All Forum Posts by: Michael Zuber

Having left the Rat Race this year after 15 Years of Buy and Hold Investing I find it is time to reflect, document and give back.  One of the first areas I reviewed was my initial purchases and I believe I made a mistake on a lot of my first purchases and thus wanted to share. Let me explain.

My focus when I started out was "Cheap" Cash Flow Positive properties.  This seems like a solid start but when I looked back I think I stunted my initial growth rate substantially.  Let me do the math and explain what I could have done different.

Let's say I bought a property for $150,000 that had a After Repair Value of $200,000 (keeping Numbers Simple).  Let's say the repair cost or make ready cost is $30,000.  Seems like a great fit as I get to create $20,000 in forced equity by funding the repairs myself.

My first 7-8 purchase all those years ago were like this but here is the problem with what I did.  

My Purchase from a Cash Stand Point.

$150,000 * 20% Down Payment = $30,000

Make Ready Cost = $30,000

Total Cash out of Pocket = $60,000

If I had bought the Property at $200,000

$200,000 *20% = $40,000

Make Ready = $0

Total Cash = $40,000 (Or $20,000 less)

The other area that is subtle is time to Cash Flow as my Cheap Property approach meant I could lose up to 6 months+ of rent if I bought the cheap property for 150K that was tenant occupied and paying under market.  When this happens I have to give a 60 Day Notice to vacate, hope they leave and if not start evictions which could take 90 days+, then repair, release, etc.  

In the end my cheap property approach 15 years ago meant I had to use more cash and I lost time to rent collection/cash flow.  

In the beginning my mistake was not appreciating the value of my cash position for down payments and the time to start collecting market rent.  What do you think? Does that make since?

Self reflection is always fun

Z

It took 15 years of Buy and Hold Rentals but I finally got to the finish line and retired from my demanding day job.  Now I am trying to find ways to give back as I am too young to do nothing and I have too much energy left.  So I am coming back to Biggerpockets as it was such a great platform for me to communicate with other active investors during the depth of the crash when I was an Approved Weekly Blogger for Bigger Pockets.

Biggerpockets helped me maximize my activity when I needed to and now I want to see if I can give back in a small way.

Today I want to start by sharing and asking others what is your best advice for new investors who are spending hours digging through the tremendous content on this site?

Mine is please don't get distracted by the glitz and flashy stuff that some folks are trying to put out there.  Some folks are flashy with high end cars, trips, meals, watches, etc.   I promise you in time that lifestyle will catch up as the market will turn and catch people who are living to close to the edge.  

Instead focus on One Rental/Deal at a time, try and make the next deal better than the last and do what ever you can to lower your monthly expenses because you can not get out of the rat race until your passive income exceeds your fixed monthly expenses.

Be the Turtle not the Rabbit

Good Investing - What advice do others have?

Z

If you have been in this business for nearly 2 Decades I would love to hear your thoughts and comparison between the last sellers market in 2006 that exploded badly and 2018 Sellers market.

I see lots of differences, Financing and New Construction being the most obvious.

But as I sit back and remember the crash that happened post 2006 I am left wonder what could cause a lot of forced sellers in the current market and I am just not seeing much.

I just don't see the same setup in 2018 as we had in 2006 and I might be blind hence I wanted to document my thoughts and see what others thought

Z

@Frank Lin yes I am still in Fresno - closed on 7 Properties in last 45 days or so - fun times

@Andy S. happy to connect any time

What is best way?

Love to connect 

Nate

I to live in Mt View - welcome to BP

I chose Fresno 15 years ago and have been very happy

In fact I just left my job in March and now real estate is my full time job and oh so much more fun

We should get coffee on Castro street sometime 

Michael 

@Malcolm Miller as others before me highlighted you should continue to educate yourself and as @Jeff Zimmerman highlighted you should look to partner with someone in your market. Let me give you an example of something I would do if you were in Fresno (My Market)

I can't cover Fresno by myself as it is too big so I pay/reward people who help me find deals and this can be done several ways.

1) Often called Driving for Dollars.  You could pick a neighborhood, drive around and find all the properties that look to be in some kind of distress. This isn't big money but a couple of hundred bucks for a nice long list never hurts and you get some experience 

2) the real money comes in when you can find a motivated seller.  If you can find a situation where the seller will take a cash offer at a discount you can secure an assignment fee and I have paid assignment fees between 5K - 25K depending on the deal. This is called wholesaling

Lastly as was pointed out in an earlier reply I would focus your activities on Modesto as you can't really get this type of hands on experience via realtor.com/google maps/zillow

In the end get your hands dirty and look to find opportunities to create value for investors around you and money will follow

Z

Like many of you I review the MLS in my market everyday and I have been doing that for nearly 15 years. Too that end I have to ask you a question as I am seeing things in the MLS today that I have never seen before (Even during the run up in 07-08 it wasn't like this (if my horrible memory isn't playing tricks on me))

I am seeing the most unbalanced market I have ever seen. Let me give you some numbers.

If in Fresno you assume the median price is 250K (Rough #) and you are looking at New MLS listings everyday for the last 6 weeks what would you expect?

What % of new listings are above and below the Median Price of 250K???

Well to my surprise the average is about 75/25 or 80/20.  Meaning 75-80% of the new listings are above the median leaving 20-25% below the median.

Then as you might suspect days on market for properties below the median have to be approaching < 10 days before they go pending and they are expanding for properties over the median.

So my question for the group

Are your markets as unbalanced as this?

What do you think happens in a market that seems to be creating two different markets (Above and Below the Median)?

Z

The Mayor of Fresno Lee Brand has kicked off a Rental Improvement program thank I think has some real merits but curious what you all think

Key parts of program

Every rental unit must be registered (SFH- Apartments)

Inspection fee’s per unit

If quality unit you can be called tier 1 and get 5 year waiver 

My thoughts 

I think being a slumlord is horrible and this program will identify many of them

Unintended consequences 

I see costs going up

I see Rents going up big in the lower end as Properties are upgraded or sold then upgraded

I bet we see a 10-20% rental increase in the lower end of the market once the dust settles 

Z