Debt deal typically has less risk but less reward. Below are a couple of my guys (below) who lent money to as the Private Money Lender are sure happy after their hard work and risk. Lucky guys! They sold for $15,000 over anticipated. But for me as the debt investor, I saw no equity upside.
Equity deals have a lot more options on how returns are paid out. You partake in the upside returns and downside risks.
Well, at least the bought be dinner while I was in town.
This is the first property in a series (1 out of 9) of acquisitions that resulted from a couple 1031 exchanges. If this is your first time reading this post I suggest you read these few prefaces first.
This property was put into service in October of 2015 (I know a little behind but I’ll catch up in the next few months). I acquired the property from a marketer that makes connections with the rehabbers in certain markets and finds buyers such as myself who are typically located in low rent to value ratio locations (this does not necessarily mean high-priced locations) such as California, New York, Hawaii, Seattle, Portland, and basically the coastal areas where all the cool kids what to actually live. Marketers have their place if the buyer is totally clueless but once you purchase a few of these properties the marketer really does not offer much value. The only thing I see that they would offer would be someone to be the bad guy role in a negotiation but many of the marketers are buddy-buddy with the rehabber because of their business relationship and won’t stick their neck out for you. As the buyer, you need to take ownership of the due-diligence process and negotiations because that marketer is not a licensed agent and does not have a fiduciary responsibility to you.
Check out my previous post for a bit more context. My goal was straight cashflow so Memphis and Birmingham were at the top of my list as opposed to Atlanta/Texas which seemed to trade off some cashflow buffer for appreciation potential. I was comfortable going with a seemingly grungier city because I was going for cashflow (rent/value). A wise mentor of mine told me once “the security of your investment in a market correction is how much cashflow/buffer there is from between your rent minus expenses… when bad times come, how much can you lower the rent to ride out the bad times.” I think most people get wrapped around in analysis paralysis over the plethora of data such as crime stats, employment trends, population trends, etc. Those indicators tell part of the story but for me the reason I moved forward was just talking to a couple of people who were (not referral based salesmen) investors with disinterested agendas that said “dude, just buy it (from the right people), it just works”. If you have ever heard the saying “stand on the shoulders of giants” that’s what I did – if it worked for these other investors then I’m just going to start where they left off – after all every month I delayed action I lost a potential $200-300 of cashflow. In the end, maybe it’s just because of my personality, I chose Birmingham because I heard so many podcast ads for Memphis and saw all the investors going there.
I apologize, it has been so long that it’s hard to remember (again I will get better at this, scouts honor), but I can’t really remember much because there were really no huge exceptions in the due-diligence process. I did a 3rd party inspector that I got off a referral from other investors. Remember do not take a referral from anyone on the sellers side as that is a huge red flag for their integrity due to the conflict of interest. A big difference in my growth as an investor is running these processes together with the lender’s parallel process and being able to effectively negotiate additional renovations or contract terms. Looking back I probably over paid a few thousand at least more than I would have today with my experience because you just can’t read about this stuff. Also it’s worth noting that you always should connect with a few property management companies and interview them early in this period. In addition, use them to validate your rental numbers and property location.
I paid cash for the property initially because it was the sellers terms. I would never it do it again this way since I basically waived my right to a property appraisal. The next step was to refinance the property with a convention Fannie Mae mortgage to pull out most of my initial investment. We had a lot of trouble getting the property to appraise for the value due to the technical processes of the appraisers. Finally, after the third try I finally got an appraisal number that I was able to live with, but the damage had been done and I had to have all my cash tied up in the deal for 2-3 months. Lesson learned was to always have a financing/appraisal contingency to ensure that the property that you buy appraises and that what you pay is what it is worth. This is another example of a standing on the shoulder of giants, when you are financing from day 1 the bank owns 75-80% of the home via the mortgage and they are doing their due diligence too via the title work and appraisal. Therefore use the banks process as your friend. I got a lot of help from my lender in this transaction as they were the ones behind the scenes working the appraisal issue. This the difference between going with any big bank lender and a lender that works exclusively with investors. Again the golden rule is to always go by referral by another investor.
After the smoke cleared I was out of pocket $27K and had a $50k mortgage. The interest rate was a little under 5% but that does not matter. Sophisticated investors do not look at interest rate and the amount of debt instead they focus on cashflow and effect on net worth because after all who cares if your interest rate is 8% if the deal is returning 20-40%.
After all the closing issues got taken care of everything else went pretty smooth and the property got filled by a nice family. Here are the numbers:
5 Rooms/3 Bed/1Bath, 1 story, 1008 SF
The Story: A nice suburban home in the Center Point area. The property was picked up as a distressed seller and rehabbed
$875 Rent per month
– 10% Property management
– In the first 18 months I have less than 400 dollars of repairs total
– $395 Mortgage/Interest/Insurance/Taxes (PITI)
I typically get $300-400 per month after expenses. Please note: Make sure you are saving 30-50% at least in reserves for cap ex, expenses, repairs, vacancy. I have had good luck these first 18 months however the law of averages will catch up.
Knock on wood – it really does not get any better than this property because in the first 18 months of ownership I have experienced no vacancy and only $300 of repairs. 🙂 So yea things are pretty boring on this one.
Why don’t buy Turnkey under 50k.
1) not worth financing… If your not financing then what’s the point
2) bad tenant quality
3) no exit strategy because no one will want to buy it other than a sucker investor
I am transitioning to MFH syndications and selling my 10 B Class properties in Birmingham/Atlanta/Indy (rents $900+/month). They are going to go up on Roofstock.com for investors to purchase at 1.2M asking. The highs are sorta mediums and the lows are lows 🙁
PS: There is no such thing as turnkey. Check out these disaster photos… https://photos.app.goo.gl/R4PZLuOLGHONO5Rl2
And always but with inspection and appraisal.
Let me know if you would like a referral to any good turnkey providers
Kenny Wolfe is an apartment syndicator today but it was not always like that
At 33 years old he left his CFO position and went full-time REI
2016 might have been the peak (100 deals, 10 look ok, and one offer)
5.25% interest rate at early 2017, 1.25 DSCR is a hard underwriting figure
At 24 years old bought and failed at a tanning salon
MFH Property Management is much more responsible
Treating investing like a business with an office and professional documents
If you need a VA I am a partner of a VA firm that offers super qualified staff for a variety of tasks. Get creative and send me an email if interested in a free 10-hour trial.
I am opening the kimono and getting naked… I am hosting a free webinar showing my 2017 results from my 10 SFH personal portfolio.
WHEN: 6PM, Monday April 3, 2017
It is only available to those who have signed up for the HUI Deal Pipeline Club. Click here to sign up!
Complete Private Form to get on the Guest List:
You will learn the following:
-See how I use excel to track each property performance per the Schedule E
-See how I track overhead ie meals and other fun purchases like my beloved Apple AirPods
-What metrics I keep track of
-How much money I made last year
-What was my average returns
-How many of the properties actually lost money
-This may never be seen again! – I do not know if I will release/record this to the public for obvious reasons so this may be the only chance for you to see this.
Please reply back to me to unsubscribe and I will not email you again.
Check out the first few foundational podcasts and then start on this checklist:
And if you need help starting a SFH portfolio or Turnkey Rentals…
Commentary of the market from my crystal ball:
The Fed and Executive branch are in conflict. Both want control and want to wrestle control away from the other and make the other look bad.
Look out for instability in China as it might be the trigger for economic weakness.
“My wife is officially is quitting her job at the end of this year. Thanks for helping us be able to do that. One of her friends had to go back to work 10-weeks after having their second kid because they need her income to pay the mortgage. It makes me cringe just thinking about that.” –Hui Deal Pipeline Club Member
****UPDATED 2/2018 w/ Quick Start List!!!****
Welcome if you are new! And welcome back… here is what I have been working on…
1 ) Just closed my second syndication in my own name. If you want access to these opportunities they are only available to folks with a pre-existing relationship. So sign up for my Hui Deal Pipeline Club and setup a time to chat.
Hui Deal Pipe Club acquisition stats (Estate-2016)- Acquired over $55M dollars of total real estate and $5 million dollars of funds raised.
4) Analyzing just 5 MFH deals a month for my own deals (quality over quality). Finding another deal I can partner with.
Goal: Turn “C” and “B” class properties, 60-300 units (stabilized with value-add opportunity) with at least 75% LTV/25 year amortization. We plan to hold 3-6 years and sell when we have doubled our investors’ money. Utilize Non-Recourse debt for extra security.
Seeking MFH at least 60 – 250 units.
1. Value-add component: typically 85-90% occupancy for non-recourse loan & discount based on condition or motivated seller
2. Price: $1,500,000 – $9,000,000, per unit cost under $55K.
3. Location: secondary and tertiary markets across
4. Class: D/C/B Property in a B/A neighborhood
Current holdings as of co-owner of MFPE Investments LLC (1200+ units in OK, LA, IA, TX, and WA).
“I read a book called, “The Millionaire Next Door” and it explained why my pain points were motivating for me, and how I channeled that frustration into something productive…the desire to make my family proud and ‘come up’ in life and pull my family into a better socioeconomic situation, and to ‘have what others have but i never could’ but somewhere along the way, I learned quickly that the ‘having of stuff’ is not what brings happiness so I dont pursue the shiniest of immaterial things… just the MED…. minimum effective dose of what I truly want which is surround myself with a few quality people and necessary things to subsist on than a bunch of trendy new things and fads that will fall off eventually” . –Hui Deal Pipeline Club Member
Networking with other Buy-Hold investors I discovered two things:
1) Passive investors are hard to spot out among the typically ‘active’ RE crowd, therefore trading best practices was very difficult and
2) Passive investing is often boring since this is not a get rich quick method of building wealth and uneventful (if things are going well there aren’t too many cool stories).
This podcast and blog are meant to distill content just to the golden nuggets for the passive Real Estate Investor. I plan to go beyond the newbie tips that clutter the internet and cocktail parties because lets’ face it, as a passive investor your time should be spent on things that you love to do and those who are important to you (not trolling real estate internet forums or making makeshift plumbing repairs on your property).
As I get more experienced, I recognize that there are a lot quicker ways to make a lot of money in Real Estate such as apartment investing, flipping high-end properties, or development but for the time being I have a full-time job that is alright and until that changes this is the path that I have zeroed in on. So if you are like me, join me on this train and if you don’t like your job and want to quit you can get on board too we will wake you up when it’s your time to escape the rat-race.
Real Estate has empowered me financially I wanted to give back to the investor community.
My Motivation For Creating this Site:
1) Begin with the end in mind and decide now what you want your obituary to read. We are only here on this earth for a finite period. I like this picture because this is what will probably be on the welcome table at my funeral. I hope you can make it! Rich Cohen wrote that there are four rungs of being remembered after death: “newly dead; dead but remembered; dead and all those who knew you dead; dead and all those who knew those who knew you dead.” In terms of YOU…All that matters is what happens when you’re alive. Your legacy will offer you no pleasure after you’ve passed so live how you dream but know that there are some unconventional paths that you have to take (like buying cashflowing rentals not in your home state). And for myself…fame will do you no favors for me once I die but at least people can use SimplePassiveCashflow.com to get out of the rat race. And if that does not get your going listen to the wisdom of Frank Ostaseski.
2) Create a repository of information where my unborn children or others can reference with some context into what I was thinking. Similar to Seattle Seahawk, Marshawn Lynch’s “Beast-Mode”, I have tried to live my life in “Legacy-Mode”. And I really want to have a real book!
Why a Podcast?
I jumped on the podcast ban-wagon in 2007 while I was working on the road when I did not have a friend near me. It got me into Crossfit in 2008, Paleo in 2009, Real estate investing in 2010, intermittent fasting in 2013, internet marketing in 2015, and led to meeting and creating friendships with a lot of you because we are aligned on the same wavelength. Yes… The phrase “we met on the internet” is totally acceptable! Obviously, a few of these interests have come and gone but in the macro sense, podcasts have instilled a lifelong interest and ability to learn.
When you ask a kindergartner how do you make money? Why don’t they say “invest in cashflowing real estate?” Because their parents don’t have a clue!
3) While I am alive I want to teach/empower others to fish for themselves. In real estate, we use leverage and by teaching others, I am leveraging other people to achieve their financial goals in hopes that they will pay it forward. I poke fun at MLMs a lot but I would like to create a pyramid scheme of philanthropy.
What is the change that you want to make in the world even if its a 1% move in the needle? Financial education – people have such struggle so much to make ends meet.
I was baptized on Easter 2016 and searched for a way to give back. I want to help others but I struggle with giving money away because I know I can grow my money much faster and I am much more frugal than any philanthropic organization. Bill Gates gave back only after he amassed a fortune. Tithing as you go along has a smaller cumulative impact. My end game is to give away my wealth to rightful causes via a Charitable Remainder Trust.
4) I hope my blog/podcast will help families realize the powerful wealth-building effects of real estate so they can spend their time on more important, instead of working long hours and worrying about their financial troubles. There are a lot of successful families with good jobs (teachers/engineers/programmers/finance) yet they struggle to make ends meet financially. It is their kiddos who ultimately get the short end of the stick. (Cool graphs on this subject) Being a Latch-Key Child growing up, both my parents had to work and I was left home alone after school to fiddle with my thumbs.
With Real Estate you are able to grow your wealth exponentially faster than the conventional 401K’s and stock investing, therefore you are able to escape the dogma of working 50+ hour weeks at a job that is unfulfilling. And if you are one of the lucky ones who happen to do what you enjoy… well good for you 😛
As a great time in history to be alive with general peace and technological convinced, I see a silent war being waged upon the shrinking Middle Class. This is the Civil Rights movement of my time. In a way, people are having a Stockholm Syndrome with Wall Street profiteers being the captors. Let’s work together to redirect money from the Wall-Street casinos and corrupt financial institutions…To help the endangered ‘Middle Class’ savers find safer, more profitable investments in Main Street opportunities benefiting local communities.
Why this podcast/website/syndicating deals is the perfect storm:
Self-awareness is truly the most important aspect of being an investor/entrepreneur. My job being a syndicator is to find opportunities and lead other investors like you to them and using my podcast and experience makes this a logical step for me. I always encourage folks to find out what their competitive advantages and disadvantages are. I can usually help point people in the right direction in a 15-minute free chat – Click here to schedule.
By doing the podcast I found that there was a lot of things and people that I did not know. As Robert Half says, “When one teaches, two learn.”
What are my downfalls?
Being an engineer and introvert communicating was something I was never good at. However, I think I get it after hearing these “straight from the 1990’s salesmen.” I don’t like to waste people’s time, no tricks, no games, the deals should sell themselves.
What is my competitive advantage?
1) I don’t have kids. After learning about hundreds of listens situations via free calls I hear that this sorta complicates things… 😛
2) I am an ISTJ (introversion, sensing, thinking, judgment abbreviation used in the publications of the Myers–Briggs Type Indicator). I don’t really know what the last three manifest in my life but I am a recovering introvert – a side hobby is this group I started to help others get out of their shell. I believe an introvert has nothing to do if you like people or if you are loud and annoying. Your affinity is determined where you derive your energy. Going to the day job and working with you know “others” was really tiring for me. The weirdest thing is that when I talk to others over the phone or in-person I get so excited and sometimes a little too passionate. That’s how I knew I was on to something. I’ll say it many times but what really fires me up is redirecting money from the Wall-Street casinos and corrupt financial institutions…To help the endangered ‘Middle Class’ savers find safer, more profitable investments in Main Street opportunities benefiting local communities. And it would be awesome to help out people in Hawaii where I now live where so many struggles with finances. I’m not looking to change the world just a portion of it.
3) I do recognize that there are seasons in life and right now I am accelerating my syndication business along with my own investments via my Hui Deal Pipeline Club. Sign up here.
Right now my goal is to get to $10-15k per month of passive cashflow as fast as I can. Once I get there, I plan to put things into cruise control. Sophisticated investors call this going from the “growth stage” to hitting “critical mass”. At that point, I will continue to help others get where they want to be via my syndication business which creates good options for passive investors with so little time on their hands. I trust that at this point deals and opportunities will fall into my lap and the Hui.
4) Some people say they work smart. Bust guess what? I work smart and work hard (2-4 hours every day after I get home from the day job). Right now I am working at a pretty unsustainable pace but I am motivated by being so close to activating cruise control.
5) I don’t think binary. I see the world as shades of grey and zero-sum trade-offs when win-win deals can’t be made. I am able to evaluate deals analytically and make holistic decisions. I seem like a machine sometimes but don’t act like one 😉 Robert Kiyosaki says “there are always three sides to a coin.”
6) Integrity – Through these podcast interviews, I had the idea beat into my head not to chase money. I did it in my W2 career in construction management trading money for a poor quality of life working in something I did not like with people who were jerks. Being a younger investor, I realized that was going to hit “zero-gravity” or financial freedom well before my 40s. And then what the heck would I do??? I plan on doing this for a while… at least a few market cycles. I always wanted to act with my investors best interests in mind. The last thing I want to do is not act ethically and have someone put a hit on me as I check my mail at my PO Box.
“I started the Hui Deal Pipeline Club because I want to see each of you get to your goals financially so you can focus on what is really important to you. There are other fundraisers out there that will train their investors down to 10-15% IRRs on crappy deals and do “deals to do deals” or to pick up acquisition fees. Between investing alongside you folks and wanted to grow my track record the right way with the best product I know you guys will keep coming back and bring your friends.”
If you are new to the site here are the recommended posts to read if you had a couple hours:
Please do me a favour and share with your friends. Because you can change someone’s life.
“I started the Hui Deal Pipeline Club because I want to see each of you get to your goals financially so you can focus on what is really important to you. There are other fundraisers out there that will train their investors down to 10-15% IRRs on crappy deals and do “deals to do deals” or to pick up acquisition fees. Between investing alongside you folks and wanted to grow my track record the right way with the best product I know you guys will keep coming back and bring your friends.
SimplePassiveCashflow.com is for working professionals who are looking for diversification and better returns outside of traditional investments such as mutual funds and stocks. The Hui Deal Pipeline Club is a free investor club where I filter investments and underwrite the numbers and partners myself. Unlike other investor lists and groups, my investors have personal access to me and know that I personally have skin in the game investing alongside with my investors.
Let’s work together to redirect money from the Wall-Street casinos and corrupt financial institutions…To help the endangered ‘Middle Class’ savers find safer, more profitable investments in Main Street opportunities benefiting local communities.”
Turnkey seller and MFH investor discuss the cons of Turnkey rentals. Also discuss leverage and the current TK landscape in 2016.
The problem with the lower end assets, they are such a more hands on investments , just more of a headache. Which I’m about to tell you why. Yes, on paper the entry price point looks great. So folks are only seeing one side of things. Lower end properties tend to be higher maintenance, higher expenses, and much higher turn over rate. Another factor is the rental prices aren’t making sense, while still continuing to rise. We owned 37 of these exact type of homes (lower end in RH SC during the timeframe of 2004 -2009). So I’m speaking from experience, these type of assets tend to burn holes through investors pockets. Most folks start here, (1) Because they do not know any better and (2) The price point is much more attractive. These are what I like to call recycled product ( Quote by “Jay Hinrichs”) , which usually has a 5 – 8 year shelf life. Or in better terms ” the game of hot potatoes”- who or which investor is getting stuck holding the bag. Easy way to look at things are any institutional, or Hedge funds buying in this asset class. Now they are mostly buying A – B assets. Their is a reason Wall Street, and most private money are parking their funds into higher class assets. Most times this is why newer investors, jump in because its all that is left on the table for them ( lower end )or what the Gurus are selling.
I can dig a lot of great information up to prove what a great city Charlotte is. We are Atlanta’s little teenage brother growing up (fast) We are all lucky to be in a booming city basically still many years of growth left
I have to disagree on this being a good buy and hold market on most markets. From 2009-2013 this was one of the best buy ,and hold markets. Today we are facing an over priced market, rental returns are much less. I have some left over stock still holding from 2009. I was buying from $40k to $50k range. Same house now priced in $100k – $120k pre-rehab price range. I was also buying in 4 states; NC, SC, Georgia, & Florida. With that being said, “one man’s junk is another man’s treasure.” So for out-of-state folks with (ex: California or NY) they tend to have much higher entry points. So buying a house here from $100k $150k with 1% rental rule. Still makes this a very attractive market for out-of-state or international folks. This does not mean we have a great buy and hold. For me personally, it says we are lucky that we still have a lower entry point then most folks markets.
If we jump in and really become bit more analytical. It is cheaper to build than buy today. We will be building new construction rentals for a few years. I am seeing this as similar to the 2000-2004 market. So the box Vinyl Village type homes is the current build (mixed in with townhomes, duplexes, quads). That mixed with real estate cycles , which very folks even discuss or understand.
Now back to the 10% Cap rate this is why most international folks are going to get burnt, and USA folks will as well. When investing in these lower end asset classes, Folks brought in cities like Detroit and Michigan. Promised a 20% return on the properties. I challenged folks to show me that over 5 years period (I am sure those returns are a lot less). Keep in mind this has nothing to do with the homes. It has everything to do with our economy, salaries for the lower income bracket, and a renters mentality. No security in those type of jobs with very little insurance benefits so job changing is common among lower end renters. It is very hard for someone paying 35 to 45% of their income to pay rent. I know here comes that chatter, well property management will handle that, right? We owned a management company from 2009 -2013. We lost our asses with that side of the company. I did it mostly for our turnkey clients. Good Rule of Thumb for any management folks who want to get in the business. Get 300 homes plus or get out of the business. Not profitable with out the inventory.
Now back to low end assets, very rare you are every going to sell, and get retail prices in these areas. How many USA folks move to rental areas? Once a area is over 50 % or more rentals, values will eventually drop as will the area. We have artificially inflated prices, in most of the areas with cash sales to out-of-state folks, or local cash buyers( who just don’t know any better). Basically most people are showing up to the table, and all we have are scraps left! This is not just here; Kansas City, Indianapolis as most markets to just a name a few are going through same thing. I still jump on 3 to 5 webinars month with out-of-state folks seeing what they are selling. So limited sales potential down the road for every one.
I was working with as well as being one of these turnkey groups for a few years. We all setup table and booths in LA, San Fran, and other markets. Selling our cities, and our turnkey deals. Me and a few of the guys we got smart, and jumped into the international markets. I still play there my self and see a strong demand for the turnkey product (just not worth it for me). Folks if someone was to start a local solid turnkey business here in Charlotte NC (5/month ) there is a good demand out there for this product.
Now for the lack of inventory. We had a few smaller hedge funds here in 2011-12 buying before most folks realized. They were already here buying smaller up to 100 homes.. Then the big boys like invitation homes (Blackstone which is a large wall street fund for folks who don’t know ) came in purchased 7000 plus homes in little under a year. Most of the vinyl villages, anything built 2000 above; 3bed 2 bath or larger was their focus. Banks are realizing they can go into the property now . Taking a lipstick approach to rehabbing. Sell it them selves as well. So that’s a few reason for the lack of inventory.
So I hope I don’t offend any one and please answer back separately but I like networking and so should others. Great way to get out there and meet more folks.
So here we go another few answers or thoughts of mine on turnkey investing and why I made the jump to apartments.
And my latest post for folks if you think it has some substance please feel free to share with friend. First one was about turn key investments how they did over 10 year period.
First one must keep in mind most turn key companies did not exist 10 years ago. This was a product the market created. These same properties the lower end were subprime homes. So folks sold them locally in their own market. We were approached by LA reseller in late 2008. Back then everything was sold retail, very few investors (very few smart) were building their own portfolio. Most of these guys have been involved in this business for a very long time
Next point- the mess started in 2007 – 2008 when most of the product was created. Now that being said, I see the same lower end crap returning and being sold as great turn key deals. These type of deals are going to cost folks a lot of money. Again, nothing to do with the asset, but more to do with the mindset of the renters.
Now on the flip side, if you purchased between 2009 – 2013 most of the numbers made sense in many markets. Right now the nice properties (A and B limited product) as most folks can sell these retail.
So why sell turnkey or through a reseller? Look at most resellers or turn key with the exception of one or two companies. They are selling lower over priced assets or a nice products that is super over priced. The problem is even over priced, the entry level makes sense compared to most folks (local entry point). Lack of good solid deals make folks have to stretch the numbers or present good deals to others. If all these deals were so great why would any one sell not keep?
At the same time, I used to buy 4 properties sell 3 to keep one free and clear. So every person’s motivation is a bit different. I would just be careful to anyone who has not seen or been through the 2007- 2008 crash selling deals. I don’t think they can or will truly understand things. Especially when selling for profit and their motivation is profit. Which is why I get it; because they are in the business to make money, by selling a product. I just think the shelf life of that product has passed. So one can look at wall street or other investments, or jump in the turnkey market.
I don’t want folks to think I am against turnkey. I just feel the window has passed on solid buys. The market tells us what to do, you just have to listen. Right now I’m building rental properties all in for $65/sqft. So cheaper to build than buy. There is no rush to investing. Sometimes it is better to sit back and watch. See what the market is saying and find the best place to park funds. Real estate is not always the best, but not the worst either.
Now what am I doing~ building new construction retail and rental. Taking the profit and buying apartment buildings. So I am hoping to have 200 units paid free and clear in the next 5 years along with being a private lender for local folks. Knowing I know the numbers better than most.
So I hope I answered your questions and have not made it more confusing.
Post number 3 was turnkey investing in general
I was a turn key guy who also provided for resellers. I think the window for solid deals has passed. Most of the folks selling or giving you advice here are selling an asset or being paid referral fees to sell that asset (nothing wrong- it is a business and they are providing a service or the asset itself). During 2009 – 2013 was the prime time to purchase the solid cash flow rentals. Right now folks are way over paying for higher class assets or buying the lower end scraps. Lower end is basically recycled product that did not work out for the investor the last time around. Lower end is usually not a winner, but more of cash drain for your pockets. I see Indy and Kansas city being spoke about as they are the first recycled cities that I can attest to.
What I mean by this, in 2009 when I was doing seminars around U.S. areas, so were the guys from both of those markets. Now I am seeing the same older junk make its way back around only as higher priced. Again, I am not against turn key. We were scheduled to build 150 units for one company (turn key rentals). That number is now up to 500 units in a few markets in the southeast. We are rebuilding the vinyl villages that were built in 2000 – 2004. Very similar product, actually identical product. Just cheaper to build than buy, which then tells me the cycle has changed or moved on.
Basically what I’m saying, it is cheaper today to build than buy in most markets. That is why I don’t think the turn key is a great buy today. I think folks are getting the bottom of the barrel or very over priced assets. Keep in mind, most the major hedge funds came in 2013 they took majority of any of the solid deals. The nicer homes A – B type assets most local folks can sell them retail. So why would they pay a reseller or flip to investor? Better money in retail sales in most markets, which is similar to 2005-2007. Folks sold these same assets to subprime buyers (lower end) or retail to home buyers (A-B) asset. So you can see, first and foremost, there is inventory shortage in most markets. Folks now have to push other cities (lower end product). As you folks in California have such a high entry points. Most markets still look attractive. Trust me when I say on paper numbers look great. In the long run I feel the return for folks from 2014 – present will be a lot less than the prior years. In 2009-2013 if you purchased during this time I think you made great buys. As well as hitting the timing of the market correctly.
Real estate is a lot about timing and cycles. At the same time the market tells folks what is working and what is not. You have to listen and not recreate the wheel. Still good deals just harder to find. I just prefer apartments over houses.