All Forum Posts by: William Jenkins

@Shiva Bhaskar - I understand where you are coming from on the house as an investment theme, but I have to somewhat disagree.  The bottom line is that you have to live somewhere, so you can either pay rent or a mortgage.  An owner occupied home will not cash flow in the traditional sense, but it sure does when you consider that you will be paying x per month either way.  With owning you will at least get the principal pay down, 30 year fixed payment (as opposed to rent increases), tax advantages, and appreciation that comes with owning.  I guarantee you that you will be your own best tenant!

The issue with a home as an investment motto is when people use this an excuse to overbuy or purchase a home that they otherwise shouldn't..... Its the typical "Hey we qualified for $350k so lets go start looking for $400k homes (insert any price range)...  its in investment after all!"  The other issue is when people buy knowing that their living situation is going to change and they will need to sell it is a relative short time frame.  

My current primary was an excellent investment.  In 2017 I purchased a property that needed rehab and turned it into EXACTLY what I wanted (kitchens, baths, flooring, EVERYTHING).  I bought a good enough deal where I could have sold it for 25% more than what I had into it at the time.  That spread has grown significantly since.  Not that I plan on moving, but that profit is now tax free (2 years on primary).  I would call that a pretty good investment!  BTW... I did the same with my primary before that as well.  It took discipline waiting for the right deals to come along.  

Some suggestions....

1.  Get your quality subs lined out.  You will need demo, flooring, electrical, plumbing, cabinets/counters, and painting/finishing. 

2.  If the layout works than stick with it and don't try to get too creative.  Repeat.... don't be creative!  The only exception would be for high end homes. 

3.  Measure the kitchen and take it do a good cabinets and countertop shop (not a big box).  You can get much better pricing and quality from non-big box stores.  Have them layout the space.  Double check it but trust their judgement on layout.... They likely know more than you.  Tell them you are an investor and you can sometimes get a wholesale discount (if they think they will get repeat business). 

4.  Take the cabinet design and determine your lighting and plumbing layouts (hopefully this remains the same, but this is the time to do it if necessary).  

5.  Proceed in this order... Demo, electrical/plumbing, flooring, cabinets counters, and then painting/finishing.  I would highly suggest hiring the cabinet company to install the cabinets and counters.  I've found that they are usually cost competitive (maybe a little more), but there is a lot of liability transfer when they have full A-Z responsibility for design and construction.

6.  I would almost always suggest new cabinets if you have even the slightest question as to if you should refinish.  I've seen too many people be penny wise pound foolish on refinishing cabinets.  In any rentals I would suggest granite.  In higher end flips you would likely need to upgrade.  Granite should always be the default (no laminate) even in low end homes.  Granite costs are reasonably competitive to laminate and it is (a) indestructible, and (b) will likely get you a higher rent or quicker occupancy.

Good luck. 

@John Brooks For most of the population, here is my advice.....  I would 100% suggest buying your own property first prior to a rental.  This of course assumes that is it not cheaper to rent in your market.  The key to this however is to (1) buy significantly less than what you are "qualified" for and (2) buy something that you can add value to (house hack, duplex, rehab, growth/preciation area, etc.).  You are the only tenant you are going to be able to completely trust... :)

It is important that you buy something less than what you are "qualified for," so you can snowball income for your investments.  Otherwise you will end up like many people who buy at the top of their budget and become house poor.

Getting a value add property is also a necessity.  There are tons of ways to to this, but you need to make sure you have an edge on the property you are buying and not just buying something for full retail that you like.  Get creative.  

For your market, I would perhaps suggest waiting a little bit to see how things pan out.  Although I'm not an expert in that market, I have heard that rents (urban areas) are dropping rather significantly.  This will probably lead to quite a few top tick investors that will be tomorrows distressed landlords.  That could give you an entry into that market.

Not purchasing anything is MUCH better than buying a bad deal.  I've said it before in other forums, but I haven't bought anything in the last 3 years.... The risk reward just seems out of whack to me. 

As chance would have it however, I just went under contract on a local rental SFR in an area where I own a property already.  The deal was on the MLS and had been languishing (overpriced and title issues).  I approached the selling agent with a number that was significantly lower than than ask.  About a week later she said write it up and the seller took it so here I stand.  So far I've yet to walk through it (only seen photos.....tenant occupied), so I am hoping tomorrows walk through looks good.  I'm not afraid to walk away, but I would like to get the feeling of buying something again.  Haha.

This happens to be a "tired landlord" type property.  I think we are going to see a lot more of these nationwide in the near future.   

I would say the answer is yes..... It is 100% wrong to collect fees on that many applications.  Illegal no, wrong yes. 

Is your time not worth more than the markup you are charging on those applications?  I don't charge for any application on any of my properties (residential or commercial)....high end or low end.  I have a set criteria of what I am looking for and if a prospective tenant doesn't meet that criteria then why would I want to waste my time with them?  If they make it past my "pre-qualification," then I simply foot the bill for the background check as a cost of doing business.  Some would stay that is a mistake, but I don't really want to waste time asking for, collecting, and processing a $50 application fee.

On a side note once people pay for an application they are usually pretty adamant about getting a response and knowing the exact reason why they were turned down (and rightly so).  I really don't feel like having that many conversations to defend my decision, and nor do I have the time.     

@Alex Grosvenor - I could not have said it any better.  Nice work!

@Shannon Oakley - I'm not targeting you specifically, but most wholesalers out there are completely unrealistic on what repair costs are, ARV, and then subsequently contract with a seller for way more than what the property is actually worth trying to make a spread that DOES NOT EXIST. That 100% of the time ends in disappointment for both the wholesaler and the seller.

If one person doesn't buy one of your deals then maybe you can make an argument that there is something wrong with them.  If it is a reoccurring theme among everyone you present it too then there is probably something wrong with you.

Good investors have a criteria and they will stick with it in good times and in bad.  New investors are more likely to get sucked into a dream.  I haven't bought anything in some time because I cannot find opportunities that meet my criteria.  I'm fine missing out until things realign themselves, and I will not get into a deal because someone trying to sell me something tells me the "market is flipping upside down."

No offense meant in this post, but just trying to give you a straight and too the point answer.  

I can't sit here and predict a crash or the timing, but I haven't bought anything since 2017.  I'm always in the market to make a deal, but in the last couple of years I haven't seen any "deals."

Returns are super thin right now on everything I come across.  I am just not interested in playing in a crowded market where everyone seems to be interested in working their butt off and risking capital for subpar/breakeven returns.

I was in the game pre-2008 and I am feeling the same way now that I did back then.  The general feeling was that the market was INSANE and my thoughts were how long could it keep going vertical.  It went on longer then I thought it could but eventually crashed.  I was flipping at the time but I wasn't effected all that much because I didn't chase deals and I was naturally a lot smaller when the crash eventually came. 

I just don't get a warm and fuzzy about where we are right now personally.  I know first hand of a lot of distressed commercial (retail, office, hospitality).  That product has not hit the market yet....maybe it never will.   


 

 
 

Just saying invest in commercial is painting with a very broad brush.  There is industrial, office, and retail just to name a few.  Each of these sub sectors has its own pros/cons and supply/demand drivers.  Leases from one to the other are very different as well. 

Eveyone has the impression that managing commercial is easier than residential. That can certainly be the case for large national tenant NNN properties, but with your budget and likely yield requirements you will be looking at small time commercial opportunities (i.e. small strip centers).

Some generalizations for what its worth.... Residential is generally much easier to lease and minimize vacancy.  Residential tenants come and go, but there is usually another one right around the corner.  With commercial unless you have an extremely in demand commercial property, you will have to work much harder to attract tenants and vacancy in between tenants will be much higher.  Finding the right fit tenant is harder in commercial, but the leases are longer term, and renewal more sticky than in residential.

In general I find my commercial properties to be very time consuming during vacancies, but otherwise easy to systematize manage once tenants are in place and things are normalized.  My residential properties seem to demand more constant attention but the necessary time requirements seem lower during the peaks and more constantly spread out.  

If you are looking for commercial (especially strip centers) I would wait for a deal.  I think you could see a lot of distress in that sector in the near future, and I would not be paying up to assume other peoples problem leases.  

Absolutely DO NOT quit college.  I am inclined to think that most of your dissatisfaction with college is because of the current COVID situation.  I have older friends with kids in college and the stories I am hearing are horrible.... basically like a prison. 

A degree will open up doors that will otherwise be closed to you for ever.  It will also give you 4 years to grow, explore yourself, explore the world, and make connections.  All of those will benefit you throughout your life.

I see a lot of talk in general about quitting/not going into college and going straight into real estate.  That path essentially means going right into becoming an agent.  You can make some great money doing that, but the odds are not on your side and most agents are simply just "surviving."  How about go to college and get a part time job in real estate?   

@Michael Haas - We are in agreement on almost everything.  My only difference is on the continuation of the tiny home movement.  For remote airbnb and vacation properties, I agree that they will continue to be popular.  On a vacation or family trip, being close together is great with small children.  I have a 2 and 5 year old and they would both have the time of their life in a tiny house out in the woods. 

Living full time in a tiny house however is another story.  Millennials have been drawn to full time tiny houses because of (1) financial reasons and (2) freedom.  As they get older, make more money, and have kids that reasoning will disappear.  People will always want more space if their budget dictates.

@Ryan Xu - I'm not in your market and don't know the ins and outs, but it is interesting that you think mid range condos will suffer a price drop while luxury will remain strong.  In general, I've always thought of (and seen) luxury suffering first and then that softness moving down to middle and lower tier properties.