All Forum Posts by: Stephen Dispensa

Quote from @Greg M.:

Quote from @Stephen Dispensa:

Where the federal government COULD and SHOULD take action is by investing in housing by offering better benefits to developers to encourage construction. The biggest problem is that we have a shortage of housing stock. Other actions that would help is to encourage competition by limiting the ability of large funds to purchase huge amounts of housing stock by utilizing the Sherman Anti-Trust Act.

We do NOT have a shortage of housing stock. We have an overabundance of entitled people who believe they have the right to live where they want even if they can't afford it. People have no right to live in extremely expensive cities and complain things are expensive. People need to be told the cold hard truth. You can't afford to live here, so you need to move to some place cheaper. Don't matter if you grew up here or your family and friends are here or your job is here. Just because YOU can't afford to live here doesn't mean we should build to the sky and destroy the appeal of the area.

The local governments do NOT want more housing built. State and federal might, but that is because they don't suffer the consequences. What local politician wants the number of people living in his area to suddenly increase? More cars, but same size streets. More students, but same size schools. More usage of infrastructure, but same old infrastructure. Upset the current residents who voted them in and add a bunch of new voters that may want someone else. No politician wants this. 

 And the hedge funds buying up all the housing stock is a boogeyman argument. Last I heard, mom and pop landlords outnumbered hedge fund ownership by 25-to-1 margin. Maybe the government should do something like encourage mom and pop ownership, perhaps by leveling the playing field between landlords and tenants?

I actually do agree with part of what you said. It's true that people who can't afford to live in say, the center of a major metropolitan city, have zero argument to needing affordable housing stock in the most expensive areas. However nationwide compare over the last 40 years median income rates with the average home cost and the CPI, you quickly see that housing costs have far outpaced income rises and inflation. 

1983:

Median Household Income: $24,580

Average Cost of a new home: $75,300

CPI: 99.6

2023:

Median Household Income: 72,000 * (estimate from most recent census numbers)

Average Cost of a new home: 446,000

CPI: 296.797

40 year change: 
Median Income: 206%
CPI: 198%
Average Cost of a New Home: 492%

The average cost of a new home outpaced median income and the consumer price index over this period by a factor of almost 2.5! Classical economics tells us that demand for homes has been historically high, while supply has been low over this period. Even when we've had building booms like in the early 2000's or the past few years, the economics of construction have been completely out of whack with where they had been historically during the booms of the 1920s or the post-war period. This leads to development that tends to skew towards luxury housing, be it in the form of single family homes, or luxury apartment buildings. The problem is what  we actually need is middle of the road housing. Not deed restricted affordable housing in prime areas, but reasonably constructed single family homes, condominium buildings, and rental apartments that average people can afford. Problem is the cost to build this housing stock is too high, so I'm honestly not sure what the fix is. 

I'm originally from NY, relocated to Tampa in 2017, and have worked exclusively with out of state investors ever since. First, I will say that you can make REI work anywhere, but the challenges posed in certain places (NY being one of them) don't really match the returns. If we look purely at numbers, yes you need more money to get started in NY, but it goes beyond that. Try flipping a house on Long Island, instead of dealing with one centralized building department for the county or city, you'll be dealing with a million small villages whose building departments are run by patronage workers. I knew one building department where an inspector candidate couldn't pass his inspector exam, so they made him the head of the department instead. Good luck dealing with people like that. Oftentimes you'll find yourself coming up against people who don't understand the building code, the assessment process, or have any concept of engineering. Furthermore some of these towns and villages have decided to turn their building departments into revenue centers. Using fines and violations to generate income because they can't possibly raise taxes any further.

Florida has been way more above board. The building process is way more straightforward. The building code is the strictest in the nation, but it's very clear as to what needs to be done. There are opportunities across many different price points here. Sure, it's not what it was in 2014, you're not picking up houses for $50k anymore, but with that said the opportunity is still there for investors who put the work in. 

The biggest challenge you will find when investing out of state, is getting a good team in place. My advice is to make sure everyone's "interests are in alignment". Be creative in how you structure your ventures, you want the people representing you on the ground to have a financial motive to watch out for your best interests. I myself believe the "only deal that matters, is the next deal." Meaning, I'm not going to screw over an out of state investor to put money in my pocket today, because I want to do another deal with you tomorrow. But unfortunately not everyone you work with out of state has that same mindset. 

Be careful. Vet your people. Do your homework. And keep your interests aligned.

Depends on the market and size of the property. Here in Tampa, generally anything bigger than a 16 unit will have a pool more often than not. 

Doesn't really matter what they pass, most of these issues are well within states and local municipalities' rights to regulate, not the federal government. Any executive action will get challenged and thankfully we have a supreme court that won't let this sort of stuff go unchecked. 

Where the federal government COULD and SHOULD take action is by investing in housing by offering better benefits to developers to encourage construction. The biggest problem is that we have a shortage of housing stock. Other actions that would help is to encourage competition by limiting the ability of large funds to purchase huge amounts of housing stock by utilizing the Sherman Anti-Trust Act. (They could also do far more to curb inflation by limiting the size of large funds that have bought out huge swaths of our agricultural and meatpacking industries.)

Basement apartments are a sticky issue because there's a number of code issues that can make them illegal. Big things to consider are:

1. Ingress / Egress - In order for a basement apartment to be considered legal, it needs to be able to be accessed from the outside. Tenant needs a separate doorway/stairwell for access. If they're accessing through the main house, it starts to become a bit of a legal issue. Since this is more of a "house hack" and they're merely renting a room, it isn't illegal per se but you would do well to protect yourself from liability in the event of a tragedy. I would start by making sure there are egress windows in every room, including the bathroom. 

2. Safety monitoring - A big concern in basement apartments is Carbon Monoxide. Make sure you've got carbon monoxide alarms installed and maintained regularly. Also smoke detectors, fire extinguishers, etc. 

3. Finding Tenants - Easy enough using zillow, roomates.com, spareroom, etc. Just take your time finding someone because she is going to essentially be making this person her roommate. Do a deep background check, I would even go so far as to try to view all of their social media, etc.

4. Draw up an iron clad lease. Make sure to be very specific about the rules, etc. Depending on your municipality, the tenant may have some heavy protections in place. The more you put in writing beforehand, the less that can be left up to a judge's decision later on.

Speak to a lender about a conventional loan. If the property is going to be your primary you can get usually get a low downpayment on a conventional loan as a first time borrower. Definitely talk to a mortgage broker. Even regarding income requirements, if you held a job in the 6 months prior to your current employment they may count that income towards your 2 year qualification, OR they can just average out your 18 months worth of income over 24 months and if it's high enough still qualify you. Don't get married to the idea of FHA until you've spoken to some lenders.

You can also do a "stated income" loan. It'll be a higher down payment and interest rate, but you won't need to provide proof of income. However, I will ask, since you own 3 properties free and clear, 2 of which aren't your primary residence, do you have rental income coming from these? I would assume cash flow would be significant from two properties that you own outright. You could probably use that income to qualify for a mortgage.

Ooooh boy. If you want to dive into this deal hold onto your hats. I just finished a deal like this and it took over 6 years to close. Read the post I wrote describing the process here: 

https://www.biggerpockets.com/...

Now as far as where to start, first thing you need to do is see if they have a registered last will and testament on file with the county. This will be held at probate court. You'll need to go to either register on the county's probate court system, or physically go down to the courthouse. Depending on when the last will and testament was filed, the record may or may not be available online. 

In the event that the owners did not have a will on file, then the estate officially is in probate. You'll need to search the court dockets. With any luck the remaining beneficiaries are currently in the probate process with an attorney representing them. You can then reach out to their attorney to inquire about purchasing the property. Be forewarned though, the probate process can take some time so it may be a while before you can close. 

A couple of things:

1. You stated you're in Missouri and the rental is here in Tampa. Your husband drove from Missouri to Tampa to deal with this leak. Are you using a property manager? I honestly think a $950 water bill may be the least of your expenses if you're self managing from that kind of distance. 

2. The way that I am reading this is the water bill is in your tenant's name. If this is the case, I would not even have attempted to deal with the city until after they had. Let them learn what happens when you break something and don't act to get it repaired. Let them negotiate the bill with the city. If the account isn't in your name, don't take on the stress until you have to.

3. If the tenant is refusing to pay the water bill even after the city has discounted it, and you are concerned about a lien on the property, you always have the option of paying any unpaid utility bill out of the tenant's security deposit at the end of lease. At some point the city will come and turn the water off at the property. The tenant will probably pay the bill at that point (or break the lease, not really sure about the quality of your tenant's or what protections your lease has in place). 

4. As far as whether or not a parked vehicle could break a cpvc water main, it DEFINITELY could, but the circumstances would need to be a bit extreme. First, when my team are rehabbing a house or an apartment building, we have trucks driving over and parked on the lawn all the time. We've never broken a water main. HOWEVER, most of the water main's I see are cast iron, (Sometimes galvanized steel) and structurally alot stronger than cpvc. I think in order for something buried 6 inches or more to break, you'd need to park a heavy vehicle directly on top of it, and have some degree of softness to the soil. Maybe then that breaks it. The normal circumstances we see breaking water mains in tampa is tree roots strangling them, so I'm not sure. 

5. Possible compromise may be to split the bill overage with the tenant. To me I still think most of the responsibility falls on the tenant because the bill is in their name and the time they took to report it. For example, if they had a running toilet for two months and never said anything to the landlord, they should absolutely be held responsible for the bill.

Generally, my thought is you need to actually avoid cashflow if you want to build your portfolio "quickly".  Investors who are looking for cash flow generally avoid making the "value add" investment necessary to increase the value of their asset which can then be sold off and reinvested to grow their portfolio.

If you want the cash flow that 200 doors gives you, you need to make a path to that asset and follow it. As an example, let's say you start with $150,000 to invest, maybe it means putting $100,000 down on a quadplex, after 18 months and another $50,000 in renovation, perhaps that property is worth $150,000 more than what you purchased it for. Perhaps you sell off that property, now you have $300,000 to 1031 into a new property. This time you're able to buy a 12 plex, etc. And on it goes until you start hitting the size properties that you want to hold on to for cash flow. It does not happen overnight. But the beauty of it all is that real estate investments do scale exponentially because of economies of scale. 

In reality, "quickly" really means within a decade or so. However, there are obviously strategies that speed this up but they come with their own challenges: syndication, pe funds, etc.   

The point is, you need to be disciplined. The longer you can go without taking cash out, the faster and bigger you can build that portfolio.