All Forum Posts by: Quentin Mitchell

I have 9 doors in C/C- neighborhoods.  Most are smaller 2 BR units.  They cost less to purchase (2 BR) and repair (smaller sq. ft).  There are generally 2 people living in them so there is less wear and tear.  I update them when I buy and in between tenants and keep them in good repair when a tenant is in them.  I am able to charge top dollar rents and require a 600+ fico score with no evictions in their past.  I have little problem filling the units and average about an 11 - 14% return after all expenses (including Cap Ex and financing).  I use a property Mgr so I can concentrating on Investing and my other job.  It works for me.  The bottom line - you can invest at any grade level with the proper procedures/safeguards in place.

@Quentin Mitchell the LARGE majority of investments I do and see people do are Class C properties. Would highly recommend them for a variety of reasons but mainly that you can make good money if you know what you’re doing.

However, if you’re having to worry about “an endless supply of tenants” you should evaluate your market against others.

@Quentin Mitchell

I own several class C multi families in Ft Lauderdale Fl. Best investments I ever made. Sometimes hard to manage, but over the course of 5 years I’ve leaned to ignore lots of the tenant nonsense and get important things done.

On point #5. I went in thinking I could help make the neighborhood better by making my properties better and over the years I’ve become disillusioned. You can only help people who will help themselves. My tenants in class C aren’t interested in caring for new improvements, they’ll most likely take something new and improved and destroy it. I’ve learned that my Class C units simply need to be livable, understanding this has made managing and maintaining them a lot easier and cheaper. Most of my tenants receive government assistance and would be happy to find a reason to sue me, even when they like me. I am diligent about repairs and respect my tenants and trust me they will work to find reasons to fault you, even make things up. Once you accept these facts, get yourself a few reliable handyman who are willing to work with your tenants and ignore the verbal abuse that you’ll soon realize has nothing to do with you personally, you’ll realize you have cash flowing properties that like every other class of properties have problems. I have class A properties that are less problematic but cash flow lots less. And as far as tenants go, well class A can come with its own interesting personalities. Personally I didn’t get into rentals because I assumed they would be “passive income,” I knew they would come with some work. It can get bad sometimes but it’s always better than working 9-5 for someone else. I couldn’t afford to purchase a bunch of class A rentals when I got in, it didn’t make sense. I think getting in at class C level made me tougher, thicken my skin a bit. They’ve also appreciated a lot more than class AIf I could purchase more class C right now, I would. Housing organizations call me everyday to see if I have any available units. Fully booked and looking for new rentals, but unfortunately everything is priced too high.

Fantastic I myself am a fan of C's because of then entry price and honestly the experience they provide. In regards to #5 I was saying it's a plus not the main objective.  You are right if people don't want to be helped you can't, but If you can make money and help those that do want help it's icing on the cake.

@Quentin Mitchell not sure I buy #2. Lots of these types of tenants work in the construction industry in my area. During the last recession many were out of work for quite some time.

...If you follow your market closely, you know exactly where gentrification will happen. Timelines can be affected by local policy makers as can areas so its never a “set it and forget it” type plan, continue to monitor closely.

Agreed

@Quentin Mitchell I believe he is talking about living expenses.  If you cashflow 5k/month from your rental properties, but your day to day living expenses total 5k/month (gas, food, clothing etc), then you are net neutral.  Years later you what you are left with is a bunch of beat up homes that are difficult to liquidate, and if you do sell them you now owe all that depreciation recapture. 

There was a thread just the other day about an investor who was stuck after numerous years with a bunch of low end units that he couldn't get rid of without taking a loss.

@Quentin Mitchell

What I meant is, group a few doZen of them together that over a 5 year hold will cashflow $100 each monthly (round to $5,000) and then yes, you could use that to “live on”... but at the end of year 10 you’re left with an absolute garbage sfh that literally has zero value (physical buildings DEppreciate) and you’ve got some land value (land Appreciates)... so you may have paid $75k for both land and sfh to start, you ended up literally eating and paying for gas etc with all your “cashflow” and now in year 10 (or sooner for D class) you’ve got a knockdown little box, in the hood, beside 400 other little knockdown boxes...

Whereas buying in a B neighbourhood, the useful lifetime of the home if managed well will be (at minimum for a comparable asset) quadruple and you’re building genuine wealth instead of living paycheck to paycheck on monthly ”cashflow” from the hood rats.

You will never build genuine generational wealth on cashflow. You might live on it just fine, but that isn’t wealth any more than your day job paycheck is. By the time you’ve got our D class fully paid off it has nearly $0 value. Stuffing your kids stockings with the title to a $0 house likely isn’t your target