All Forum Posts by: Sebastien Hitier

Indianapolis, Kansas City for returns, 

DFW, Charlotte, Florida for appreciation.

The risk of finding someone incompetent is much higher than finding someone dishonest. 

I would recommend to buy from an established tunrkey vendor with 5Y+ in this business. If you go for one of those fly by night operation that just started a year or 2 before, you are taking the risk that they do not succeed as a business. 

You also want a PM that has at least 200 doors, and 4 people in administrative roles (not just a sales guy and his friend). There are great resources on internet on how to vet a PM or a turnkey.

Risk also varies with property classes, class D are the most risky. You may want to establish some normal landlord experience before you move into that.

Do you have a portfolio lender you'd recommend for buy and hold?

Preferably a lender that can finance a lot of houses in many states.

1,2) Every book says that a LLC (filing as partnership) is a disregarded entity for tax purpose. So there is normally no tax benefit. A tax specialist can tell you more

3) You have unlimited liability instead of limited. Also joint ownership is a legal mess, having a partnership allows you to define who is the general partner rather than having all beneficiaries having their say. A lawyer can tell you more.

4) never heard of that.

interesting point of view: 

what asset type and size do you think currently offers the best return?

I suppose it would depend whether you look at the market pre-2006 where the developer was making all the money, or 2011 where foreclosure meant many SFH prices were up fr grabs.

Since we talk about capital accumulation, how do you think the average cap rates (and 15%-85% quantile) for large asset compare to similar class SFH?

Las Vegas or Orlando had been growing very fast until 2006, and there was a large inventory of new houses built for a homeowner while credit dried up. Valuation was not supported by rental yield or a rental market. Investors were scared as the narrative was that vacancy could stay there because these were holiday destination.

Memphis population does not grow so much, so the question is not whether people will be able to buy houses, but whether some renters will lose job and get lower pay, putting slow downward pressure on their pay.

Memphis blue collars will pay their rent, the risk is more a long term risk that rent (and therefore value) does not increase as quickly as other places. It is all a question of yield. Arguably, the long term pay increase differential between class A and class C dwellers is no more than 2%.

For some places (Miami, NY) lifestyle reasons, and for other states, US is currently the highest yielding developed market, and it has a very well developed real estate service industry.

Toronto, Montreal and Vancouver are very nice too, but they are relatively low yield compared to many places in US.

Hi Mayda, 

At such price points, performance depends on property manager and the kind of contractor handles your rehab and repairs.  

What kind of rent do you expect to receive from a 30k-50k property? 

In this kind of investor only market, you will have to allow for annual replacement reserve for fridge, HVAC, roof etc, as you can't count on some homeowner buying from you at an inflated price before these expenses come. 

I read an article on bp where someone was suggesting there is at least a 3k reserve per year needed for any house, no matter its price (ensued a big debate as to whether this was 2k or 4k).

I'd be interested in what experienced investors in these kind of properties do set aside as reserves and what kind of formula they use (per bath/sqf?).

Rentals with ample reserves for vacancies seem a very good bet. Most crisis come from investors being squeezed by margin calls and interest reset, so you need to make sure you are safe on this side. 

Real estate works on multi-year trends, so have you tested whether it is preferable to buy precious metals only when there is a crisis, and keep buying rentals otherwise?

If one wants to refinance a few SFH that are owned by LLC, what kind of competitive terms should one be able to obtain with very good credit?

How does the picture change for foreign based investor with very also good credit but no credit history (do they just lower the LTV? or also increase rates)