All Forum Posts by: Mike Roy

@George Sprague I will send you a direct message.

@Austin Steed - I do get that question, and there's no doubt that where I'm from in Maine the best time to list is the "spring" market, which can start as early as February and run through Memorial Day.  The second best time is the "fall" market, which begins right after Labor Day and runs as late as Thanksgiving.

As a seller, you ideally want to target the prime selling season, but it's not always possible depending on circumstances.  Some sellers have the luxury of being able to make a life transition and still carry their old home a while in order to launch their listing during Prime Time, but others aren't financially able to and sometime need to list in December. 

However, rather than focus on seasonality with sellers, I try to make sure their home is best positioned for a sale regardless of when we launch.  Often, the way you position and market the home - from inexpensive repairs and strategic upgrades to the quality of listing photos and remarks - will give your sellers more bang for their buck than focusing first on the timing of the listing.  Even in Maine, people are always looking.

@Austin Steed - While there is some seasonality to most real estate markets, I would just caution that your clients are not purchasing the market, but an individual property.  Most of the off season mark downs I see in my market are those that initially had pretty aggressive pricing to begin with, so I'm not so sure they represent a deal more so than a revision closer to market value.

The true deals in real estate are often available due to some kind of distress to the owner, property or both, and that can happen at any time of year.  Divorces, job losses, deaths, etc. know no season.  The two best deals I ever purchased were put under contract during the prime of the selling season in March and April and were the result of burnt out landlords who were looking for quick sales.

As a real estate agent who is primarily working with clients that purchase single family homes to live in, I tell my clients that the best time to buy a property is when they are financially and emotionally ready, and when they find a home that meets their current and projected future needs.

@Logan Jamieson - Very nice job putting yourself in a good starting position. I own 20 units in Bath/Wiscasset and think Midcoast Maine is a great place to invest. I do suggest caution and taking things very slowly right now. I bought a fourplex in Bath off the MLS in 2015 for $180k, and a similar fourplex just closed up the street for $322,500. Traditionally, the Midcoast offers very good cash flow from multifamily, but the last couple of years have been crazy and I personally don't think it's sustainable.

$300k invested at a 15% cash on cash return is $45,000 per year and conceivably enough to retire on.  I think those kinds returns will eventually cycle back to us, and I would be spending this time to educate yourself so that you recognize value when that time comes.

In the meantime, start networking with other experienced investors in the area.  @Dave Holman and @Bob Langworthy are experts in Brunswick that you should get to know.  Even in this market they are finding opportunity.

With $300k and experience as a GC, you have value to offer.  Perhaps consider partnering with an experienced, conservative investor with deal flow if you're looking to jump in now.

@Tyler Galloway - If you lived in the condo for two consecutive years in the last five, you should be able to sell it outright with a $250k capital gains exemption for a single person or $500k for a married couple.  I would run this by your CPA if you think you qualify.

Otherwise, you can do a 1031 if you can find a good replacement.  Some investors simply pay the tax rather than be forced into a bad deal.  That is a personal decision based on the opportunities you have access to.

@Rik Patel - This is definitely a personal choice.  One the one hand, responsible leverage will magnify your cash on cash returns and enable you to stretch your investment capital.  Leverage also enables you to diversify your holdings and, thus, spread your risk.  Many of the growth-minded investors here are going to echo this sentiment, especially those looking to achieve F.I. through cash flowing rental properties.  After all, the more property you own, the more you benefit from all of the ways real estate pays you. 

On the other hand, irresponsible leverage, especially in the commercial realm, can create significant risk to your holdings should cap rates increase significantly in the future.  Irresponsible leverage can lead to a negative cash flow position if rents drop.  Irresponsible leverage has resulted in investors losing their properties all together when they try to refi an underwater commercial investment.  There is definitely a crowd that "sleeps better" knowing their properties are paid off or have low leverage.

I think there is a happy place in between - one that lets you take advantage of the growth leverage affords, but has enough equity and cash flow to protect against downside risks that recession brings.    

@Adam Lang - I recommend researching Tenant Estoppel Certificates online.  Using these will help keep your seller honest.  

@Tyler Galloway - I would consider selling the condo outright.  I think Return on Equity is a very important metric, so you want to look at what that metric would look like after a refi vs. what you could earn on after investing sale proceeds into something with better cash flow. 

I would also take a look at linear markets that cash flow and distinguish them from cyclical markets like the big cities on the coasts, including Phoenix.  I think a lot can be learned from the GFC in terms of distinguishing the two market types.  While the future is an untold mystery, I personally would be looking to pull equity out of cyclical markets at this time and moving over to solid cash flow investments.   

I've invested out of state, but in a place where I grew up.  I'm a big believer in investing where you know.  If you do not know any cash flow markets, I would begin doing some homework and finding a market that you believe in. 

Finally, I would caution to not buy simply what you can afford now and hope the price goes up.  To me, that is speculation.  Rather, I would look for opportunities that provide the what you perceive to be the best potential return on your capital.  
 

@Shawn Rasmussen - 1-4 unit properties are classified as residential and are valued based on comps.  While you can finance these properties with a commercial loan, the appraiser will still value the building as a residential property. 

Investors tend to look at fourplexes through the lens of cash on cash, NOI and cap rate, and this is useful for evaluating the merits of the investment relative to other properties, especially against commercial opportunities. Since fourplexes tend to be non-owner occupied, the comps even tend to play out based on acceptable cap rates investors are willing to pay anyway since investors by and large set these comps in the fist place.

The challenge, though, is that you cannot project future value based on NOI and cap rate because, while you may optimize your fourplex's NOI such that it is more profitable than all the other fourplexes in your market, you will still be tied to a residential appraisal when you try to sell or refi - that is comps that are set on less optimized financials.
 
The best way to capture appreciation on a fourplex is the same strategy you would use for single family - buy in a growing market with solid, long-term fundamental demand drivers.  You'll need a rising tide to float your ship.  

@Cameron Moore - I'm guessing @Ryan Murdock and @Jesse McCue can assist with that.