All Forum Posts by: David Faulkner

Just find the WORST property managers in town, and find out what properties they are managing ... that right there could be an endless source of deals IMO ... eviction courts may also help locate them ... did that absentee owner you bought from or the property management company they were using have other properties under management I wonder? ... Oops, more secrets out of the bag :)

I would get started as if you didn't have a lump sum to invest. If you want to go multifamily, then "house hack" a 4-plex with your brother, put 20% down, you two share one unit, fix up hands on yourself, if you do hire some stuff out then act as GC and oversee it, rent out the units, manage the tenants yourselves. Get your hands dirty, learn the business, then apply those lessons to slowly but surely ramp up the business with the remaining funds. As an added benefit, it could be inheritance from your mom that brings you and your brother together even more to start and learn hands on the REI business ... I think she would've been pleased to see such a plan like that come together ...

Yep, and that is why locals should LOVE absentee CA investors ... they don't know the market, they overpay when they buy (which is great if you are a local seller), then lose control of management, and become distressed sellers at a discount (which is great if you are a local buyer). Its a tale as old as time, and yet when folks like me advise other newbies that investing in multi-families out of state is risky, they look at us like we have lobsters crawling out of are ears. Guess that is the REI circle of life, though, and it keeps the locals well supplied with good deals. LOL.

Interesting angle on things ... I'm wondering what happens to some of those homes and debt AFTER something like this happens. For example, if the insurance company declares the property a total loss, pays the homeowner the equity they are owed, does the insurance company then own the property sub to the bank financing, or would the insurance company also have to pay off the bank and own the property free and clear, and then sell it off similar to how a bank might with a REO?

Or alternatively if the owner walks away, and the bank decides to sell the NP'ing note ... does the insurance coverage convey with the note since the bank presumably required to be listed as additionally insured on the flood insurance policy (if the property was in the flood zone and one was required)? Does that mean that the new note holder/investor may also be entitled to some potential insurance settlement? It seems by the same logic that in theory and by the same logic that the note investor should also be insured against such a loss if they held the note BEFORE such a flood occurred as well ... that is why banks force place flood insurance if it lapses on properties in a flood zone, right?

You never know if, when, how much, and how long a market will crash, so I don't advise waiting for a market crash to get started. I do, however, advise waiting until you are able to find or create a great deal that you can afford before investing, and those type of deals don't just fall into your lap, you must work and actively seek them out ... the sooner and harder you start looking for them, saving for them, and educating yourself on how to spot and find them, then the sooner you will find them. That can happen in a hot market, or it can happen in a crashed market, and any and all points in between, and a true investor will be willing and able to pull the trigger on such a deal at any time and any market condition. The only thing about a crashed market is that it may make it more likely to find such a deal, so in actuality it may very well take until that happens for a newbie to find one, but that doesn't mean you shouldn't look for a great deal because that hasn't happened yet, and it doesn't mean that you shouldn't invest if you find one of those before a crash happens, it just means that you should NOT buy anything at any time that is NOT a great deal, or buy anything (great deal or not) that you can't realistically afford to hold through a downturn under some reasonably bad analysis stress tests. A great deal will insulate you to a large degree from any short term market fluctuations ... in fact, that is the very definition that I use to analyze if I have in fact found a great deal ...

Then my advice is do NOT sell the stock. You now have a low risk, blue chip security, with a low tax basis. Selling it, paying the taxes, and using it to leverage up on a single property in a market you don't know well, and then giving up control to a stranger in the form of a property manager is not a wise use of funds IMO. Leverage without knowledge or control is very risky ... and no, you can't gain the knowledge you need by just reading on BP and googling street views and statistics on the market you want to invest in ... and no, you cannot maintain adequate control over your investments when you are a newbie without scale, established systems, hands on experience, in a market that you have to travel thousands of miles to access ... anybody telling you different is likely trying to sell you something, and there are plenty of them out here on BP. Caveat Emptor.

There is an interesting article below that is focused on REITs but has some good analysis that actually argues the effects may be nation wide, and also has some good data on the apartment markets supply and demand fundamentals aside from the effects of flooding:

https://seekingalpha.com/article/4102880-quantifyi...

I still remember distinctly that I was in a Marshall Reddick "seminar" in early 2006 and he had a bunch of guys that were scaling up out of state in Mississippi, that were trying to say how great Hurricane Katrina had been for them since their property prices skyrocketed afterwards ... in retrospect, the supply shock to that market from the hurricane temporarily covered up some deeper supply and demand fundamental issues that would later resurface in a big way, as we all know. 

I'm no expert in the Houston market, but to me, today it has a bit of that sort of feel to it, though perhaps not to the same extent ... the fundamentals appear to have been deteriorating a bit, then you get a supply shock from the Hurricane which will bump prices and rents, but that effect is likely to be short lived. 

When you say "given" do you mean that she inherited the stock? If so, she may have a stepped up basis on the stock and not owe any taxes upon sale. When you say invest in RE, do you mean you are going to be buying properties in or around Lomita?

You need to get over your fear of rehab and force some appreciation, both on rental properties you purchase, and also possibly on flip properties to accelerate the accumulation of capital to invest in rentals. I know some successful investors in expensive areas that employ a "flip 3, hold 1" type model, and they force appreciation on the ones they hold as well ...

REI is NOT a passive investment, at least in so far as getting started buying individual properties go ... you have to be willing to get your hands dirty at least until you can built up your knowledge and business systems to make it more passive. If you aren't willing and able to do this, and you want passive REI, then buy an REIT and be done with it ... your returns won't likely be nearly as high as hands on local, but that will be passive and it least you will be diversified and only leveraged in a manner that is non-recourse to you personally (which is very important if you are truly hands off with no control). Going out of state as a newbie buying individual properties you are applying leverage without control or diversification, which is a recipe for disaster IMO and experience.

Portland should have enough great REI deals to keep you more than busy and profitable for an entire investment career. For out of state investing, all I can say is "Dr. we are going to need more pressure to stop the bleeding!" LOL.