All Forum Posts by: Alexander Szikla

@Lucia Lilac Zoning is a good point which @Andy McQuade brought up but my big concern would be insurance. 

Would such a use totally invalidate your current insurance? Would getting a more robust policy that covers you completely make this economically unviable? Please diligence this before making your decision. 

Have you explored a 1031 Exchange - This allows you to buy another property and scale up while tax deferring the gain. 

Basically, the government says you did a good deal on this one, reinvest the full gains (a "partnership" of sorts) with expectations that both your gains and your tax bill will be higher later. 

If you perpetually do 1031 Exchanges, you never pay capital gains. If you eventually do, that's fine, you got to play with "bigger" dollars at a quicker pace and still make yourself quite wealthy in the process. 

Pros:

(1) Premium Yields 

(2) Parents as Guarantors

(3) High Occupancy

Cons: 

(1) Higher Wear and Tear / More CapEx Requirements

(2) Shorter Term Tenancies

I have issues with BTC in general. People claim it is a great hedge against inflation / fiat currency, but what about gold or silver which have been used as mediums of exchange and stores of value since ancient times. 

Also, Bitcoin can't be "hacked" but the exchanges can and value can disappear or be stolen. There is no FDIC or SIPC for Bitcoin.

Moreover, what is Bitcoin really backed by? Trust - much like the US Dollar. However, we need to remember that the US Dollar is backed by the US economy and military! Bitcoin is basically just "internet points" .

Lastly, Bitcoin isn't even the "best" cryptocurrency available from a technology perspective - there are much better alternatives - it is just the "household" name. 

We are real estate investor here at Bigger Pockets, not speculators. We invest in properties that YIELD. While real estate, companies, bonds, stocks, farmland, etc. all do Bitcoin, Gold, Silver, etc. do not! Something crucial to remember. 

I would agree with the sentiment shown here - Philly has some bad areas and might warrant far more than a 6.5% cap rate.

Additionally, take the numbers provided with a pound of salt. Not a grain. 

Lastly, if this is a portfolio that is not centralized (i.e. a bunch of 2-4 family houses all over the place) then you aren't going to really achieve much in terms of synergy and this will hurt your margins

Tenants might be a bit "tougher"/more demanding

@Jorge Vazquez I understand your frustration, but I do not agree. The number of realtors/agents passing off a cap rate as rent roll (without a vacancy factor) minus taxes is astounding and frustrating. But they are the gateways for deals. Who is more motivated than someone who lists with an agent and will pay their commission! 

Many people, regardless of their field are incompetent, and realtors/agents are people too! In fact, they are sales people - so their most valuable skills are confidence, resilience and presentation. Not the financial prowess or thoroughness with regards to due diligence. 

What you are seeking is a seasoned professional who sees themselves as an advisor, not a salesperson and that breed is somewhat rare. 

I started my career in investment banking then moved to real estate private equity and now invest for myself while also taking on that "advisor" role but I seek to only work with a few committed investors as their "part time acquisitions officer". Some folks are more valuable as "team members" than others and everyone has their own business model and we must be sensitive to that. 

The number one thing you need is discipline. Have conviction in your numbers and be able to back them up.

Don't just assume because something feels right and don't chase a deal just because you really want it to work. 

The number one edge any investor can have is discipline when deploying capital.

Avoiding losses is just as valuable (arguably more valuable) than making gains. 

Always remember that you need to hit 100% return on your next shot if you make a 50% loss on your first shot. 

Yes, every deal is unique and special with its own nuances. And aside from the human factors that are unpredictable (i.e. contractors, subs, tenants) the "financial rules" people apply are just nonsense. 

Take the 1% rule for example. It totally ignore basics like taxes and insurance not to mention things that change by geography (i.e. snow removal, CapEx, etc.)

Depends. Are you relying on wife's income to carry the place? 

If one party has enough income, no need to involve the other. However, if that is not the case, be wary.