All Forum Posts by: Nate R.

The TK guys are basically marketers. I wouldn't have found this without them. I'm buying from the seller and his agent.

Since it's new construction and all the units are being managed by the same company, I can easily find the comparable leases for identical units in this neighborhood.

Of course, I will verify those numbers but I visited the neighborhood yesterday and it looked good. 

There is something wrong with the BP forum post WYSIWYG editor. I can't quote someone without the formatting being applied to the entire message.

Originally posted by @Mike Makkar:

"@Nate Reed, Its all about hedging your risk. Non-Retail buying allows you to get 20% to 30% below intrinsic value. So even if the market tanks, you may be covered. As I understand Ben is in a non-growing part of Ohio, where he may have to take extra steps to hedge. But if you're in a market which is greatly devoid of inventory, Austin for e.g., if the property cash flows with a healthy return, why worry if its retail or not?"

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The properties are actually in San Antonio. I should clarify, too, one is turnkey, one is through a connection in BP. Either way little work would be involved for me as everything I'm looking at is new construction and I would be hiring out PM.

I've already looked in Austin, but the market is "hot". I have seen a couple of things come up that looked interesting but they were quickly snatched up. I'd rather look somewhere where there are plenty of opportunities, so I started looking in SA.

Ben specifically said don't buy the capitalized value of future rents. By that I infer he means to use market price as a measure of value and ignore the future income stream.

"Value" and "price" are constantly shifting yardsticks. This reminds me of dividend stocks over the past few years. Low interest rates and the hunger for yield have pushed up prices of dividend-paying stocks beyond any measure of "intrinsic value," but those stocks keep paying dividends and raising them. As they do, the prices continue to go up...

I guess what I would be worried about is new supply. If I'm depending on rents at current levels, then the real risk is over-building. Austin's advantage is there is very little inventory in the more central areas.

I'm haunted by Ben L.'s comment "Don't be a retail investor!" in the podcast on rental properties. This is also common advice in real estate investment books. Always buy at a discount, or, as Warren Buffett says, with a margin of safety.

I've been evaluating some turnkey opportunities and am close to pulling the trigger on one, but Ben's admonition is in the back of my mind, watering the seeds of doubt.

Is it really that big of a sin to pay the asking price if the cash flow makes sense? I am also trying to buy in an area that I believe will appreciate over the next few years. 

It's hard for me to conceive of how I can "buy below market" value in this market. If a property is below "market value", why is it even available at that price? Common sense dictates that those kinds of opportunities are ephemeral and elusive by their very nature.

This probably works with properties that need some kind of repair, or where there is value to be unlocked by some kind of zoning change, etc... I don't see how this applies to what I'm doing. 

I'm planning to focus on acquiring SFH's and possibly duplexes. Over time, I plan to acquire a portfolio of these. When I accumulate enough equity, I would eventually like to be able to liquidate these and replace them with multi-family residential.

Is this possible? Can I exchange multiple houses for a complex as part of a single 1031 exchange? 

In another thread, someone commented that the sale of a SFH would barely cover the legal bill for a 1031. I would assume that this math would be different if 10 houses were involved.

Perhaps someone can clarify?

 No, I don't care about it either. I spent Sunday night analyzing some properties. :D

Wow, just down the road from me! I might come, too. 

I was mistaken. Most REIT dividends are taxed as ordinary income.

Capital gains distributions and pass-through of qualified dividends from a tax-paying company owned by a REIT are the exceptions.

This is a good question. I'm thinking about the same things as OP. 

I want to practice evaluating deals and when I'm ready, will take some baby steps this year by making offers that make sense, but in the meantime I am investing in REIT's with some of my real estate funds.

I love the hands-off nature of REIT's, instant diversification across geographies and tenants, liquidity and the opportunity to reinvest the dividends in additional shares. One can take advantage of the volatility in this way, dollar cost averaging to get more shares, decreasing average price and increasing yield when shares prices are low.

It's also interesting and educational to read analysis of REIT's, shareholder reports, annual statements, etc. Brad Thomas writes a lot of interesting articles on Seeking Alpha and publishes a REIT investing newsletter. I think you can learn a lot about the financial and accounting side of real estate this way.

Anyways, it doesn't have to be either or. Both are good potential vehicles for investment and they each have their pros and cons.

I own Realty Income (O) and it has done well for me. Approx 5% dividend yield, shopping centers diversified across geography and tenants. Long history of paying dividends and raising them every year. I own it in a taxable account. Qualified dividends are taxed at 20%, which is lower than ordinary income rates which 401k's and traditional IRA's will be subject to when making withdrawals.

There is at least one other Dividend Aristocrat in the REIT space, HCP, which is in senior care. I'm looking at that along with HCN and SNH.

I'm researching companies that have exposure to the sunbelt and Austin, Texas in particular. Whitestone is one. It's a small cap. Pays a 10% yield and it's got some growth potential.

The market was spooked by the threat of rising rates late last year, and so income investments like REIT's have sold off, presenting an opportunity for savvy long-term investors to get good yields. Many REIT's have shown relative strength in the recent sell-off.

All these have multiple risks, as do any investments. Do your own due diligence.