All Forum Posts by: Robert Whitelaw

Howdy Folks,

I wanted to reach out to see how many folks that have purchased multi-family properties required in the offer that the units be vacant at close of escrow.

I realize that it all depends on the context. However, I have found that in recent transactions, this request is needed so that work can be done and rents can be brought up to the market level so that the property will even cash flow.

To answer the original question tho - No - it is not normal to lose money on a deal. The point of the deal is for it to be positive cash flow for you.

If you are talking about multi-family deals, it should all be about the math. Unlike SFRs, there should be ZERO emotion involved. If someone is going on about the sentimental value of their duplex, that might be your que to move on.

Right now, the reality is that finding properties that flow with a decent ROI is tough. At least this is the case in my area. Its nearly impossible in the heart of Silicon Valley. However, as of this week, I am finding way more multi's coming on the market and just staying there in that market. I keep an eye on them and will usually reach out after 30 days to get a feel for how soft their asking price as become. But in some cases, the price would have to go down by several 100k for it to flow.

Quote from @Daniel Shuler:

This is something I've been seeing a lot of lately that leaves me scratching my head. Sometimes I feel like "Am I missing something here?". What I'm seeing are numerous multifamily properties, brand new, old, updated, not updated, that are listed that even after a 20% down payment, with today's interest rates, wouldn't even cover the mortgage, let alone all of the other things you may need to account for like CapEx, PM, etc.
How are these sellers/realtors coming up with their prices when the numbers don't seem to jive for an investor?

This is a great point that I am seeing in my market as well. I do a pretty comprehensive analysis of properties and when it comes to multi-family units, it is all about the math. I am working with a sellers agent on a property I found last week and I simply sent them my breakdown. It simply does not pencil out as a good investment at the current price and the seller is still trying to stick to their price right now.

The agent suggested putting more down to make it flow, which then kicks ROI into levels that don't meet any reasonable minimum. I laid out both scenarios for them with data and I am waiting for a reply at the moment.

Of course, this is before even SEEING the inside of the units! They are not allowing any viewing until there is an accepted offer. I cannot recall the last time I did a deal like that where I did not come out insisting on concessions from the seller.

One issue I am seeing feeding this is real estate agents that are clueless about multi-family investing. They then set very poor expectations for their seller clients and if any creative solutions come up - it is deer in the headlights time for them.

On the upside, that all spells opportunity for the folks that are chasing the right deal - it just requires a greater investment of time on the negotiating side.

The property taxes question is a pretty quick google, such as:

https://www.investopedia.com/a...

You need to kind of get a feel for your preferred parameters. Some questions to ask yourself:

- Does distance matter to you? The further away the property, the more likely it will be you need to find a good property manager.

- There are areas in California that would work for you in terms of property cost. Stockton and Modesto are markets I look at for affordable investments for my starter investor clients. I did a quick search on realtor.com and found a good number of choices in Southern California that you might want to consider if you want your first investment to be closer.

- Consider duplexes. So much more bang for the buck and in addition you can find duplexes that "feel" like SFRs. Here is one in Victorville, for instance:

https://www.realtor.com/reales...

Hope that helps,
R

Howdy Folks,

I am looking into getting a multifamily unit in Arizona. Specifically Phoenix or the surrounding communities. I wanted to get a handle on what recurring expenses I will be encountering there. Is there a good site out there that breaks down this kind of info? I am looking for those little gotchas that can surprise you - like in some areas, the landlord is required to pay garbage or water for some reason.

Cheers,

Robert

Hello All,

I realize this is a post that may generate a whole lot of churn, but I figured I might was well cast the net wide! I have a few markets that I have been keeping an eye on for a while that interest me. The greater Phoenix area, Boise and a few others. However, I wanted to check the room and see what your go to markets might be right now to invest in. This would be for someone with about $70k in cash to invest who has excellent credit. Areas west of the Mississippi would be preferred, but anywhere in the US is fine if the math works out and the ROI is there.

So, what areas are you most excited by and why?

Cheers,
Robert

Howdy Folks,

I am looking into getting a new investment property before the end of the year. Likely in a new region I have been keeping an eye on for a while. I was just talking with some lenders that work in those markets and the best interest rates I am seeing are about 5.125%. This would be in Arizona. Figured I would check in here and see if anyone has a lead on better options for investment property loans.

Cheers,
Robert

I am very familiar with your take on this and I don't see any good common ground we can find here.

However, I will say that if the goal of your business is to make money, you are missing the mark. The goal is to provide a service that people will pay for - without that, the whole make money part will fade fast. A subtle difference, but one that makes all the difference when it comes to being able to sustain a profitable existence.

Also, if you equate the most satisfied customers in the world with having to work for free, that kind of informs that whole attitude. This does not mean I am willing to work for less, I understand the value of what I provide and getting paid well goes right along with it.

If you are doing it right, you are charging for your services AND getting the most satisfied clients in the world.

But hey, as I said before, staying focused on the bottom line works for most folks - you are in the majority. My way works great for me and I feel like it is a better path that gives me a good foundation for longevity and sustainability in my business.

Originally posted by @James Wise:

 It's business. The goal is to make money. The more money one makes the better they are at running their business. You're kidding yourself if you believe differently. I am guessing you don't actually believe something different either. I am thinking this is some softball "I care more about my clients than the next guy" sales pitch. If you want the most satisfied clients in the industry work for free. They will love you.........................Lame.

Hey @Gail W,

Thanks for that Gail. There is also another way to think about this - in case anyone more bottom line oriented needs a nudge. One of the responses I get from agents when I talk about this is that "It does not scale". Of course, they are talking about wanting to become the agent that closes 300 transactions a year. This is correct, it does not scale. Surprise, it shouldn't. Let me tell you what I know about industries that are designed to be able to 'scale'. To scale is to create a path of delivery in which those efforts can be made easily duplicated and/or automated. So, the agent out there that is trying to work "At Scale" is literally making what they do completely replaceable by automation - which a number of companies are trying to do.

What I want to create is a service that has clear data to backup its benefits (I routinely save/make my clients far more than my fee - this should ALWAYS be your goal). But, I cannot accomplish that at scale. I limit the number of clients I take on at any given time in order to assure that I can give their transaction the time and effort needed to yield the best results. That does not scale - and if it did, I should be worried for the future of my position.

More to Gails point, agents do not start out the twisted creatures they have become. They were trained that way. I have gone through the onboarding training for a couple of different national franchises and NONE of them provided any kind of training relating to excelling at the things I previously listed as the metrics you should care about. You get enough of that kind of training - which can and does work - and you start losing touch with providing a quality service rather than having an effective client acquisition process. 

Originally posted by @Gail W.:

@Robert Whitelaw

@Robert Whitelaw I started a thread asking how I can get noticed by Real Estate agents and I got some very good advice there. In a nutshell the responses were how to provide evidence of value to them. Which was what I asked for.  However you have given me a list of metrics to use when interviewing agents. The things that matter to me. I wanted to thank you for that.

I feel that if agents and brokers continue with the mind set that their own bottom line is the only way to measure success, and they are not taking into account the clients perception of value, this is most detrimental to the industry in general.

My thoughts have been the same as some others on here that I need to get my license so I can get the MLS and make offers on my own. I don't really want to do that. I would much rather find an agent who will do the work for me, but I have no interest in doing the work so that the agent can be paid their commission. I don't see the value in that.

So here is my 2 cents. And it is 2 cents of opinion that gets me a few thousand bucks in angry real estate agents trying to argue with me pretty much every time I bring it up.

First, we need to admit to ourselves that the metrics we use to measure ourselves have nothing to do with the quality of the service that our clients get. We have managed to sell ourselves and the population on the idea that because I listed the most houses, sold the most houses, earned the biggest commissions or sold the highest dollar amount of real estate in some arbitrary time frame, that we are good at our jobs and clients should believe it too.

Sorry folks, just not true.

I knew a "Top Producer" in my market. They tended to get the most listings and sell the highest dollar value of homes. However, lets review a few things about that agent from when I ran the numbers a few years back:

- If they list a home, it only has a 53% chance to be sold in a market where 87% of homes that list sell on average.
- When they do get a home sold, it tends to be for 92% of asking price. In the market in general, homes tended to get 99% of asking price.
- Once they get a property into escrow, they have a 18% chance that the escrow will fall through. The average in the market is a 13% rate of escrows falling through.
- This agents listings tended to sell after 52 days. The market average was 36.

So in every way that matters to a client, they do worse than the average experience for their market. How much you made or the volume of homes you sold should only matter to you and your broker. Your client does not have a dozen homes to sell, they have one.

And there is the problem. You can be a very successful agent and be very crappy at the actual job of getting clients what they want. So if you want to really focus on your clients needs, focus on the things they actually care about. You already know what those things are, because it has been beaten into you to address them in your listing presentation. Show them that when your home sells, it tends to sell for more than the average home in the same market. Show them how you get homes sold faster than normal for the market. Share how when you open an escrow, it closes, unless your client does not want it to. Of course, have the data to back all that up.

I have shared this enough to know that for most agents, the idea of having real metrics to judge how well we do for clients scares the stuffing out of them. I remember when I first opened my brokerage and I did a recruiting event. I brought up how success would me measured using the criteria I mentioned above and I looked out on a room of people that look scared to death.

Anyway, maybe it's just me. I gave up trying to convert other agents a long time ago. All the current assumptions are so ingrained (and hey, they work if all you want to do feed the bottom line - don't argue with "success" right?)

Funny story to go with this. Way back in the first few years of my career in real estate... it must have been like 1990 or 1991 I was working at a huge national franchise. Three of us were among the youngest in the office and were pretty aware of each others accomplishments in the world of real estate. So one of these folks was showing me his new card. On it, he had proudly placed the cute little medallion thing for being a "Top 1%" agent. In all the ways that was normally measured, I knew it was not true. When I asked him, he dead pan told me "For the month of June, I got the most listings of any Male agent over 6 feet tall in this office." So there ya go.

Before you can be better, you have to want to be better.

Cheers,

Robert