Found a good deal in middle of nowhere Missouri.

The attachment has the cap-rate at 8.8%, as is. The owner is disabled and retiring, and just wants to liquidate it. The town has a household income of $31k, but only 12% of households living below poverty line, which means income inequality is pretty low.

I don't know how to imbed Gdrive images.


Value Add: Currently, there's no section 8, but with Section 8, Rents could go up 25-30%. Price could come down to $500k. Which would bring the cap to well over 10%

My concern is the 7 hr drive from my residence. I would obviously setup a management company to take care of the rent collection, maintenance, etc... My plan would be to check on them once a year.

Let me know if there are any gotchas! I'm missing.

Not an investment question but I feel like some sketchy **** just went down and am looking for opinions lol.

I rent in a duplex that was owned by the other tenant's parents. Amazing, super nice, people. Never raised our rent over the 3 years we rented from them. We find out 6mo ago or so that they are selling the building, but it's a private sale. The new owners aren't sure what they're gonna do with the building at first, but eventually agree to let us stay on another year, for a rent hike of course. No lease though because they arent the owners yet. We only deal with their agent, not the buyers themselves.

So the sale goes through on Wednesday. Sale price is 175k under the Zillow estimate. Their agent emails us, let's us know that circumstances have changed and they are going to immediately relist the property. As a sign of good faith they'll give us a 3mo lease at our current rent. Today the building goes up on the market, for 300k more than it was sold for just 2 days ago.

Obviously TBD of it'll sell at that price, but I think it'll at least get close. So I'm pretty confident there was no change in circumstance and this was the plan all along. Is there any way this is some sort of collusion? The seller and buyer work at the same firm, and I doubt my landlord's agent is so bad at his job that he sold for 300k less than market value.

I feel like my former landlords got taken advantage of. And obviously shame on them for not doing their research and knowing what they should've been asking for, but they are innocent old people who just wanted a house for their kids. Do they have any recourse?

Anyone have any experience with Road Maintenance Agreements? Major things to lookout for or common problems? Looking at a nice property, but roadway is private. Relatively short, but has a portion over a very small creek...

REITs vs actually investing in real estate?

It all boils down to how much control and diversification you want and how much time and skill you have. If you have the knowledge, skills, discipline and time to devote to finding and managing your own deals, you typically generate substantially better returns by investing in your own deals. But, if you don't have the time and/or skill, REITs are probably the best option to get real estate exposure in your portfolio.

You may know this already but warrants mentioning that REITs are much better investments in tax-advantaged/deferred accounts.

That's sad but it happens all the time.

Can you find out how much it appraised for? (Was the appraiser/inspector bribed?)

Maybe report the realtors to the licensing board?

Maybe have the former owners speak to an attorney about whether or not all parties fulfilled their legal obligations to them? Maybe they can sue someone for negligence or breech of contract and recoup a small amount?

Or just mind your own business.

If you networked with your landlord it'd have been yours. Live and learn. To be fair you also have no idea what really happened in the transaction nor what the real price was, if there are 2 agents involved there is very little chance of conlusion and even if there is, what is it to you?

With all due respect, you sound like a terrible person.

The minimum the OP should do is contact the former landlord and ask if they saw it was relisted for $300k more.

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The last time I checked this thread was maybe 5-6 years ago. Sorry for the delayed responses guys

I started getting interested in poker again, which led me back to 2+2 forums, which reminded me about this thread from long ago. I guess we should just pick it up?

I know this is an old thread, but since the question is here I figured I might as well answer. The first thing that I'd look at is the population stability over the last 30 years. My rule of thumb for investing long distance is that, first and foremost, the population has to be stable. Second, I'm leery of investing in a city where there is a concentration of employment to one or two places. E.g., I stay away from small towns where, say, 10% or more of the population works at the same place.

As for the deal itself, I'd personally only buy it if the numbers pencil out based on current rents. Section 8 is amazing for landlords that know how to work with the program and tenant population. But I look at the S8 rents as upside to the cap rate. If the property doesn't work at fair market rent then it doesn't work. You want to leave yourself some optionality to put a different type of tenant in there.

Last point I'll make on this is in some small town the S8 population is extremely small and the competition for them is higher based on the overall rental market. Best thing to do is call the housing authority and find out what you can about how many tenants they have in that particular market. This is another reason why I'd be careful about buying when the property doesn't pencil well at fair market rents.

Internal rate of return (IRR) is correct calculation to "project" your ROI. But the challenge with IRR in real estate is that it relies entirely on the projected appreciation rates of both rents and market values. Both of those are impossible to predict. So IRR is junk, even if it impresses your bankers and investors (which it does). IMO there is only one true metric that matters in REI, and that is cash-on-cash return. Everything else is speculation.

I've bought and sold notes, but they were all on mobile homes rather than mortgages. Another avenue that you might try is buying liens and judgements where you can secure the investments with real estate. I sort of think of this as pseudo-REI, since you're really investing debt secured by RE rather than RE itself. But what's the point of nitpicking.

Word of caution: I've looked into judgement and liens as an investment strategy. I scrapped it because end of the day it takes a ****load of time to really jump into it and I just didn't find it to be interesting enough to spend my time on.

Don't invest for appreciation. If you want to make appreciation investments, just buy publicly traded REITs. You get all the benefits of a highly liquid asset and appreciation investment without all the headaches of actually owning a building. I wouldn't do this because it's speculation rather than investment, but to each his own.

This is a really smart question. Real estate investing requires expertise in many complex areas of finance, tax law, landlord tenant law, property management, negotiations, investor relations, construction, zoning and land use, contract law, debt collections laws, and probably a lot more areas that aren't coming to me at the moment. It's an area of skills that you develop over a lifetime of investing because you can go extremely deep in any one of those skillsets. But success in REI requires some knowledge of them all.

I think that there are levels here though, from the micro to the macro. I'll take a crack at the necessary conditions for success, going from most micro to most macro, but i'd love to hear other perspectives on this as well.

Self - Entrepreneurial, hard working, meticulous, comfortable with risk.
Property - Offers a good investment for a strategy where you have expertise
Neighborhood - Demographically stable, no structural issues (e.g., prone to earth quakes or flooding or erosion)
City - Has a reasonable process and rules for zoning and regulation of investors and tenants, works to attract new businesses
State - Has a reasonable approach to landlord tenant laws, works to attract new businesses, low taxes
Nation - Stable currency, predictable monetary policy, low taxes, reasonable tax laws
Economy - Stable interest rates

Many of these any particular investor has no control over at all, and any one of them could have an enormous impact on your investment. It was, for example, an investor apocalypse when President Reagan signed the 1986 tax reform laws that removed the ability for investors to own real estate as a tax shelter. That change caused 20%+ price drops in many markets.

the legend...has returned.

lol "the legend" is a bit strong. But I'll help if I can.

Well, I think this is generally true but I wanted to add some color to the explanation. I believe that to be successful in real estate investing over the long term you have to make money on purpose. Which is to say that you have to utilize your *skill* in finding deals, adding value, managing properties, etc. Any jerk can buy a property and hope it appreciates over time. Just like any recreational poker player can get action with the nuts sometimes. But it's skillful decision making over a period of time that separates the wheat from the chaff as it were.

If you want to invest such that you sit back, don't do jack, and hope the asset appreciates, then buy a REIT. Don't buy a building or a piece of land. Buildings come with massive headaches and ongoing expense and time. And they're risky. You can get sued (I have a friend that's been sued by tenants 7 times). Your building can burn down (this happened to both me and my brother. I lost $50k, he did ok. Was a pain in the ass for both of us). Your town can pass rent control. Your government can change the tax codes. Interest rates can spike. Toxic contamination can be found on the property. The list goes on and on.

REITs are also highly liquid, whereas buildings aren't.

But the thing about REITs is that they're investments in a business that owns real estate. That's different than being a real estate investment for several reasons. First off, they're generally publicly traded unless you have the inside track on a private deal. That means the prices for the shares fluctuate wildly and inexplicably, like s stock does. Second, you have to trust the management team since they have all of the power when it comes to the outcome of your investment. Third, and most importantly, *you* can't do anything to impact the outcome of the investment. Personally, I trust myself to make me money more than I trust anyone else to make me money. I also don't speculate, I buy for cash income not appreciation. If a property appreciates, that's just cream. But I don't factor appreciation into a purchase decision *at all* because if I could accurately predict real estate prices there is better and more lucrative use of that knowledge than buying actual real estate.

Any tips for marketing and renting your units? Do you rent them yourself or do you outsource it, do you hire a photograph ever?

Also what do you think of student room rental, did you ever try that niche?

I thought I was interested in real estate until I took an actual real estate class and the impression I got was definitely as you described, that you need to know a lot about a bunch of different ****. So as someone who generally doesn't know a thing about RE but could potentially come across REIT's though the stock market, are there any tell-tale signs that management knows what they are doing? Or maybe some red flags that should raise caution?

mmm not that I know of. Honestly if there were then that would already be priced into the share price of the REIT. Markets are efficient like that. For the record, I don't invest in REITs. The only "stock market" sort of investing that I do is buying interest futures to hedge my variable rate mortgages. And they're not even investments, they're hedges. In any case, I can't give any credible advice about REIT investing, but I do know that there is tons written on the topic because I looked into starting a REIT at one time before deciding it was too much work, not how I want to spend my time, and the financial upside wouldn't have a big impact on my lifestyle even in the best possible case scenario.

First off, I think it is great you are sharing your expertise in this field with the thread, but I disagree with you on a few points.

Yes, REITS prices fluctuate, but just because you don't see the price of your RE fluctuating doesn't mean it isn't fluctuating. Whatever RE you are buying is fluctuating just as much or worse than most non-leveraged REITS.

In response to your 2nd & 3rd issues w/ REITS: A team of pros managing property seems way better than the average person ITT managing a single property, IMO. You are probably better managing RE than most/all ITT, but even then I doubt as good as the management teams on the REITS. If you were they'd be banging on your door to hire you.

When you say you don't speculate when buying RE you are either mis-speaking or don't understand what speculate means. Buying RE is speculating unless you are somehow guaranteed a tenant won't leave, there won't be problems with the house, gov't won't raise property taxes, create new laws, etc. and like 1,000 other variables.

Well a lot has changed in my personal life since I started this thread years ago. I got divorced, then met a new partner, which triggered me to move from the Kansas City area out to the San Francisco Bay area. I started a technology company which took my primary focus off real estate for several years. Given all of that, I ended up selling most of the portfolio that I had when I started this thread, and replaced it with other real estate assets. I now outsource all of the management of my properties to a 3rd party management firm, and they handle all of the day-to-day operations of my portfolio. However, and I can't stress this enough, when I hired them I already had significant direct experience as a property manager, as well as in employing property managers. Lets just say that my BS detector is well developed. I'm not totally happy with how they do things, and from time to time I have to call them on various things. All in all though, they do a good job.

Having said that, my portfolio is stronger than it has ever been. Right now across my RE holdings, I get about a 32% COCR. I'm implementing some changes to my buying process that I believe will raise that to closer to 40% COCR. So I like to think that I have gotten better at investing with time.

As for marketing, the basic thing is that you have to do what works. I know a lady that does Section 8 rentals and in her market it makes sense for her to give away a TV with each 2 year lease. She gets them at Walmart for like $300, and it's a big draw given the tenant population. She asked me once if it's "ok" that she does that. Of course it's ok! I've not had to do that, but there is no principle at work here that would prevent it. For me, listing on sites like GoSection8.com and such works fine since that is where most housing authorities direct the tenants to anyway. I've completely stopped using Craigslist after hearing several horror stories from other landlords. I almost got caught up in a C-list scam w/ a property I was buying. On closing day I showed up at the property, which was supposed to be empty, and someone was living in it. I called the seller to find out WTF, and it turns out that somebody broke into the house, changed the locks, listed it on C-list, and rented it out to some unsuspecting single mother. I eventually bought the house after the issue was resolved by the seller.

As for student rentals, I have had one rooming house that was not focused on students. My brother has one large rooming house and a hotel that operates similar to a rooming house. In all cases, they're a pain in the ass. However, the trick that he's learned, and my experience is similar, is that the manager makes all the difference because in a property like that there is much less room to let **** slide. They have to be actively managed. The cash flow is real good though.

The other thing about rooming houses is that most cities present zoning issues that are difficult to overcome unless you offer disabled housing. That's a different animal. I've looked into that area, and it's something that I'll probably do at some point as well.

Yes of course RE prices fluctuate, I totally agree. That's more or less the major gist of what I've been trying to relay this whole thread. Don't expect RE prices to only go up. They go up down and sideways and you can't predict which at any given time with any degree of accuracy. My point though was slightly different, which is that REIT prices very *inexplicably* and *quickly* largely due to the liquidity of the asset. But this is all a bit of a nitpick because end of the day, if all you want to do is sit back and hope an asset appreciates then best of luck to you, but I don't personally see that to be a credible or realistic REI strategy.

mmmm possibly but it completely depends on the individual entrepreneur. I'm quite sure that I'm better at managing my own money than a team of professional REIT managers. My returns over time vs. any publicly traded REIT prove that to me absolutely. As to the "average" person, I think that the idea of this thread is to help the average person be better at thinking about and making real estate investments.

As to whether REITs should be banging down my door, I'm not sure why that would be true. I think that the skillsets of REIT managers are quite different than small-time RE guys like me. From what I can tell, they are experts at fundraising, marketing their REITs, dealing with regulators, and managing publicly traded companies. They're mediocre real estate investors from what I can tell based on their returns. Which is part of why I wouldn't invest in them. Should they be banging down my door? Perhaps. But if they knew about me and tried that I'd tell them to go away because I've already lived the board room life and I have no zero interest in going back to it.

Of course you're right. I suppose I should come up with a different term than "speculating". mmmm maybe you have a suggestion for a better term to use? All investments are speculating to some degree, and all investments have variables outside of the control of the investor. I guess what I mean to say is that I buy based on verifiable cash returns under a set of known variables. Som of the risks in RE can be hedged, some can be reduced, and others you just can't do anything about. Some are completely unknowable. I think what I'm trying to get with my comments about speculation is the idea that appreciation/depreciation falls into the unknowable bucket. I admit that I'm using a bad term for it.

Edit: I'll add one more thing here. I'm not anti-REIT. For me personally, REITs don't make good sense. I'm not saying that they don't make sense for anyone at all. My whole point for bringing up REITs at all was to say that if you're buying a building with the primary intention of hoping the building appreciates to generate returns, you'd be *better off* just buying REITs than you would be buying buildings. I suspect that bahbahmickey and I agree on that point.