All Forum Posts by: Martin L.

@Michael Ross I've been in Asia for the past 6 years and my PM is literally the key to my ability to invest. Your team is everything when you're not there yourself. Whether the process is easy or deeply painful however, depends entirely on your realtor and PM. We communicate mostly through instant messages (which I highly recommend over email) where she only communicates with me on major items such as tenant changes or repairs. She takes repair costs right out of my rentals for that month and just deposits a smaller amount and messages me the receipt. 

I was fortunate enough to have built up my team before I left the country, but I still meet them every time I go back. They always take me to lunch when I'm in town, offer to pick me up from the airport, etc. We've got a great relationship because we each make the other a good deal of money. Their rates are on a sliding scale, 10% for rentals below $1,000/mo and 8% for rentals over that. @Andy Mirza is right, you really want to meet with your team when you can. There are online notaries now, but I don't know if they work for real estate transactions as I typically buy on my visits home, and my realtor will have several properties lined up for me to see. I miss out on some deals this way though.

I wanted to minimize the opportunities for issues, so I tend to buy A class properties. It's a personal choice that slows my growth but is more stable for me. Lower turnover and less problems are important for me.

PenFed is your best bet, and if you don't qualify by military connections, you can qualify by joining a military support organization (through a small donation)

 Victor, clearly you are either unmarried or else you married a unicorn. For the rest of us slobs, we understand that when our wives are unhappy, they have a burning need to make damn sure that everyone else is unhappy with them. Especially the husbands.  It's not emotion, I've lived it for 11 years. :D

I think we say "Happy Wife, Happy Life" because it sounds a whole lot better than "Keep your wife happy or else she will make sure your life is hell"

First of all, let me say congrats and you've done an amazing job with your portfolio. Now... My apologies in advance, but I'm going to be a bit brutal with this one. But what I hear from you right now, @Joshua D. is a lot of EGO talking. I know, because I've been there myself, I've been IT myself, but you need to remember one thing.   Your wife's full time job is what has enabled you to focus on your investing and grow the way you have. She's basically supported you for all of these years with HER income. A lot of people have weighed in on this, and nearly all of them have been in the direction that you don't want to hear, and while you haven't outright rejected them... you also have "listened". All I've heard from you are justifications and excuses. I'm not saying those justifications are wrong, and I'm not saying you're wrong. You've done an admirable job, and I completely understand where you're coming from... but your attitude is wrong. 

Perception IS reality, and if she perceives that she has been used... then to her, she has been and no amount of reasoning or justification will change that in her mind. Besides... you've already indicated that your company is very streamlined and that it mostly runs itself so exactly what DO you do all day? Also, is she coming home from working all day and seeing you playing video games or taking a nap? Remember, she doesn't see what you're doing when she's at work, what she is probably seeing is someone who hangs out at home or with friends, does whatever he wants, and makes no income. Besides, if the business runs pretty streamlined, then what exactly prevents you from getting a stable job, and adding MORE money to your investment goals as well as to improving your lifestyle? If she's covering expenses already, then any extra is GRAVY.

What you really need to do right now is to think about what your priority in life is. Take a HARD look and decide... Your spouse, or your company... because like it or not, they are currently mutually exclusive and you need to make a decision as to which one you want to place FIRST and I expect you need to decide quickly before the decision is made for you. If you want to keep your marriage then you need to change her perception, and you've gotten several excellent suggestions here already. Start paying yourself a wage from your company, or get a job to supplement (which really is a win-win situation, more money = happier wife PLUS more investment capital). Regardless, you need to change her perception before she decides to change her partner. If you decide you are more interested in your company then you better get divorced now. Your marriage will never work if you have ANY priority above your wife. Plain and simple. Even when you have kids, most women can't accept you prioritizing the children over them, even if they prioritize the children over you. Keep her happy, and everything else will be smooth. If you have to slow down your growth, then so be it. Or work a little harder and actually increase your growth, as well as additional padding for yourself against a downturn. The PM or realtor ideas are GREAT because they position you to learn even more about the business, and possibly get inside info.

Good luck, regardless of which path you decide to take. 

@Chaz Mathias ABSOLUTELY!

But I didn't. She even offered to sign one, but I told her I didn't need one, because I feel the same about marriage not being about money. I even somewhat recently added her name to the title of property I held before our marriage. Recently, I did tell her that I would give her everything and walk away if we ever divorced.

Although I said, that, she didn't divorce me (yet). She's actually far more into money than I am, because although I've been investing and growing my portfolio... I probably would have been too lazy to do this if I hadn't married a woman who didn't care about money as much as she does. I've certainly pushed myself harder to shut her mouth. We've been married 11 years now with two kids, and I'm okay to leave it all to them if it all goes south (except in the case of infidelity).

So I say... I'm an idiot, and you should protect your assets! But you always have the option to change your mind later if you really want.

@Steve K.  I was basing my definition of risk off my memory of one of the definitions of "risk" when it comes to investing, different than adventurous or daring "risk" or "risk of failure".

"A high standard deviation indicates a high degree of risk." This was excerpted from 

https://www.investopedia.com/

The term risk has like... several dozen definitions depending on what it's referring to, and "risk" doesn't even need to mean that you lose money. You could literally make a positive return, but still have "risk" if it didn't perform as well as you expected. Also excerpted from Investopedia:

"A better way to think of risk is as the possibility or probability of an asset experiencing a permanent loss of value or below-expectation performance. If an investor buys an asset expecting a 10% return, the likelihood that the return will be below 10% is the risk of that investment." 

"If investors accept the notion that investment risk is defined by a loss of capital and/or underperformance relative to expectations, it makes defining low-risk and high-risk investments substantially easier."

I actually learned this definition of risk in business school, I can't remember if it was economics or finance (it was a VERY long time ago). I tried to define it from memory in my earlier posts, and it was slightly off target, so hopefully the excerpts from Investopedia help. Your definitions of risk are also correct in their different settings. I did try to define it from memory in my earlier posts, and it may have been slightly off target, so hopefully the excerpts from Investopedia help. Lastly:

"Low-risk investing not only means protecting against the chance of any loss; it also means making sure that none of the potential losses will be devastating."

This was really a biggie for me. You're at your most vulnerable when you're just starting off. One bad deal can absolutely break you and put you on hold for a year or more, especially when you're on a limited income. When you're making 35k or 45k a year, it takes years of sacrifice and saving to make that first down payment. I really needed my risk to be as close to zero as possible, regardless of the possible reward. I didn't have BP when I started, and didn't know of any alternatives, and would have never imagined OOS as an option.

P.S. Your use of "uncertainty" is usually referred to as "volatility", but is also often confused with "risk".

@Account Closed not so much insider info, just what my realtor and property manager have told me. I'm no longer living in Vegas, I've been gone for about 6 years, but was checking into getting another property and that was part of the report I received on the situation "on the ground". 

And yes, downturn resistant, not downturn-proof. Major events hit Vegas harder, but minor recessions are generally shrugged off. Actually, until 2008 it was "conventional wisdom" that Vegas was recession-proof. That proved not to be the case, but decades of historical evidence should still hold at least partially true and show resistance, rather than immunity as previously believed. This article is one of many from 2008 (I just picked one at random) when everyone was reporting the surprising fact that Vegas was being hit by the downturn.

https://lasvegassun.com/news/2008/apr/10/vegas-recession-proof/

Answering a few of those questions. I'm not in commercial real estate (although I've definitely thought about it), this is all from my observations as a former resident and landlord.

So... there are quite a lot of attractive properties that I've seen, but a disturbing number of them are partially or even mostly vacant. Supply has always seemed to outstrip demand for spots in places like small strip malls. 

The transience generates a pretty large pool of renters. Its a pretty hot rental market and growing. My PM tells me that there are now waiting lists for all new builds. People always plan to leave Vegas and "go home" or somewhere else, but the large number of extremely well paid jobs that have very low education or skill requirements tend to make these "transient" workers more semi-permanent. We call them "golden handcuffs", where they don't leave the job because they'll never get paid as well anywhere else with the same credentials. That creates a lot of renters, always ready to leave but never doing it unless they basically get forced to.

Serious downturns in Vegas are few and far between. As shown time and time again, Vegas is downturn resistant. That isn't to say it's immune, far from it... When a major downturn hits hard, Vegas gets hit harder... but minor and even moderate downturns have minimal affect on Vegas. Certain types of incidents (ie travel industry impacted terrorism, Mandalay Bay shooting) and really major financial crashes have a larger impact and tend to be longer lasting. Vegas has several major "feeder" cities from California, Arizona, Colorado, Texas, etc. where people can drive. In minor and moderate downturns, people often tend to take shorter, cheaper vacations. Rather than flying to more distant locales, people from the feeder cities will drive to Vegas for cheap hotel rooms, food, and entertainment (it still exists, mainly in Downtown). These tend to make up for the visitors lost from the reduced air travel. Of course, the major incidents end up creating layoff situations and that is when the transience really hits hard. All the renters I mentioned in the previous point will now leave in droves. 

What I find difficult about multi-family in Vegas, is the lack of any deals on the market. I've looked to get into it many times, the few properties that exist have tended to be older than I am (aside from those in N Las Vegas, where I refuse to invest). Since my body is already breaking down, funky pains and creaking joints... can't imagine what that means for a building... that I'll have to pay to repair...

Lake Tahoe is pretty far, in terms of driving by the way. It's by Reno, not Vegas. Lake Mead is by Vegas. Tahoe is insanely beautiful though, Lake Mead a lot less so. However, Las Vegas is more centrally located to more national parks than any other major city in the US.

Phoenix is HOT. I mean Vegas gets cooking in the summer, but we all take comfort in the fact that Phoenix is almost always worse. You ever play Super Mario? Remember the stage where the sun is literally trying to kill you? That's Phoenix, Vegas too but less often than Phoenix.

Golden Knights. They really epitomize Vegas. A bunch of misfits and rejects that couldn't make it anywhere else, but somehow succeeded way beyond anyone's wildest's imaginations in Vegas. That's VEGAS BABY!

Thanks for the reply Amanda. I should mention that I'm looking at out of state, but would probably try to work with Guild Mortgage, which is one of my current mortgage companies. It's not that they're amazing or anything, but I've also never had any problems with them and they also pride themselves at being a "servicer" and rarely sell their loans to other companies. It's not a big deal for most people, but it always really annoys me.

I probably wasn't clear enough in my original post. My bigger concern is whether anyone knows of any problems/issues with cash then refi vs straight to mortgage. For instance, does it cost more? less? Is it harder to get? I assume it's easier to close the sale with cash, but it would suck if I end up with problems when I try to refi.

@Steve K. I actually have these conversations with my wife all the time, and HER risk tolerance is far lower than mine. She wants everything paid off, while I want to expand at a moderate rate. It all comes down to risk. "Risk" is not inherently good, or bad. High risk just means that there can be a very large "swing" - basically a large variation in outcomes. Low risk means that your outcomes are more predictable, not wholly predictable, just more so. An example of extremely high risk would be something like betting on a number at the roulette table, you might lose your money but you also might hit a pretty big return (typically 35x your bet). If you bet $100, that's basically a range of -$100 to $3500, hence "high risk", a less risky bet (less risk, not low risk) would be betting on black or red giving you a range of -$100 to $100. No risk would be keeping the money in your pocket and walking away because gambling is a pretty bad idea in the first place (I work in casinos, so don't tell my boss I said that). 

Strategies like BRRRR are high risk for many people, because frankly... far too many get excited and want to "strike while the iron is hot". They don't maintain enough cash reserves for each property, because it would slow down acquisition... grow Grow GROW! And they're right. If they can keep striking while the iron is hot, they will continue to grow wealth at a fantastic rate. Get rich quick. But if they don't slow down in time, when a large dip in the real estate market happens... some of them won't be able to weather it.

Don't get me wrong, I'm envious of the ones that grow like crazy. Striking when the iron is hot and making a fortune before resting on their laurels. They are a lot braver than I, but hindsight is 20/20. The funny thing about the economy is that.... no one can really predict it. If the economy crashed before they became stable, they would have lost all of it. Prior to the trade war, we were in the midst of a near record-setting decade long bull market. Keep in mind that we are STILL in that bull market, but the trade war has been making it fizzle a bit. The fact that it is very close to record setting means... we're in totally uncharted territory and some people may say "overdue" for a correction. But once again... it could collapse tomorrow, or go on for another decade. People said the real estate markets in Hong Kong and China was unsustainable and in massive bubble territory... about 10 years ago. Some of the people who didn't listen have seen their properties grow 500% or more.

There are people out there that will only do cash outright, they miss a lot of opportunity that way but they have almost zero risk. If the economy collapsed tomorrow, all they need to worry about are insurance, taxes, and maybe some repairs. There are people like Matthew that like to play it very safe, aiming for some leverage but carefully measured. I'm a little more risky, especially now that I'm looking to diversify a little more, but that's because I've "built in" some security first. But that's a key word.  Security. Better properties, mean you're less likely to have issues with both the properties and the tenants. Matthew and I belong to the turtles of the real estate world. Slow and steady wins the race.

Then you have the early birds that catch the worm. An early bird that started when I did would probably be in dozens of properties right now, possibly worth double, triple, 10x what mine are worth. Or... the early bird might have gotten unlucky on one of the early acquisitions and ended up 20k in the hole for major foundation issues that somehow got missed, or 5k for a new AC unit. (Did I mention that my one B-/C+ property had the copper coil stolen from the AC unit on the DAY I signed escrow? 4K to replace that one.) One or two really big setbacks early on can break a new investor. A big slide in the economy could break many investors. Or... we could have a record-setting, decade long bull market, and the ones that made it look like geniuses right now. They're in the strike while the iron is hot camp, and they've been the real winners for the past decade. But it could have just as easily gone sideways much sooner.

I'm okay being a turtle. The other guys have been doing great, many have made fortunes, but I don't want or need the kind of stress that operating like that would bring me. Sometimes I'm envious, but it's just not me. What good would an extra million or two do me if I die an extra 10 years earlier because of the ulcers? I'll just turtle along with Matthew, and let those guys make their fortunes. They've certainly been RIGHT this past decade, but that doesn't mean that I've been wrong.