All Forum Posts by: Paul B.

You also want to be in a landlord-friendly state. All other things being equal, would you rather own property in an area where you can evict someone in a month if they fail to pay the rent, or an area where it takes 6-9 months? 

Others have already said it, but sell them on the advantages of multi-family over single-family. I invested passively in a single family rental, and it went well the first year, then the tenant skipped town and wrecked the place. It's been sitting vacant for over three months now. No income! The property manager doesn't seem to be very good to allow this to happen. I had already made the decision since then to focus on multi-family, but this issue convinces me I was right. If this were a 100-unit apartment complex, I can think of two advantages off the top of my head:

1. One bad tenant only impacts 1% of the income, as opposed to 100% with my single family.

2. A complex that large can have a professional property manager, who would never let a unit sit vacant for three months in the hot DFW market. I bet a good PM could turn over a unit and get a paying tenant in there in a matter of a few weeks! A lot of PMs in the single family space just aren't very good. I don't think it's a great business model. Even charging 10% of rent, they don't make much money, so you can't expect them to perform well. But when you have 100 units under one roof, you can have professionals on site for something like 5% of rent...cheaper, and they do a better job. 

I bought my first home in the mid-2000s, near the peak of the bubble. It was a condo close to my job and in a neighborhood full of young people. I figured it would make a good rental property whenever I decide to move out. Despite what people say about condos as an investment, I think they work in certain markets, such as Boston. There were even signs of gentrification on the horizon. I didn't have the mindset of an investor and never actually did a cash-flow calculation. Besides, it was a home, not an investment, so I would have bought it anyway. A few years later, my job sent me out of state, and I became a long-distance landlord. The property never cash-flowed, and the value only climbed slowly, unlike other neighborhoods in Boston which have skyrocketed.  A decade later, I am just about breaking even on cash-flow, but the appreciation and amortization have put me far ahead. But strictly as an investment, it hasn't been great. The gentrification still hasn't happened, and a savvy investor would never buy the property based on the numbers alone. I'm mostly holding onto it so I'll have a home if I ever return to the area.

Two years ago, I decided to acquire more properties, most likely in the hot DFW market where I live now. I got my feet wet by passively investing in an LLC that owned two single families. The cash flow was projected to be good, and it was in the first year. Year 2, tenant skips town and trashes the place. We're at three months vacant now, and the rehab still is not done. This is prime leasing season, and the property manager doesn't seem to be showing any sense of urgency. I don't regret the decision to invest with this group. For a small entry price point, I got the experience to lead me to the conclusion that single families are not for me, and am totally focusing on multi-family now.

There are my two stories, not of colossal failure, but of sub-par results. Let's hope that nothing happens in the future to dwarf these ho-hum tales!

 If you want to learn about investing in multi-family, Brad's event is great. If you are already experienced in commercial and want a full seminar on syndication, then look for something else. Brad teaches about multi-family for two days at his "R2R" events, and syndication is a big part of it, but he does not do a deep dive into the subject. On the other hand, you would network with lots of people experienced in syndication, so that alone could be worthwhile. Brad often cites Gene Trowbridge as an expert on the subject, so any books or events Gene does should be worthwhile. I've also heard good things about the Real Estate Guys event that the OP can't make. 

 It wouldn't shock me if some see that as a good thing (if it's actually happening). Right or wrong, there will always be some who blame investors for distorting prices, and would rather see more owner occupants in a community.

Does a true "motivated sellers" list even exist? It seems too good to be true.

Yikes. I was trying to rent a unit at $1450 (what I believed to be the market) a year or two ago, and Zillow said $1700. Today it says $1800. It got a lot of interest, but no takers, and as soon as I lowered it to $1350, I found a good tenant, which indicated it was finally priced correctly. I wish I waved around the Zestimate to all the prospective tenants who walked through. 

Hmmm, I always thought Zestimates were too high (and estimated rents too high also). Apparently they are too low in other areas. Does anyone try to protest their property tax assessment using the Zestimate, in cases where they underestimate the value?

Most successful real estate investors could have excelled in a number of other fields. The gurus and seminars often draw people who are broke or unhappy with their lives, and are looking for an easy fix. In many cases, whatever weakness got them in that position (lack of focus, lack of drive, failure to take responsibility for their destiny, etc.) will also make it difficult for them to succeed in real estate. 

Not a crazy plan at all. If you were sure you wanted to stay in the Bay Area forever (in the same place), then it might make sense to buy something for the long term. That $1,000,000 house that seems crazy to buy today could be $2,000,000 in the future. But if you're flexible, it's best to stay flexible. 

I'm following a similar plan in Dallas. My neighborhood keeps getting more expensive, and it would have been lucrative (in 20/20 hindsight) to buy when I first moved here. But I don't want to be tied to this area, and Dallas will never have Bay Area real estate prices, so I know I can always afford something in the future if I did decide to buy.