All Forum Posts by: Ray Johnson

I don't invest in the C-, D Class neighborhoods. I consider these to be a specialty real estate class since they require more than the average type of landlord experience to succeed in this RE investment class. If you're going to use a PM make sure they have dealt in this tenant base for a while.

If you're really interested I would recommend taking the plane ride from FL to Cincinnati for a few $$ and check out the property and neighborhood. Make it a long weekend checking out the area during the day and night on Friday, Saturday, and leave on a Sunday. Look at the entire neighborhood, not jut the block your property will be on.  

I'm not sure what the $2.5 million in SFR real estate equates to, If you're in certain parts of California, it could be one or two properties leaving no room for alternative plans, however if it's in the Mid-West it could be 10-15 properties with room to sell a few and do your project. I would not recommend using your 401K to cash-out for the project. try using your 401K as collateral/leverage for any new loans to do the project and save yourself the 10% penalty, and tax hit.

Not sure may people recall it use to be illegal to be homeless in LA, mostly to prevent people from living on the beaches, and to control the mentally ill as they were released from the Downtown facility after stabilization. The Beta's (homeless advocates) felt this was an unjust assault on the human rights of the homeless by not letting people live on the streets if they wanted to, and criminalizing the homeless was also unjust. The homeless advocates were successful and policies were changed to make it legal to be homeless in LA County. Even with the way the county is today with some areas looking like a third-world country, I see these same crazy advocates saying we need to leave the homeless alone and let the live on the street if they want to. The only policy change I've seen recently is making it illegal to be homeless near schools. This is one of those issues where the advocates had a linear focus, and never thought about the big picture, or those outside of their direct cause. 

On the other side of this issue, February 2020 my company engaged Los Angeles on a PPP to build an apartment building on a lot they own that hasn't been used in 47 years, it went to the city council housing committee as they have first right of refusal before it can go the PPP route. The council said they will do an assessment to determine if they can build an affordable project themselves via the contacting route. Flash forward almost three (3) years, the lot is still under assessment by the housing council. If they had said yes to my company, there would be an apartment building there on the lot right now instead of trash, and homeless people sleeping in front of the fence. 
The only thing that moves quickly is if you want to contract to build those 12X12 home depot like shacks for people to live in at the tune of $150K - $200K per unit for the taxpayer.    

@Micah Jackson If I'm reading this correctly, you have a little over $2 million in equity between the three properties and want to scale. Why aren't you looking to transition into a mid-size Class B apartment project in a decent size city?

@Kai Soremekun Isn't this what those reverse mortgages for seniors is all about?

Not sure which state the property is in so the $100k equity loan would mean different scenarios are in place depending on the location. If it's in Los Angeles where the house may be worth $900K she has a problem with a simple and easy solution.

If the property is in one of the cheap Midwest, or South States, the $100K equity loan may have less value in an overall deal.

@Christopher Rucks Yes this happens. In my experiences, I've always said no. If you appear to be a committed investor and running a business, the agents will not charge you because the better option is the long-term business relationship.

@John Zurzolo Depends on where you're planning to buy. If you're buying in Boise Idaho, you got some time to wait to buy, If you're buying in Newport Beach, CA. there won't be much of a dip so you can buy now.

Like everyone else has said, don't waste your time trying to time the market.

@Catherine Maria This will depend on where the asset is located. If you're in Los Angeles the rules are very strict and favorable for the tenant.

While the allure of an already rented asset is nice to have, you've encountered the downside of an asset with under market priced tenants.

It's too late now since you've purchased the building, but the typical process would be in your financial projections to account for removing the tenant at the end of the period, rehabbing the unit, and leasing the unit at market rent. Factoring this in will always give you your true cost of getting to market rents. And what you should pay for the asset. This is always your easy out for this current scenario regardless of the location.

As others have said, give them notice that you're rehabbing the units, they need to be out by X date, and run your business.

I will add that I have seen scenarios where tenant advocate representatives, and Courts go against the landlord when trying to remove tenants during the holiday season. You've got a little over a month before the Thanksgiving, Hanukkah, and Christmas season begins, hint hint!

@Christina Luton If the numbers have some fluff in them, they can't tie back to the Financials, and they aren't willing to take a lower offer, they are looking for a sucker, an inexperienced investor, or a gambler to do this deal.

I see deals all the time that are crap, yet I see people buying them, I also see these same assets showing up for sale 3-5 years later when that gambler bet didn't payoff.

If you're an investor, and your intent is to use the property as its current use type, I wouldn't do this deal as it is bad business, especially in this category.

@Sam Fowler I would say look to buy now. As a buyer you're going to be in a good position as properties are sitting on the market longer, and selling after multiple price reductions.

In regards to all of the interest rate talk, we are still below the historical average on mortgage interest rates. Purchase now and if rates were to lower in the future, you can always refinance.

Lastly, your lease expires in February, I've had great success buying in January, February, and March as there is far less competition. The year-end equity placement buyers are done, and the family buyers are waiting for Spring/Summer.