DIY Real Estate

A place to talk about speculative investing ideas for the optional Variable Portfolio

Moderator: Global Moderator

ppnewbie
Executive Member
Executive Member
Posts: 850
Joined: Fri May 03, 2019 6:04 pm

DIY Real Estate

Post by ppnewbie » Sat Dec 24, 2022 2:02 am

I was thinking that if I had taken a conservative real estate path out of college, I may have been able to mostly retire at 30 to 35.

Part of it was based on the fact that my technical degree gave me a better than average salary, the other part of it was that I was from a very nice but relatively cheap south eastern city with affordable housing but everyone still wanted to move there.

It probably would not have been too difficult to end up with 10 houses over about a 10 to 15 year period, that were cheap and generated around 120 to 150k+ in cash flow per year.

Been thinking about this as I am helping steer my kids to long term financial health and wealth.

Interested in hearing in the forums opinions on this topic.
User avatar
Xan
Administrator
Administrator
Posts: 4393
Joined: Tue Mar 13, 2012 1:51 pm

Re: DIY Real Estate

Post by Xan » Sat Dec 24, 2022 9:15 am

ppnewbie wrote:
Sat Dec 24, 2022 2:02 am
I was thinking that if I had taken a conservative real estate path out of college, I may have been able to mostly retire at 30 to 35.

Part of it was based on the fact that my technical degree gave me a better than average salary, the other part of it was that I was from a very nice but relatively cheap south eastern city with affordable housing but everyone still wanted to move there.

It probably would not have been too difficult to end up with 10 houses over about a 10 to 15 year period, that were cheap and generated around 120 to 150k+ in cash flow per year.

Been thinking about this as I am helping steer my kids to long term financial health and wealth.

Interested in hearing in the forums opinions on this topic.

Would you be retired, or would you be managing properties?

Being a landlord is hardly passive income: it's a job, and one that I personally have no interest in.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: DIY Real Estate

Post by mathjak107 » Sat Dec 24, 2022 9:28 am

We sold all real estate before retiring just because we want simple assets that can be sold , traded or spent with the click of a mouse .

Being in nyc smart money has opportunities in real estate not available elsewhere thanks to the fact politicians tried to screw over landlords with rent stabilization.

Those who learned how to use it to their advantage could make a lot of money …

I was never interested in just collecting rents …. I like special situation stuff that comes with 7 figures of equity built in .

I loved buying packages here of co-op apartments in prime locations but that contained original rent stabilized tenants who didn’t buy .

With the right brokers you can get a package of them for cents on the dollar … if you can get the tenants to take a buyout of. Their lease you can sell them for 7 figures each here .

We got a package of 9 over looking Central Park in the second most desirable co-op in Manhattan for cents on the dollar since rents were barely break even .

We offered 100k to move … 7 out of 9 took the offer over 10 years time .

Each sold for 1 to 2 million .

We sold the remaining two which we really got free because all the others paid so well , to an investor group .

Now each apartment was worth 1.1 million with no tenant if it could be sold .

The last two tenants were not interested in leaving .

So we sold both for 360k and now the investor group will sit with them ..so they are paying about half price for one and got the other free
DogBreath
Full Member
Full Member
Posts: 75
Joined: Fri Oct 14, 2022 1:52 pm

Re: DIY Real Estate

Post by DogBreath » Sat Dec 24, 2022 9:50 am

mathjak107 wrote:
Sat Dec 24, 2022 9:28 am
RENT CONTROL
LOL. This is so classic. The Dem pols create a problem - high real estate taxes - that they try to solve with more bad policy - rent control - bc lower income folks are getting priced out. But instead of helping the poor, they create a black market system which, of course, gets exploited by smart wealthy people. The only winners are the people smart enough to exploit the stupidity, or connected enough to get a rent controlled apartment.*

*Which I'm guessing, in most cases, is not the people who were intended to benefit from rent control.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: DIY dReal Estate

Post by mathjak107 » Sat Dec 24, 2022 10:01 am

There is a big difference between rent controlled apartments and rent stabilized.

Rent controlled apartments are almost gone as it applied to only those in apartment’s since the 1970’s..

Rent stabilization is what more than 50% of all rentals here are .

Rent stabilized apartments range in price from pretty far below market to beautiful rentals going for 5-7 k a month .

We live in a very nice stabilized building with pool , tennis courts and gated with guard house .

We’re pretty much at market even though my wife has been living here forty years .

On the other hand our tenants we had in Manhattan were paying half market .

But landlords either pay very little for these or they get really nice financing and tax perks .

No one who built since 1974 has to be stabilized……but not one rental building was put up for decades .

Then various incentives were offered through the 421a and j51 programs to get developers back .

It worked and we have nice luxury rentals being put up …a two bedroom can be 6k a month …the developers just agree to go by the stabilization board increases .

So don’t confuse stabilization with low or affordable housing
Last edited by mathjak107 on Sat Dec 24, 2022 10:22 am, edited 1 time in total.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: DIY Real Estate

Post by mathjak107 » Sat Dec 24, 2022 10:08 am

For those who think rent stabilization is somehow for low income tenants or affordable housing, it hasn’t been that way since the 1970s ..

Here is a stabilized building put up by the developer I sold some commercial lease rights to .

It’s a gorgeous building and is really only affordable by the wealthy .

All stabilization means is you have guaranteed renewals and increases are voted on by a board …… what they go to market at is the sky’s the limit for any of the new programs developers are taking part in

https://www.thechrystie.com/?gclid=EAIa ... gLH0fD_BwE
Last edited by mathjak107 on Sat Dec 24, 2022 10:23 am, edited 2 times in total.
DogBreath
Full Member
Full Member
Posts: 75
Joined: Fri Oct 14, 2022 1:52 pm

Re: DIY Real Estate

Post by DogBreath » Sat Dec 24, 2022 10:09 am

Okay, thanks for the clarification. But it still seems like if the pols just stayed out of it and let market forces work, you wouldn't have to create incentives for developers to return, no?
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: DIY Real Estate

Post by mathjak107 » Sat Dec 24, 2022 10:13 am

Actually developers found better profits in co-ops and condos .

They stayed away from rentals and tenants..

Plus rent control back in the early days left a bad taste in their mouth as politicians artificially prevented rent increases using tenants as pawns .

They didn’t trust politicians and so until the incentives were offered not one rental building was put up that wasn’t part of a low income deal or affordable housing subsidized deal.

But today it is different .

There are amazing deals on stuff with existing tenants so real estate speculators can make money .

Tenants can make money on buy outs and many do have less then market rents saving something , so for all the bad press it can be a win /win
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: DIY Real Estate

Post by mathjak107 » Sat Dec 24, 2022 10:27 am

7 out of 9 of our tenants were handed 100k to leave .

Being boomers they couldn’t afford to live on Central Park south once the pay checks stopped .

So that fact played a role in us buying 9 apartments…

So here you have tenants with nothing invested making a windfall just for being tenants..plus they were paying about half market rents for many years .

This was the building we owned in below .

Plus we held a stake in the commercial lease rights in the building which we sold as well .

We were partners in the lease rights portion with Bernard spitzer, a nyc real estate mogul and Elliot spitzers dad

https://www.cityrealty.com/nyc/midtown- ... south/5625

So this is the kind of real estate deals I like ..I never liked just dealing with tenants and hoping time appreciated my property…

I want to know I have huge equity day one and it can only get better overtime while. Waiting for the apartments free up so I can sell.

But you need to buy a bunch of them since the risk is the tenants won’t leave
User avatar
Kriegsspiel
Executive Member
Executive Member
Posts: 4052
Joined: Sun Sep 16, 2012 5:28 pm

Re: DIY Real Estate

Post by Kriegsspiel » Sat Dec 24, 2022 11:23 am

ppnewbie wrote:
Sat Dec 24, 2022 2:02 am
It probably would not have been too difficult to end up with 10 houses over about a 10 to 15 year period, that were cheap and generated around 120 to 150k+ in cash flow per year.
Well, if you could have bought 10 houses that cash flowed $1,000/mo in today's dollars, that could have been a smart play, but you left out an important variable: how much they cost to get that cash flow. Some of the big hitters on Bigger Pockets have talked about how they aim to get at least $100/mo cash flow on their rentals, so getting 10x that would put you in lofty company.

Just doing some math for the numbers you gave, using some of the BP crowd's rules of thumb; 1) 50% of rent goes to expenses, the other half goes to your mortgage and whatever's left is cash flow, and 2) a purchase price 200x greater than a months rent*, it's tough to square your numbers. Or did you mean that they would generate $1,000/mo cash flow in today's dollars once the mortgage was paid off?

* In the recent years of low interest rates, the rule of thumb evolved to 100x monthly rent. But back in the 80s/90s, when I assume you were talking about buying these, the interest rates were higher and the rule of thumb needed to be higher.

Either way, like Xan said, managing your real estate (or managing the property manager) is a part time job in itself. If your kids don't want to put up with that aspect, it's kind of irrelevant whether they can get higher returns with rental real estate than with something like an index fund. If they do like it, then it's a pretty good business to get into, both with their own rentals, and maybe managing other people's rentals for them, rehabbing houses, etc.
You there, Ephialtes. May you live forever.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: DIY Real Estate

Post by mathjak107 » Sat Dec 24, 2022 12:03 pm

we wanted the real estate to be as transparent to our lives as we could .

even though we had 24/7 Maintenace in the building, we had douglas elliman handle all calls and field things ....

when it came to retirement we wanted nothing to do with tenants and apartment issues
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: DIY Real Estate

Post by mathjak107 » Sat Dec 24, 2022 12:33 pm

in real estate , the really lucrative stuff stays in the good ole boys club .

like when we wanted to sell off those two remaining apartments to an investor group .

they never listed on the open market .

our broker has a list of their key players .

they contacted an investor group who already held 2 or 3 apartments in the building .

they jumped at talking to us .

so most areas tend to have the real good deals locked up by the pros in sweetheart deals .

even when we bought the package , it was a deal never advertised
ppnewbie
Executive Member
Executive Member
Posts: 850
Joined: Fri May 03, 2019 6:04 pm

Re: DIY Real Estate

Post by ppnewbie » Sat Dec 24, 2022 2:44 pm

Xan wrote:
Sat Dec 24, 2022 9:15 am
ppnewbie wrote:
Sat Dec 24, 2022 2:02 am
I was thinking that if I had taken a conservative real estate path out of college, I may have been able to mostly retire at 30 to 35.

Part of it was based on the fact that my technical degree gave me a better than average salary, the other part of it was that I was from a very nice but relatively cheap south eastern city with affordable housing but everyone still wanted to move there.

It probably would not have been too difficult to end up with 10 houses over about a 10 to 15 year period, that were cheap and generated around 120 to 150k+ in cash flow per year.

Been thinking about this as I am helping steer my kids to long term financial health and wealth.

Interested in hearing in the forums opinions on this topic.

Would you be retired, or would you be managing properties?

Being a landlord is hardly passive income: it's a job, and one that I personally have no interest in.
The thought was getting good at the management or overtime finding reliable managers would significantly decrease the actual time required. Maybe property management would reduce the profits but the rents and property appreciation would have also increased over time. Just seems (or seemed) like a much faster way to build reliable cash flow then a corporate job with the associated stress, politics, and the sword of Damocles permanently hanging over your head.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: DIY Real Estate

Post by mathjak107 » Sun Dec 25, 2022 8:00 am

The problem in retirement is the more property you own the more potential big expenses not on the radar can be .

Even in a high rise co-op we had big expensive assessments come up .

Like new windows and a major elevator overhaul .

Don’t forget markets determine rents and not what one’s expenses are .

In fact markets don’t care if you have a mortgage and other rentals around you don’t .

So it can take many years for rents to actually cover all the costs .

It is rare in desirable areas where rents are more then buying day one
User avatar
doodle
Executive Member
Executive Member
Posts: 4658
Joined: Fri Feb 11, 2011 2:17 pm

Re: DIY Real Estate

Post by doodle » Mon Dec 26, 2022 8:51 am

Is OP's post the sign of a real estate top? Why does it seem that everyone and their uncle aspires to become a landlord these days when a decade ago most people wouldn't take a second glance at houses that were being sold off for pennies on the dollar?

There are very weird things happening in the residential real estate market these days. Honestly I can't make any sense of it...especially given the interest rate environment and long term demographics of our country. I don't see the attraction.

I occasionally browse through listings in oddball places to kill time and lately when I click on price history I see a lot of this (picture below)...I wonder what the back story is.... perhaps an aspiring landlord who realized this wasn't for him?

This is from Ely, Nevada of all places but I see the same price history everywhere from Cleveland to Yuma. It's incredibly strange.
Screenshot_20221226_072629.jpg
Screenshot_20221226_072629.jpg (253.9 KiB) Viewed 3629 times
User avatar
Kriegsspiel
Executive Member
Executive Member
Posts: 4052
Joined: Sun Sep 16, 2012 5:28 pm

Re: DIY Real Estate

Post by Kriegsspiel » Mon Dec 26, 2022 4:50 pm

doodle wrote:
Mon Dec 26, 2022 8:51 am
There are very weird things happening in the residential real estate market these days. Honestly I can't make any sense of it...especially given the interest rate environment and long term demographics of our country. I don't see the attraction.

I occasionally browse through listings in oddball places to kill time and lately when I click on price history I see a lot of this (picture below)...I wonder what the back story is.... perhaps an aspiring landlord who realized this wasn't for him?

This is from Ely, Nevada of all places but I see the same price history everywhere from Cleveland to Yuma. It's incredibly strange.

jpg
Just looking at a price history doesn't really tell anything. Did someone buy a dump and rehab it? Did someone buy a property then find out an attractive development is going in nearby? It could be any number of things.
You there, Ephialtes. May you live forever.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: DIY Real Estate

Post by mathjak107 » Mon Dec 26, 2022 5:01 pm

Absolutely, look at the investor group that bought from us …two apartments for 360k

If they can sell those apartments it would show they sold for 1.1 million each in a year, to the unknowing
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: DIY Real Estate

Post by mathjak107 » Mon Dec 26, 2022 5:05 pm

We once bought a house at a tax lien ….it cost us 20k in taxes and fees ..

However it cost over a hundred thousand in work to make it marketable…and my partner was the contractor.

Now that is something I would never get involved in again
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: DIY Real Estate

Post by mathjak107 » Mon Dec 26, 2022 5:09 pm

For anyone who thought tax liens are a way to real estate success let me tell you .

having dabbled in tax lien sales i can tell you i would never do it again .

the pitfalls you only find out afterwards can be a horror .

we didn't really expect to get the property . we really were doing it for the 18% interest . the owners always come up with the money at the last minute .

well this time they didn't . so with the people still living in the house we had to start the eviction process .

so now we are in to this for 2 years back taxes at 10k or so a year , and now legal fees .

they used every tactic to stall the court so they were finally evicted almost one year later and 3 years taxes

but now they left their stuff behind . it was basically junk but nj law says we have to store it for months and if not claimed and paid for it is ours .

so now a moving company moved everything out to storage . now we had storage fees for 6 months and moving expenses .

at the end of the time frame we had to pay again to have the stuff removed .

while the house was empty , we can't prove it but we are pretty sure the ex owners went back inside and vandalized the house ripping out all plumbing and wiring .

basically the house was trashed . my partner luckily was a builder so we ended up gutting it and starting over inside .

by the time we sold it the money we made and the aggravation was hardly worth it .

i would never get involved with these tax liens ever again .
User avatar
doodle
Executive Member
Executive Member
Posts: 4658
Joined: Fri Feb 11, 2011 2:17 pm

Re: DIY Real Estate

Post by doodle » Mon Dec 26, 2022 5:26 pm

Kriegsspiel wrote:
Mon Dec 26, 2022 4:50 pm
doodle wrote:
Mon Dec 26, 2022 8:51 am
There are very weird things happening in the residential real estate market these days. Honestly I can't make any sense of it...especially given the interest rate environment and long term demographics of our country. I don't see the attraction.

I occasionally browse through listings in oddball places to kill time and lately when I click on price history I see a lot of this (picture below)...I wonder what the back story is.... perhaps an aspiring landlord who realized this wasn't for him?

This is from Ely, Nevada of all places but I see the same price history everywhere from Cleveland to Yuma. It's incredibly strange.

jpg
Just looking at a price history doesn't really tell anything. Did someone buy a dump and rehab it? Did someone buy a property then find out an attractive development is going in nearby? It could be any number of things.
Absolutely. I left that part out. These properties have not been touched. In fact, they don't even look like they've been lived in by the seller. Just a rough estimate from the widespread markets I've looked at I would say around 20 percent of properties have a purchase and resale date within a year of one another with price increases generally in the 100-200% range. It's like nothing I've seen before.

My girlfriend sold her car to carvana a few years ago. It was the most mind boggling experience for me to witness. She went online and filled out a bunch of information and within a day a guy came and loaded the car onto a trailer and she was paid top dollar. There was no tire kicking, test driving, inspection process at all. I'm sure her car was relisted within a few weeks for thousands more than she was paid.

It feels like something similar might have taken place in housing market when redfin and Zillow started behaving like carvana and retail investors then jumped on for the ride. I have no idea how this will shakeout, all I can hope is that taxpayers won't be on the hook for another bailout package.
stuper1
Executive Member
Executive Member
Posts: 1365
Joined: Sun Mar 03, 2013 7:18 pm

Re: DIY Real Estate

Post by stuper1 » Mon Dec 26, 2022 5:34 pm

I keep reading that large investment companies are buying single family homes in bulk so the companies can become large landlords and rake in the rental money. Is this true? Is this something new that wasn't happening on this scale until recently for some reason? What changed to make this more attractive to the investment companies?
User avatar
Kriegsspiel
Executive Member
Executive Member
Posts: 4052
Joined: Sun Sep 16, 2012 5:28 pm

Re: DIY Real Estate

Post by Kriegsspiel » Mon Dec 26, 2022 6:37 pm

doodle wrote:
Mon Dec 26, 2022 5:26 pm
These properties have not been touched. In fact, they don't even look like they've been lived in by the seller. Just a rough estimate from the widespread markets I've looked at I would say around 20 percent of properties have a purchase and resale date within a year of one another with price increases generally in the 100-200% range. It's like nothing I've seen before.
I've noticed a lot of times what happens is that someone sells their house far below market value. Then the buyer just sells it at the market value to someone else. Whether the buyer gets it based on inside baseball, like they knew the seller somehow and got it for cheap before it went on the MLS, or the seller responded to their direct marketing "we buy houses" card, or whatever. You'd probably have to dig into it more if you really want to figure it out.
My girlfriend sold her car to carvana a few years ago. It was the most mind boggling experience for me to witness. She went online and filled out a bunch of information and within a day a guy came and loaded the car onto a trailer and she was paid top dollar. There was no tire kicking, test driving, inspection process at all. I'm sure her car was relisted within a few weeks for thousands more than she was paid.

It feels like something similar might have taken place in housing market when redfin and Zillow started behaving like carvana and retail investors then jumped on for the ride. I have no idea how this will shakeout, all I can hope is that taxpayers won't be on the hook for another bailout package.
You may have noticed that Zillow shitcanned their home buying operation a while ago, and that Carvana's stock price has dropped 90% over the last year.

Just based on my limited knowledge of Carvana, I can't imagine your GF got "top dollar" for her car though.
You there, Ephialtes. May you live forever.
User avatar
Kriegsspiel
Executive Member
Executive Member
Posts: 4052
Joined: Sun Sep 16, 2012 5:28 pm

Re: DIY Real Estate

Post by Kriegsspiel » Mon Dec 26, 2022 6:43 pm

stuper1 wrote:
Mon Dec 26, 2022 5:34 pm
I keep reading that large investment companies are buying single family homes in bulk so the companies can become large landlords and rake in the rental money. Is this true? Is this something new that wasn't happening on this scale until recently for some reason? What changed to make this more attractive to the investment companies?
They were doing that during ZIRP, it's definitely not new. I'm actually under the impression that it's cooled off in recent years (I might be wrong). Blackstone is a big ($380.36 billion) real estate investor, and they're not doing so hot lately; they had to limit withdrawals from their real estate investment fund.
You there, Ephialtes. May you live forever.
xmj
Junior Member
Junior Member
Posts: 8
Joined: Fri Sep 17, 2021 4:43 am

Re: DIY Real Estate

Post by xmj » Wed Dec 28, 2022 7:49 am

mathjak107 wrote:
Sat Dec 24, 2022 9:28 am


Being in nyc smart money has opportunities in real estate not available elsewhere thanks to the fact politicians tried to screw over landlords with rent stabilization.

Those who learned how to use it to their advantage could make a lot of money …

I was never interested in just collecting rents …. I like special situation stuff that comes with 7 figures of equity built in .

I loved buying packages here of co-op apartments in prime locations but that contained original rent stabilized tenants who didn’t buy .

...

We offered 100k to move … 7 out of 9 took the offer over 10 years time .

Each sold for 1 to 2 million .
Earlier this year I read a pretty great blog post on Making Money in real estate- dissecting two investing verticals

where it says
Because private market commercial real estate is private, rarely do these quality assets sell at generous prices to counterparties outside of the “boys’ club” or in-network, off-market participants for whom favors have already been traded, country club memberships have been synched, and alumni events have been planned. This is what I would call the System 1A of real estate investing. This is where common misconceptions occur with real estate: generalist laymen see these slam-dunk transactions and the seemingly risk-free returns generated from them. They observe “dumb people” getting rich not knowing these people are actually repeat-players in a multi-generational game. They play nice with each other to stay in the club and stay rich.
You seem to have hit that spot right out the park!
ppnewbie
Executive Member
Executive Member
Posts: 850
Joined: Fri May 03, 2019 6:04 pm

Re: DIY Real Estate

Post by ppnewbie » Wed Dec 28, 2022 2:20 pm

@mathjak - Very interesting story about the tax lien adventure. I was thinking about 50k houses in the southeast and hopefully getting around 650 to 750 per month out of them. And maybe after all expenses getting down to a one percent rent-to-value ($500). Also that way, if it's a disaster probably worst case is 50k but more likely less than that. Anyway just thinking out loud. Home price index is coming down and I wonder about this productive physical asset vs gold, baby boomer demographic demographic cliffs, inflation, massive amounts of zombie companies in the stock market, etc...

To set some context I own a few homes already so am not a total newbie to this (re-newbie :) ) I am trying to decide if I want to make a concerted effort to ramp up this part of my portfolio. At the same time understanding that it will become a job before I can start coasting with it.
Post Reply