All Forum Posts by: Yizhen Su

The funniest story I ever heard was a family of small people rented a house out, paid rent on time every month for 3 years then they suddenly stopped paying one month and the owner went to check it out... why this guy didn't do an interior inspection yearly, I'm not sure...

They had divided his vaulted ceiling house into two floors and built another floor for themselves and another family lived underneath them.  One of the family patrons lost his job so they couldn't pay.

They checked out on the application side of things when they started.  

Just FYI, you never know what you're going to get.  In the end, you wanna do damage control or just collect rent?  If collect rent?  Set a strict criteria, know your market, don't fall for any tears because you might be the one crying in the end wishing you didn't go for it.  I'm sorry those people don't have a place to go, there's a 2 acre tent city in Charlotte, NC due to lack of affordable housing.  We can only build as fast as we can and volunteer our time with Habitat for Humanity if it comes down to it, but don't take on a personal crusade, it never really ends well.

My argument is 100,000 of 2,000,000 is... 5%? NASDAQ made 30% last year, have you optimized your stock and savings options already? Are you investing to make money or investing to put your money away in a high earning CD that doesn't need to have a 6% yearly yield to make it worth it? Honest question to ask myself every time before I put money into something I may be locked into. Stock market has higher variability, yes, more tangible assets are safer, yes. My point is this: are you optimizing profit by buying large or do you need to buy smart?

Just my 2 cents: why don't you take that money and put it somewhere without a lot of legislation to wade through, who'd be happy to have your money, that isn't a overcrowded, over searched metro area with a lot of real estate inflation.

For example: Rural town that just got a med school permit.  They are building all over the country but I would like to point out that the government funds schools often with a secondary goal of stimulating the economy.  They guarantee student loans so you'll get your rent on time. (BTW Med School Tuition over 4 years is $300,000+, they're pumping that in PER student into the local economy and rarely do you get a school with less than 400 students)  When there's a "graduate" level school, the students are usually demanding in their search for better living space and are WILLING to drop up to 1k for a nice 1b1ba apartment.  There's nothing in those towns other than 1970's apartments, that's why they needed to be revitalized in the first place.  I've seen enough people make a killing just building a nice, large, gated, apartment complex in the middle of nowhere and servicing highly skilled professionals that travel there to train or work.  That's your whale of a market right there.

The NASDAQ made a 30% gain last year.  There was no repairs to be made for it.  My point in RE is to INVEST, so keep that in your mind too. Are you making gains without much more effort?  If you can sell and take that money and put it into another mode of investment, make more money, less liability as a landlord, why NOT do it?

That being said, if your properties are meeting 1% monthly rent of the property value, it's worth, keep it and hold it and take care of it!  You're making 12% annual + property appreciation % - taxes and fees.  This ideally would land somewhere around 18+% for a "Good Deal".

If your monthly rent is less than 1% of the property value and the value keeps going up, your long term cost will go up IF the rent does not simultaneously go up with the property value because you're going to get more taxes, pay more interest (assuming you don't sell, you're living off borrowed money instead of just ending your obligation and responsibilities, if you have to borrow mortgage for another positive cash flow property then that's different), and put more into repairs.

Your rowhouse will need to be liquidated by that logic, the duplexes may need to be split, I think you should have the one you want more.  It's not about value, it's about how you feel about managing it.  Do you have a better set of tenants, better locale, better ...?  

If you're going to make moves, make Money while you're doing it.  RE is great, I love the feel of decorating and flipping a house that was a disaster zone.  I love making money while doing it.  Maybe the market will change, I see it as being saturated for now.  I ask myself: What kind of market supports increasing property prices without increasing the rental prices?  People who are buying to rent flooding the market because they want to get in on the low interest rate mortgage and build equity.  Stimulus down payments are nice, aren't they?  Also make sure you assess your current property value, some in demand places are paying top dollar for location! (Yeah, whatever, show me the numbers!)  There will be a dip, a "correction" of pricing if you will, when the supply outpaces demand or demand simply lowers because anyone who could qualify to purchase will have already purchased.  Maybe a year or two in mutual funds then back into real estate when the rental prices finally catch up to what you're asking and the first time landlords give up dealing with tenants.  It's not everyone's cup of tea for sure.

Scenario: Asking Price $159990 for a property by seller, I'm prospective buyer

The Nightmare: Modular home built in 2003, currently owned by rental company renting for 50% the going rate of the area, property next door looks like it came out of the Swamp (peeling paint on wood siding, plastic sheeting floating in the wind over the windows, 5 lawn mowers that may or may not work at the side of the house, you get the picture), backyard faces a truck depot with a bunch of repairs behind a chain linked fence.  Reminds me of Durham, NC, right as the $40k houses started to sell for $80k.  The home may be tolerable by some people but this is truly substandard. I feel like the owners are lying about if they even rented it. Huge tears in the floor laminating, uneven flooring, exposed water heater, trip hazards everywhere.  There's dead trees in the backyard, one's about to hit the house.  A peak back shows that the current owners tried to sell it multiple times in the past without success, they originally purchased for $80k and had to put repairs in according to the listing agent.

The Dream: ALL the other houses in the area have been renovated/replaced. The school district has 8-10/10 ratings.  It's HIGHLY desirable.  A 2 story 3b2ba about 1800 sq built in 1948 that has been renovated will sell for 300k (pulled the comps) with a tiny little backyard and a total area of 0.2 acres. This lot is comparable.

Questions:

1) What to offer?

2) To bulldoze and tear down and rebuild or try to rehab? Rehab WILL require: privacy fencing to block out other things, foundation repair, window repair/reseal, repaint, tear down of current access stair and replacement, new flooring, kitchen appliances (all), additional dry wall interior and that's just the NEED, not the Make It Pretty stuff

3) What is the most times you've offered on a property? I think the longest I've gone on with a seller is 6 months with 4 offers and we finally settled.  No one wanted her house, it was vacant for 3 years, I bought it and turned it while it was rented partly and sold it in under a week with new style and deco for a positive cash flow.  It was a perfect structurally sound house that just needed a little updating.

1) It's a seller's market, will you get top dollar for your property? 

General advice is don't sell any rentals that is in the positive cash flow (yours are not but we'll address that next), I've been struggling with this.  I looked one of my rental's market.  I purchased it for 160+2k in repairs = 162k.  There are 2 houses for sale at 235k range in that size in that area within a 3 mile radius.  I can ask that, 15 months after purchase.  This house is old, I mean, I bought it as a flip, I haven't fixed it, but IT WILL SELL for that much without me touching it!  It's a C grade house, built in the early 80's, going on 50 years.  If I keep it, I'm going to have to put in more repairs in it, I've already repaired the AC once, removed rotting trees that died during the latest bad weather event.  It's rental income is 0.8% of property value when I bought it, it's now even lower.  Projected income isn't rising because rent isn't matching value increases in that area - people who are buying homes in that area are not renters, rather, people who prefer to buy to rent and be landlords!  After doing the math I realized, it was time to get rid of it, trade it in for a similar property in a different locale without a lot of speculative buying, newer, less hassle to fix, even if it's a mark up a little during this climate, it's better than having to deal with fixing roof, fence, etc which brings me to my next point:

2) Is it really the full rent you get to keep? Now this scenario only holds true if all market prices stay the same for the foreseeable 5 years.  Maybe your rent money will increase, it hasn't for me for 3 years, only real estate taxes, so you have to analyze your market.  PM me if you have trouble.

-I set aside 6 months of payments for emergencies - I don't even have a mortgage and I do that.  Imagine being one of those COVID landlords and can't get non-paying tenants out.

-You will need at least 1 month of payments for taxes every year, sometimes 1.5mo depending on the situation, 1 mo for the rental management company, 1 mo for repairs, and you get to keep around 8 mo rent if you insure your rental.  I know people who don't insure.  I'm not sure about them but there's an option to not insure.  It's just not wise, but still, people do it.  So my general rule is if 8 mo of rent is less than your mortgage, which in your case is: 1600*8 = 12800 < 1200*12 = 14000, you're paying someone to build equity for you.  IMO: not worth. Take that 30k, put it in an ETF, divided producing retirement fund, whatever, re-invest your dividends, it's a *better* investment bang for the buck cuz in the end, your goal is to make money from the money you have without being too involved in the management of it as a real estate Investor going for Passive Income, don't forget that. Investor > Landlord. 

I've identified a potential growth area that is in a rural situation with potential growth with highly educated students and staff. I'm dealing with small town rural situation but lots of growth potential and I'm wondering if it would be worth it to build a new apartment complex to appeal to the highly educated well-to-do to set the business apart from the complexes built in the late 80's that is the only thing available and possibly only SFH available for rent. Has anyone tried to build in 1: a rural setting in GA, 2: have trouble finding land connected to the internet beyond DSL, had builder issues because no one had the expertise in the area/had to go out of town to get the builder?

Do you want to flip or rent or both?  I was doing research into Texas, seems like on the ground san antonio is a better deal but Houston is nice too.

Situation: 2 Houses, out of current state of residence, completely paid off, never had a vacancy

House 1: original purchase value x, currently valued at 2x, rental income at 1.5%x monthly when I started, currently 0.75% of 2x over 5 years.

House 2: Original purchase price value y, currently valued at 1.10y, rental income at 0.76%y monthly

y = 0.7x

Problem: I live out of state, everything that happens there, including falling trees is out of my immediate response time and I have to depend on management companies who won't take my business for one reason or another or isn't dependable from everyone else I've spoken with about them - I can't seem to let go of them and not wonder about how people are taking care of my property and prefer to self-manage.  I recognize that this may be my own issue but it's still an issue and I can't seem to ignore it.  House 1 is a furnished rental and needs some maintenance.  I'm considering doing a 1031 exchange to a new market which is hotter than the one I left - to the point that the entry price point is about 2x and rental prices are about 0.75x (it's not much of a change, just a location switch), this market is also as hot as the one I left.

The real estate prices in my original market are increasing at about 10% per year, HOWEVER, rental rates are not, they only moved about 1% in 3 years!  So I'm sitting there collecting the same rent every month and I'm getting more taxes and seeing equity build in my properties.  I'm not sure if I wanted to deal with a mortgage company and out of state furnished rentals I'm babysitting (albeit with a dependable team of handyman and cleaners) but no property manager. And I thought, maybe this is the right time to sell and cash out now and just buy into the market where I'm living so my hands are on the property on a regular basis and can take better care of it and I don't need a mortgage company I have to pay interest to, I thought about mortgaging the houses so I can keep investing without having a lot of capital locked up.  Right now in my new market, you cannot buy in with a conventional loan, it has to be cash deals or else there's not a good deal, just a lot of mark up. 

Has anyone ever "moved their investment area?" 

What are your thoughts on selling profitable rentals at a seller's market?

I rent to doctoral students, mature, pays on time, generally no trashing my granite counter tops and nicer reno stuff, sometimes can be a little high maintenance hand holding types.  They finish 2 years and then move on, basically after 7 years I'm at zero evictions after dealing with 2 properties.  I've been contacting PM's in the ATL area and I'm not finding a promising lead on good companies willing to deal with furnished rentals. Only 1 of my properties is furnished, the other is not.  I only have sturdy coffee table, conference table, couch, comfortable bed, etc, stuff that students normally won't buy to live somewhere for 2 years but definitely appreciate having in a rental which is why I have yet to have a single month of vacancy.  My current representative is moving out of ATL and I'm stuck. I'm looking for any recommendations.  I also represent close family friends who live out of the country and are willing to move their PM into whatever company I go with and let me help make decisions. So I need someone who can work the metro ATL area. Any recommendation is appreciated!