All Forum Posts by: Stuart Udis

No pot shots as you say are being thrown at anyone. My comments aren't about rent to retirement, I made that clear. It's with the entry level SFH turn key business model as a whole. It's not RTR's fault the property can't absorb proper cap ex, that's a product of the market. However, I disagree with your comments that the investor buyers who buy these homes have a greater appetite for risk and know the risks that exist. That's simply not true. Most are also not considering between the new construction product and the entry level SFH with risk being the deciding factor. In fact very few fall within that category. Most buy the entry level SFH because its what they are qualified to purchase.

Most investors who buy these homes believe they are investing in a safer investment because it came from a turn key provider. They equate the period leading up to the time its ready to rent as the risky part of the real estate process and pay a premium to bypass that part but this leaves them with unreasonable expectations because the real estate they purchase is inherently risky. Active operators are far more likely to succeed in the entry level SFH space and that's not who buys entry level homes from turn key operators.

I'm with you that sidewalk slip and fall litigation may be less likely in the Midwest than say Mid Atlantic which tends to have more litigious cities but dismissing premises liability issues can come back to bite an investor and when these properties have such razor thin margins that an investor must consider the cost benefit analysis of safety against ROI, there is a real estate issue and is usually a losing proposition.

@James Wise I don't litigate, so no I am not an ambulance chaser. Also not one of the alarmist attorneys who are recommending expensive entity structures. In fact one of the themes of my posts is dissuading investors from over spending on entities and asset protection. Another is the perils of investing passively or through turn key providers in entry level SFH's. My posts aren't specifically about Rent to Retirement, rather the concept more generally.

I am also not concerned with the new construction turn key model, its very different than the lower tier/entry level SFH's and not relevant. You know just as well as I do that the entry level SFH turn key model is nothing but a money grab for the turn key providers and PM's who ultimately manage the properties for them. Most of the investors buying the homes don't have a clue what they are doing or what a good investment looks like.

It's a problem when safe walkways are a cost burden and can't be absorbed. That points to how razor thin the margins are when dealing with these properties and how the smallest of issues can turn these properties upside down for the investor buyer but very few know this as they are posting ringing endorsements. As I said earlier, moving in a tenant is the standard that's applied in making these properties "turn key" and that doesn't bode well for most of the investors buying them.

My comment has nothing to do with comps and your decision to make the repair shouldn't be comp influenced either.  If someone is walking down the street and trips on your sidewalk or a  walk way whether its a tenant, delivery person or passerby you are the one who gets sued because its premises liability exposure. Even the tenant can sue you if they injure themselves.  The fact other properties have chewed up sidewalk isn't a sound legal argument either. The only thing that makes these properties turn key is the fact they are move-in ready for a lower income tenant with low expectations. The properties themselves often have flaws and outstanding cap ex items that are wrongly ignored. 

@Vijay Radhakrishnan Your turn key rental needs a new sidewalk and walkway poured. Clear as day premises liability exposure right in your marketing photo. I guess not so turn key after all...

For a number of years I've formed transactional partnerships (form an LLC with single or multiple members to buy a building, build condos, townhomes etc). I've become interested in finding an individual who can serve as a business partner (doesn't have to be 50/50, in fact wouldn't want that), but a business relationships that would span across the entire business and someone who would share some of the workload, guarantor requirement and capital contribution and capital raising responsibilities, all of which currently falls on me. The motivation is not necessarily to scale into larger opportunities but rather to achieve better balance and also optimize the performance of the projects and types of projects I currently pursue.

I have no shortage of individuals who possess specific skill set who would want exclusive rights to that particular service vertical in return for contributing capital and a partnership interest (construction background and wants to take over all construction duties or someone who is a sales broker and wants to list all of the properties etc.) I don't see anything wrong with that approach but there isn’t a complete alignment of interest (the individual who wants to take over all construction services will want to focus on the projects with the greatest construction fee earning potential; the brokers will want to pursue more for-sale projects etc.). These individuals also seem more interested in the ancillary fees the portfolio generates as opposed to the underlying real estate.

With the way my portfolio and pipeline is arranged I can understand why the construction management or brokerage verticals are most enticing but it still feels too transactional which is what I want to avoid. In my mind the partner who contributes and shares across the board will have a greater alignment of interests but curious how others have approached similar scenarios and views on the subject. Not as interested in how to paper a partnership agreement, really most interested in how others have successfully handled the alignment of interests component to business partnerships that span an entire portfolio.

This right here ^^^ the roadmap to success.

@Jonathan Bock Does this come before or after the $3k cost segregation study and the $10K course on how to scale through renting rooms?

I think many make the mistake of believing real estate is more liquid than it is. If there is a reason why the investor requires their capital back in a short period, they should invest in a more liquid asset. As a real estate investor you also want to sell when it is most opportunistic..... putting a clock on when the property must be sold can hurt performance and result in bad decision making.

If the extent of your real estate business is renting out your basement than no, a Wyoming trust is not necessary (in fact, a Wyoming trust is not necessary for 99.9% of real estate owners)....you were contacted by a fear mongering sales person, not someone I would consider to be offering credible services. 

@Anshuman Thakur I would recommend local counsel in the areas where you invest. It's not realistic for one transactional attorney to be qualified to represent your interests across the country.  Good transactional counsel will not only help with preparation of the purchase agreement but ensure all diligence items are covered. These items will vary depending on the municipality.