All Forum Posts by: Patrick Britton

Do you think it's appropriate to place a tenant whose primary source of income is from new memberships of a multi-level marketing company?  What if the tenant destroys the air conditioner, let's say with a hammer, and then demands that a new one be installed at someone else's expense. Is that fair? 

Is it reasonable to cost $300 to change an electrical breaker, that I could do myself for $25?

Is it reasonable to spend $200 on lawyer fees trying to fight a tax bill you never asked to fight?

Seriously, this is an absolute joke.

If you have to invest in real estate (and at this point I would advise anyone not to) buy a house in a cul-de-sac in a subdivision in a good area with good people. Don't try to be fancy or smart or clever and try to take advantage of a minor imbalance between risk and reward. Buy quality.  

Stay away from all those neighborhoods that are not a B plus rating. there is a risk associated with bad neighborhoods that cannot be quantified on an excel spreadsheet.  

So if anybody is looking for a super easy way to lose money here's my suggestion. Buy a property in the South side of Chicago and wait.

With enough time, the tenants will stop paying rent, destroy the place, and then not leave forcing you to paying all the legal costs and deal with an eviction.

Here’s the procedure with a little more detail: You buy a house, fix it up and rent it out (to someone who cannot afford to buy their own house). After a few months, the “renter” stops paying and gets to live there, free to enjoy the utilities that you’re also paying for, and then once this person finally vacates the house will be utterly destroyed.  Also, they will sneak a pathetic little half-dog in, which will be sick and poop everywhere.  

I truly consider myself to be a bit of a liberal socialist but because of the “renters” in the South side of Chicago have turned me into a vindictive, contemptuous, borderline-nationalist/extremist who is never, ever going to rent to anyone down in that area of the world. These people are rotten to the core, have no sense of decency, responsibility or good judgment.  

I didn't used to think this. I honestly thought that I was providing a service; a house that someone could live in, for a price that's less than the cost to buy it. I win and the renter wins. It is a win win situation, or is it not?

No it isn't, you're giving everything to these tenants. all you're getting in return is a massive tax write off.

But it's not all bad news because this is what you simply have to do:  Buy a house in a subdivision in a cul-de-sac and rent it to a family that has kids and pets.  I know, buying a house for a family in a cul-de-sac of a respectable neighborhood is gonna cost a lot of money. But I would rather spend a lot of money on something really good than spend less money on something that is going to turn into garbage.  

My "net" income for one of my rentals was $330 before PITI, PM fees ate $140 of that.

NET was reduced by 43%.  Consider that the next time you think someone else can manage better than you.  

Lol. Most really experienced agents of +10 years are degenerate gambling drunks and shouldn’t be trusted. I only work with young and hungry. Too much complacency, especially when things get tough with realtors. No offence, I had to be a realtor for a while since I graduated with a degree in economics and couldn’t do anything with it.

many years ago, before I got involved in rental properties I, like most of you educated myself as best I could. I read all the bigger pockets books from all the “gurus” and “non-gurus.” I did significantly more due diligence than what was comparable to my peers at the time. A large portion of my background involved investment analysis.

unfortunately, although my homework was correct the underlying assumptions were not. let me explain…

I should be making around $600 a month net income per property but that gets eaten away thanks to a $10,000 expense here or $20,000 in clawed back rent, or a $1500 expense there or multiple $250 inspections and visits and other nonsense.

Since these sorts of expenses never occurred to any house that I actually lived in I began to wonder if there was something inherently wrong with these houses in particular.

And there is something wrong with the houses I bought: they're all too old

Sure, I thought if I just got a home inspector and a contractor I could trust that all would be fine. A property management company should also be able to assist in this regard. Well, if I had to do it all over again I would buy a $350,000 house in a cul-de-sac in an area where the median income is at least $70,000 and i'd manage it personally. That's a safe investment. Buying a $50,000 house, putting $40,000 into it, and then renting it to people whose median income is near the poverty level is not a safe investment. sure, I wasn't out of pocket when I bought it (BRRR) but I certainly will be out of pocket when stuff starts breaking down.

The protections you believe you have through property managers, home inspectors, attorneys and real estate agents are all a façade. There is nothing there.  Keep that in mind when making high risk investments.  Building up your “team” in an area is an absolutely pointless endeavor.  

I do not believe I am particularly special so I have to assume that my experiences are on par with others. I empathize for those in similar situations as I feel that I have been deceived. Not necessarily by real estate agents, but more by this culture.  

In short, my mistake was assuming that I had various protections built in that would allow me to invest in higher-risk areas but with less total risk.  

I recognize it's a little more expensive, but I would buy new builds only.

replace your tenants with guards dogs for a few weeks.  lol

According to excel I should be averaging about $450 net per property per month. This never, ever happens. Real estate rentals to low-income people was a bad investment.  Rent to the rich.  

I'm about to make some loose generalizations and assumptions but hear me out. In the fed's statement today they indicated continuing to increase rates until fed funds levels at 5.1%. right now it is at 4.375%.

Since home prices and interest rates are near perfectly and inversely related, it stands to reason that a good time to buy would be a few months after the Fed has achieved its target rate and sellers have experienced a Thanos-snap dusting of buyers.  Ultimately, interest rates would get cut again which would force appreciation across the board.  It's a long term strategy that might work well for the "most" average house in an area.  

It also means that the best time to sell is RTF now or risk waiting until 2024!!!!!

To those starting out I have a word of warning, trust no one. Every single person you think is working for you or with you or in your best interest, is working in their best interest. This is America. Nobody cares about actually doing a good job. It's about doing just enough so you don't get sued and just enough so that you don't get a real nasty review on Yelp.

The worst offenders are real estate agents. When I was a real estate agent I genuinely tried my best every single time with every client no matter what. Maybe it was how I was raised maybe it was the environment in which I grew up, not sure but nobody does that down here in the United states. Or at least, so few people that they're so spread out I've never met them!   

Attorneys are pretty atrocious as well. You think you have a hedge against your bets by suing someone if they did something wrong to you? Try suing someone? See how difficult it is. See how nearly impossible it is to get a fat lazy lawyer off their fat lazy *** to write a two paragraph letter for $500. Then tell me you're legally hedged.

property managers are way up there as well. That's quite the racket. I wish I owned a business that could just take money from others whenever I wanted. At least though these guys are required to perform some duties even if they're of exceedingly little value. at least they make the paperwork easy when you're counting up how much money they've lost you.

the only people out there who could actually be trusted are home inspectors and appraisers. they perform a service and receive a flat fee. This is really how it should be. As soon as you start adding percentages you incentivize gross inequalities that will exacerbate over time and eventually result in full scale cultural divisions. You wouldn't know anything about cultural divisions, would you Uncle Sam?

So to all those who have got these elaborate plans like I did six or seven years ago with the intention of building a real estate empire: Don't bother. buy a house in your local neighborhood or even better, just do it all a really really rich people do, buy Google and Amazon and sit back and wait.  

Trust me, the pain and hassle and stress and sleepless nights are really not worth it. And whatever your expectations are of any level of performance by anybody in the real estate business, divide that by three or four and I think you will be disappointed a lot less.

Real estate is a great investment, it's just too bad there are so many people able to screw it up.  

sales comp approach.  the income approach might also be considered if there is sufficiently good data, but it is rarely the case with rentals.  yes, im making a lot of assumptions.