All Forum Posts by: Ryan Jenks

@Diane G. - That's a rough hit you took. It sounds like you bought at the top of the market which is hard to make money anywhere you do that. I almost feel like today is the top of the market again. If you bought it at $280k, would you have made money? Do you make any cash flow on your SFR in Union city or is appreciation the only benefit? Thanks for feedback... it's really helpful.

@Diane G. - That part could be hard for me if as I'm a very active manager of my properties here where I live.  I understand no one cares as much as the one who owns the property but IF you could find a PM that did their job professionally then it could work, even though it wouldn't be as good as we would do.   

What was the deal breaker for you even though you had an A class property?  What have you done since that experience in state and out of state?

@Diane G. - It's like going on vacation to a non-touristy location in an undeveloped country.  $3 to feed 4 people dinner seems like a great price all while they rip you off 300% from what the locals pay.  The problem is...$3 is still awesome haha.  

IF IF I found a newer property in a B+ neighborhood that penciled way better than I get locally (and if I could 100% be sure what I was buying hypothetically), then its hard NOT TO buy in other places.

@Maxwell Lee I like bigger pockets because it has enough hype to get you excited but at the same time stories like this (and much much worse) to keep us grounded.  I'd rather hang on to my money and sit poised and ready for an opportunity than lose on a bad gamble.  I haven't given up on out of state yet, but it will be smaller and nicer and with my eyes wide open.

@Joel Owens - Thank you.  Those points are true and helpful.  Older buildings or rougher tenants have hidden (and not so hidden) things that can eat up those potential numbers.  I am going to start to look at newer and nicer properties and see what comes my way.  

I should have pre-screened the information better.  He gave me a Jan-June 2016 rent roll (not certified), he showed the best 2 units and said they were all like that except for the tenant who has been there for 10 years as they haven't updated that one, he filled the last 2 of the 3 vacant units so it would be 95% occupied when I bought it, he was going to take care of the brick work in the back (seemed minor from a glance), and that he was selling this because his wife was pregnant and they were buying a house.  IF IF IF he was telling the truth about 3 other full price offers, then he accepted my offer for only a few thousand less than asking price because I was cash, as is, 30 days.  So @James Green, to answer your question I pushed full steam ahead with inspectors and got a normal inspector, boiler system inspection, sewer line scoped, etc.  I wasn't personally at the property but my agent was.  The mold in one unit was so bad, it got my agent sick (on inspection day) when she went into a unit before the inspector.  She thought it was smells from a meth lab that was covered up/cleaned up but it just turned out to be a very bad mold issue.  There are 10 other expensive deal breakers... I'll spare you the details.

I never signed up for a 100k-200k remodel, just put in new windows and maybe paint each unit as the tenants move out.  I can take a hit, but the deception was so deliberate that it just makes me mad people do that.  Lesson learned though!

@Joe Splitrock It wasn't a turnkey, but needed 50k worth of work and to be managed a bit better.  I knew I would be signing up for a project but finding out the project was bigger than expected isn't the part I feel upset about... it is the fact he led us to believe that it was something it wasn't.   The property wasn't 50% of its original listing price... sorry if I miscommunicated that above.  

I very much agree that a newer property would be the wiser choice for out of state.  

I also very much agree on my #1 lesson learned on this... better pre-screening just like I do with employees and my local tenants.  I should never have started spending money on inspections if I didn't have a certified rent roll.  He avoided this when I asked saying it was all mass deposited with his other properties he manages and it was hard to separate it out.  I was knee deep at this point and was pretty upset because I knew I screwed up at that point.  The inspection just added to it.

I screwed up, I should have known better.  I also realize this is part of the game.  Lucky me to find out now vs later.

As a Californian, I feel, like many investors here, that unless you aim for appreciation there isn't enough cash flow in a property.  You have to invest in D- areas just to get a decent rate (assuming you can run it tighter than a prison and that doesn't sound passive at all).  We don't have the luxury to have real estate that makes sense to invest in across the street.  I didn't save my first 10k and want to strike it rich in the Indy gold rush.  I have hundreds of thousands rotting in this state not doing much...barely keeping up with inflation.  Its not unreasonable to want to go to another state. It may be unreasonable to try to massively remodel a property and rent to a C class of tenants.

As far as @Joel Owens goes, I know he has credentials and is very active on biggerpockets.  And I'll give him credit for saying investing in higher quality projects (syndication or singular) is most likely the wisest choice.  But talking down to me why I would buy trash makes zero sense to him while insinuating I don't care about value is quite upsetting when I come to bigger pockets for the first time with a real life RE problem... a place where you can get differentiating opinions to grow from, but not be smashed down from an arrogant broker while you are trying to get your feet wet in a game that this website promotes.  Joe - your replies make me think and though I don't agree with everything I still love bantering back and forth to learn and grow.  Thank you.

@Matt R. I understand Cap Rate is moving but I was just talking about the basic business principle to sell something for more than it cost you.... I believe getting a cap rate of 6% and borrowing money at 6% doesn't get you anywhere unless you can value add/super leverage or increase income/lower expenses.  But just buy and hold a turn key for 6% and then borrow 6% doesn't get me excited.  Yea, I get 6% on the money I have down on the property, but then I might as well pay cash and have no risk of leverage.  

@Nick B. Thank you for the encouragement!

@Nick B. - True.  If interest only I would make 6% on the money I had into the property.  It is also true that if I forced appreciation, increased rents and reduced expenses there would be even more %.  I realize that you don't make money unless you bring some value to the table and my $ isn't any more special than the next person's $.  Solving problems and creating solutions is where the potential lay.  

I'm astonished by the number of rental properties for sale where they want to sell it at a price for the future or potential the building has rather than the current state it is in.  If it is not blatantly stated, the attitude tends to be... "this property can potentially bring in $x in rent and so it is worth market price as if it already got rent... and please ignore the deferred maintenance".  Is this just from my limited exposure or do any of you experience this problem?

@Jay Hinrichs Thanks.  This is helpful and encouraging.  D class is scary and I can see why trying to make money off people like that is hard.  I know of a local that rents out an apt in a hard hard area where we live but the tenants are more afraid of him than vice versa.... not my style.  It's beyond me why they had a manager literally stealing the rents from them.  It seems like their purchase and remodel were reasonable enough, but managing it was the deal breaker.  Sounds like they needed way better people running that show.

One thing I don't understand... lets say I get 6% cap on a rental, a real 6% cap (not this self managed and no cap x fund version of 6% cap) and I borrow money for 6% from the bank (I know I know, I could get 5% possibly right now... just an analogy)... isn't this like running on a treadmill thinking you are running across town???  I'd make $0... right.  And, no, appreciation is the cherry on top if it happens at all, not why I risk my money and liability to make the bank money.

 One thing I would do, is not do inspections until I have actual financials in my hands and my agent or myself have walked 100% of the property.  I know people always show the nicest units during a sale but this was over the top.  

 I see that @Joel Owens is a very active person on bigger pockets, but how does someone make a blanket statement saying they don't understand why anyone would buy anything under 100 units when there are a ton of people on here always bragging about their investments of all sizes.  If someone says that, I would expect to see the logic behind it or at least the interest rate they proclaim can be made on nice properties that they currently are doing.

In your experience with C and low B class doors, how close were you and did you have a professional property management service (or were you super hands on)?  What is the most risky part of mid west multi that are 10% Cap (that's what this could have been)?