about real estate by the tone of your post, which is great.  

My response is to clarify an item that may have been misunderstood - I never said C/D properties would not cash flow;  I said that C/D neighborhood properties are still quite available, and that properties in any class neighborhood that negatively cash flow are readily available as well.  I absolutely agree that C/D neighborhoods can cash flow;  they actually can cash flow better than A/B here right now, but their appreciation potential is typically limited compared to A/B in Huntsville and Madison.  I also, of course, agree with your sentiment on the tenant quality issue for C/D neighborhood classes.  

I am sorry if my post comes across as "glass half empty" - however, for an investor that is OOS and not familiar with Huntsville, the best I can do is provide them factual observations from my own experience.  It may not be seem positive, but factual statements are not always going to be positive in context.  

@Shelby Ashley

The property you quoted is being offered for $36/sq ft?  Within Huntsville City limits?

That raises a ton of red flags.  The price could reflect any/all of the following:

1.  It's in a D neighborhood.

2.  It's got liens on it.

3.  It's got mold / asbestos / lead issues.

4.  The land is worth more than the structure and the house needs to be torn down.

Also, be certain you are comfortable managing this property before you buy it.  The tenants will likely be challenging, and many property managers won't touch houses below a certain rental amount and/or locations in the city.  

With the Huntsville market so hot, also ask yourself why this property hasn't been already grabbed by other local investors/agents (unless its off market, then you could have a diamond in the rough on your hands).

Good luck.

Everything @Asa Ifill put in his post is exactly the reason you are going to have a hard time finding properties in Huntsville right now, unless you are ok with any of the following:

1.  C/D neighborhoods

2.  Negative cash flow

3.  Making offers site unseen within 24 hours of listing

4.  Looking for properties outside of the Huntsville and Madison proper

We have a hotter market right now than last spring (which was crazy) due to lack of quality inventory, as well as way more OOS investors than inventory.  Many sellers are actually not even considering OOS offers right now because they have so many offers to choose from.  It's something to consider when you choose where to focus your efforts.   

Everyone needs to read what @Russell Brazil wrote again, because a lot of folks here do not appear to understand what an LLC actually is.

You can't just simply "transfer" your property to an LLC, just like your bank just won't change the name on a loan to an LLC. If you personally own the property, you essentially need to sell the property to the new LLC with a legal closing. As such, the closing would trigger paying off the old loan, and initiation of a new loan in the LLC's name, not your own. Otherwise, "transferring" your property to an LLC is worthless for legal protection in my experience, because the LLC is not truly acquiring the property from you; you're just tossing the title into another legal bucket, but not really definitively separating it from yourself.

If this still is not clear, you really should spend a bit of money to meet with an attorney and CPA to better understand what you can and can't do to create a true stand alone LLC.

@Rob Hakes - first off all, great job on the open and forthcoming updates you have provided us all on your turnkey investments over the past 2 years;  especially when things were not going well, you still had the strength to be open about the negative side of your investments and the losses.  I'm glad to hear that you're getting consistent rent now.

A few things I was curious about:

1.  What neighborhood were these properties advertised as being in?  Certainly they are not even close to A neighborhoods - to be honest, with the rent amount and Section 8 tenants, sounds like C/D class neighborhoods.  

2.  After your experiences, if you could go back in time, would you have visited the properties yourself prior to putting pen to paper to see what areas your properties are located in?  If you've never been to Birmingham, there are some parts that are really nice, and some parts that can be as rough as inner city Chicago near Comisky Park. 

3.  Given your experiences, would you choose less return for a better neighborhood with future turn key investments?

My reason for the questions is purely curiosity - we typically only do A and high B neighborhoods;  while it definitely stunts the return, it also changes the quality of the tenants dramatically, and has a higher appreciation potential.  I personally couldn't buy a property sight unseen in a city I'm not familiar with - for example, when I see people on BP brag about their "great" find in Huntsville in area code 35816, it shows that they have zero knowledge of the city, and they are in for quite the surprise if they visit the area.  

Best wishes for a successful 2020 with your properties.  
 

If I were to invest outside of Huntsville/Madison, it would be Athens.  Cullman is a good recommendation as well.  

First step - do you want to do real estate full time, or as another revenue stream to augment your primary W-2 income?  This is a key question to answer, as you can not formulate a game plan without answering this question first.  When you read different posts on this site, you must keep this component in perspective.  You must compare apples to apples - I would never remotely compare my real estate experience to that of a full time real estate agent/broker/investor/developer/contractor.  There is no comparison there.  Heck, I wouldn't compare myself to a MFH investor either, as this is a different experience than SFHs in many ways.  

I use some of my W-2 disposable income to acquire properties with my business partner(s) - I don't have the time nor desire to BRRRR - this is not consistent with the time demands from my W-2 employment; if I did BRRRR, I would lose money by the decreased revenue from my W-2 job from the time and effort BRRRR would take for me. For others, they have ample time for BRRRR, but cash is more scarce. Again, you have to conform your real estate plan to your own individual goals and situation. BRRRR is a great strategy for a lot of folks, but it doesn't fit for me, for example. Good luck on your real estate adventure.

I guess I have been fortunate as I have not had any issues with my property management company like you are describing on here.  

My property manager will email me a heads up for routine repairs that they don't even need authorization for out of courtesy.  

If it's an emergency, they will text/call me simultaneously to calling in the appropriate repair person.  

All fees/expenses are clearly itemized on my monthly report.   

Granted, over 95% of our properties are A/B SFH, so that probably helps out quite a bit as well.

Agree with @Peter McDonough - 35802 is quite diverse. SFH in Jones Valley can range from as low as $175k to over 1 mil within just a 5 minute radius.

@Peter McDonough and @Mike S.  

I second Mike S's comment - let's just have everyone else assume Huntsville appreciation is the same as Montgomery, and that the whole state has no appreciation at all.  Then maybe I won't have to compete against 20 other offers on a property anymore - ha ha.