All Forum Posts by: Pete Barrow

"I personally wouldn't buy a house if there wasn't some aspect of appreciation."

Same here. Meaningful cash flow is harder to come by than people think. The real money comes when you wake up one day and notice, "Hey, that place is worth three times what I paid for it. I guess it's not a hold anymore, it's a sell." 

You cannot pay retail for the house and hire out the rehab to a contractor and expect to refi out all your money. Even if a neighborhood is rapidly appreciating, your house is not going to go up that much in the few months it takes you to rehab it. 

You need to find deeply discounted off-market deals, rehab well but economically (maybe with your own crew.) The hope is to end up with a rent-ready house where your total investment is well under appraised value. Not easy to do that.

You need to keep saving money. Buying a place and not having adequate reserves is dangerous. 

The "analysis paralysis" is your brain telling you that you aren't quite ready, and it might be right. 

Keep saving and learning...from successful local investors, not just books and podcasts. 

Yes. Make sure the guy who puts it up knows what he's doing. If he nails it wrong it can blow off, bulge out, or show gaps. If he trims the windows wrong, you'll get water / rot problems. 

About $35k including rehab, rent $750. The days of deals like that, seem to be gone. 

No, gentrification is where money pours into a distressed area, a lot of rehabs and new builds get done, a bunch of hip new eateries pop up, eventually Chad and Stacey move in and it ain't the hood any more. 

When an out of state guy buys one overpriced isolated rehabbed property in the hood, pays retail for it, pays for professional management, pays top dollar plus a markup for all repair work, and watches while the hood remains the hood, that's called losing money.  

I don't know anything about this company. But Steve L is pretty well known to be no-nonsense. If he says be careful with this business model, you might want to be careful with this business model. 

These are two completely different questions. The way I understand it, at least in my town, C-class includes most working class and a lot of lower middle class housing. That's probably at least a third of the city. The neighborhood I live in would probably be called "C+ class or just breaking into B class." There's a mix of blue and white collar, unemployed and sec 8, all types of people. There's some crime but not much, some rundown housing but a lot of rehabs and new builds. 

What I'd call "war zone" is much more uniformly bad. High crime, poverty, hopeless.

The strategy for C-class rental success is to try to stay toward the upper end of that class, provide attractive properties to get attractive tenants, maintain stuff well to keep those tenants and, in particular, be very careful with your screening in the first place. Keep maintenance and management in-house for quality at lower cost. Being local and hands-on gives you a big advantage.

I have no suggestions for how to invest in a D-class war zone. I know people who are succeeding in these areas, but I don't envy them. 

Looking at the numbers, I can't see any reason to keep this place, especially considering what could happen to those numbers in any kind of correction. 

If you're thinking about keeping it just because already have it, that's not really a good reason. 

The one thing that could change the dynamic is if you have some reason to believe that the area (Lafayette OR I guess) is radically undervalued and is bound to experience a huge economic surge in the foreseeable future...like if they're about to move Microsoft there, or make it the capital of Oregon. And if you are the only guy who knows about this, so it isn't already "priced in." 

It can be very hard to figure out just how much active k&t you have. We bought a house once that appeared to be wired in Romex. Figured out later that the seller had spliced Romex to k&t inside the walls. Every wire you could see was Romex. Every wire buried in the walls where you could not see, was k&t. So assume the worst.  

At some point, you do have to dive in and get that first property. There a lot that you just will not learn until you start doing. 

At the same time, if you aren't as prepared as possible before you buy, that first house is likely to be your last, and a very bad experience. 

I think it's very important that you get out and talk to some actual people before you make a move. Print some cards, go to meetups, and get good at walking up to people and saying, "Hi, I'm Ben. I'm making a start in real estate. Can you tell me a little bit about what you do?" 

For whatever reason, a lot of people in this business seem willing to spend time sitting down with noobs and answering questions. Maybe some kind of mentoring can come of it, especially if you have some service you can offer in return. 

But be careful and skeptical. Most people out there, and many on here, will be selling you something. 

And don't be too hasty. A lot of smart people think the market is peaking right about now. The deals that were everywhere three years ago, are very scarce these days. We are looking at hundreds of houses to find one that we want. To succeed in REI, you have to have some sort of edge at every step of the way, and that starts with the purchase. If you buy at the level we're at right now, and pay retail, you are off to a very bad start.