Of Those That Invest in Real Estate...

[Parsad]

Of those people that invest in real estate, how much of your real estate portfolio is composed of commercial property?  Cheers!

[Morgan]

All multifamily properties. I'm thinking about getting into self storage and/or multi-tenant industrial space. We shall see.  

[fareastwarriors]

9 hours ago, Morgan said:

All multifamily properties. I'm thinking about getting into self storage and/or multi-tenant industrial space. We shall see.  

 

Self-storage has been hot for seemingly over a decade no? Is there still that much growth ahead? 

[Morgan]

3 hours ago, fareastwarriors said:

 

Self-storage has been hot for seemingly over a decade no? Is there still that much growth ahead? 

It seems like it has been growing a lot, but I don’t know as much as I’d like. That’s part of why I haven’t invested in any self storage so far, plus I haven’t found the right deal yet. 

[Broeb22]

Re: Self Storage, I think Ed Chancellor's book on Capital Returns and looking at supply vs. looking at demand makes me very skeptical of all the building going on in self-storage. Same goes for the car washes and 5 minute oil change businesses. Supply is a lot easier to estimate than demand because there are zoning approvals and building that needs to happen, so you can make a reasonable guess if supply is on a certain trajectory then how much demand will keep pace with it. 

 

 

 

 

 

 

 

 

[Broeb22]

The other point I forgot to make is that if you look at UHAUL parent AMERCO, their returns have been declining the last couple of years which tells me there is pressure in the space. I think UHAUL is probably the most competitively advantaged in terms of scale, diversity of offerings (trucks, space, ancillary rentals), and network for those who are moving. So to see their returns struggle suggests others must be as well, either by fighting on price or experiencing lower space utilization.

[mbreject]

The family only has 1 building so 100%

 

Covid has made me realize that I never want to do residential. My mom has a friend who started the eviction process on an unpaying residential tenant before covid. Because of the moratorium (and possibly court delays,) the whole process took almost a year.

[Gregmal]

5 hours ago, mbreject said:

The family only has 1 building so 100%

 

Covid has made me realize that I never want to do residential. My mom has a friend who started the eviction process on an unpaying residential tenant before covid. Because of the moratorium (and possibly court delays,) the whole process took almost a year.

Sorry to hear that. I wouldnt give up on residential, its tricky to figure out but once you do its easy money. Single family detached kinda sucks but its still workable. The trick is to keep politics out of it and use common business sense. First, covid was an anomaly so some of the hiccups manifesting from that should be discarded. But overall, avoid areas that pander to scumbags. You want to be in areas that respect the rights of businesses and property owners. Also, ignore the urge to get "labeled"....every successful residential property owner who's honest will tell you, you ABSOLUTELY need to profile people. Once, and only once, I was in a unique situation and had a couple who was a walking stereotype. But I was sympathetic to them because they came from the shitty parts of NJ and had kids that they wanted in a great school system. Husband was a cop and a nice dude, the wife was a beast of a women and brought with her all the "shitty area" attitude stuff people who live where I do seek to avoid. Well, initially I wanted to help them and convinced myself to overlook their awful credit school, shitty income, and probably "shitty area" inspired mentality. They seemed like a nice young family with 3 kids under 5 who genuinely wanted to be here. So I made an exception and it was a total nightmare. As my 3rd grade teacher used to say, "one rotten apple ruins it for everyone"....so think with your head or think with you heart or whatever the saying is....but from then on, its simple. 700 credit score minimum. 4 year college degree. white collar only unless you are a business owner or have a hell of a reference list. The other thing is that the people with the above desirable attributes are also generally so much more reasonable and easy to deal with. I have excellent, almost friend like relationships with all my current tenants. I interpret the constitution as allowing property owners certain rights. I dont care what some dipshit politician wants to tell me. I have tried being a "nice guy" and at the end of the day pandering to those type of well intentioned feelings is expensive which is what a lot of people dont get. Want to make donations? Do it through charitable giving, not owning real estate. 

 

So despite being in a state thats abusive to landlords, thankfully, I live in a very solid county and city. With like minded and good people. They very quickly let the bad apple tenants who were playing games and skipping rent know that this behavior didnt fly around here and they could either change, or go back to where they came from where that type of stuff is accepted. Thankfully, they moved. This lesson was modest in cost, probably less than $10k total. But its important. Taking the first application for a rental that comes your way is not the way to go. Its YOUR property and if you only want to rent it to only half black, half Chinese people, with red hair and jewish background, that should be your prerogative. You'll pay a price in that your property will likely be vacant for awhile, but its better than dealing with people and situations that arent enviable. All jokes aside, its basically an investment grade bond vs a junk bond situation...and it pays to be thorough and diligent with tenant selection. I learned from the above and after closing on a new property in January 2020, had competing offers. Ask rent was 2200. I had a stereotype from the bad sections of NJ, with a 6 year old child, smoker, crap credit score, etc...but $200k a year as an independent contractor who basically traveled 90% of the time doing face to face sales all over the US. She offered $2500 a month. I wanted to take this but flagged it as super high risk even though she seemed like a nice girl with a daughter I wanted to help. Instead I went with a normal, boring couple with a kid and a dog, 700 credit, $80k in w2 income who had lived in the areas their whole lives for $2250. Well, covid rolled around and despite both losing their jobs, they paid every single month. Whereas I guarantee you the higher offer tenant, would have been the first in line to stop paying rent. 

 

Once you get it down, its easy money. Im in NJ and just raised annual rents 6.5% with 100% renewal rate in a year properties appreciated 25%+. NY Times just put out a puff piece on my town being a hidden oasis an hour from NYC...so life is good. Just have to rejigger the components sometimes. 

Edited June 20, 2021 by Gregmal

[fareastwarriors]

On 6/20/2021 at 9:47 AM, mbreject said:

The family only has 1 building so 100%

 

Covid has made me realize that I never want to do residential. My mom has a friend who started the eviction process on an unpaying residential tenant before covid. Because of the moratorium (and possibly court delays,) the whole process took almost a year.

 

Everyone who owns (owned) a rental has a story like that. It sucks. I can empathize. It definitely feels like it's harder and harder to be a small small mom-and-pop landlord. My advice is to either don't play or scale up.

 

Once you have some scale, the appreciation or rent growth over time makes up for some a crappy tenant or 2, or 3, or... 
 

 

 

Edited June 21, 2021 by fareastwarriors

[mbreject]

Thanks so much for sharing your experiences! It's good to hear that there are solid residential tenants out there. I'm guessing I only hear the horror stories, because people only vent when something's wrong. (Seriously, it seemed as if everyone's tenants were growing marijuana.) But it definitely sounds like the appreciation might be higher for residential. I haven't really looked at what our building's worth (the tax would be too high if we sell,) but our annual rent increase is 3%.

[Gregmal]

Yea there's good people out there. Just have to be patient in finding them. You essentially want to deal with "privileged" people. Someone who feels shame handing in their rent on the 2nd of the month rather than the 1st, even though contractually they have til the 5th. Not someone who takes til the last possible minute afforded, feels entitled to take their time paying, or makes excuses based on things in their lives that have nothing to do with me. Poor people too often make their problems your problems. I just want someone who has dignity and goes about their business. 700 credit score and 4 year college degree probably "weed" out most of the pot growers. A w2 verifying they have a real job also probably means they dont have time for crap like that and arent taking stupid risks. 

 

The beauty of residential for a normal dude is you can lock it in with a 30 year mortgage and once its rented, if you have a good tenant, you literally do nothing but cash checks. Once in a while you have a system repair, IE plumbing, AC, electrical, etc....but you pay those one offs and otherwise your mortgage acts as a savings account, you get to write off the interest and sometimes taxes, and get the appreciation for free. Its awesome. 

Edited June 21, 2021 by Gregmal

[rkbabang]

6 hours ago, mbreject said:

Thanks so much for sharing your experiences! It's good to hear that there are solid residential tenants out there. I'm guessing I only hear the horror stories, because people only vent when something's wrong. (Seriously, it seemed as if everyone's tenants were growing marijuana.) But it definitely sounds like the appreciation might be higher for residential. I haven't really looked at what our building's worth (the tax would be too high if we sell,) but our annual rent increase is 3%.

 

I do short term rentals mostly using airbnb and was doing great for about a year, then I joined a few Facebook groups for airbnb hosts.  If I had read those groups first I would never have done it.   The stories are horrific and daily. 

 

 I've found that by targeting the higher end of the market you get better results.  A similar strategy to what Gregmal is doing with long term rentals.  I went though the entire house and upgraded everything.  Raised the prices to the top of the market for the area.  Made my minimum stay 7 days in the peak season and 4 days in the off season to avoid weekend partiers.  And I've gotten great guests.

 

[BG2008]

1 hour ago, Gregmal said:

Yea there's good people out there. Just have to be patient in finding them. You essentially want to deal with "privileged" people. Someone who feels shame handing in their rent on the 2nd of the month rather than the 1st, even though contractually they have til the 5th. Not someone who takes til the last possible minute afforded, feels entitled to take their time paying, or makes excuses based on things in their lives that have nothing to do with me. Poor people too often make their problems your problems. I just want someone who has dignity and goes about their business. 700 credit score and 4 year college degree probably "weed" out most of the pot growers. A w2 verifying they have a real job also probably means they dont have time for crap like that and arent taking stupid risks. 

 

The beauty of residential for a normal dude is you can lock it in with a 30 year mortgage and once its rented, if you have a good tenant, you literally do nothing but cash checks. Once in a while you have a system repair, IE plumbing, AC, electrical, etc....but you pay those one offs and otherwise your mortgage acts as a savings account, you get to write off the interest and sometimes taxes, and get the appreciation for free. Its awesome. 

 

When can I buy into this partial RE tech start up? 

[Gregmal]

3 hours ago, BG2008 said:

 

When can I buy into this partial RE tech start up? 

Its not going public anytime soon because the tech driving the tenant selection filter would be protested, called discriminatory, maybe even racist and probably censored from being available on any platforms. So I will just keep it to myself since I dont care about any of that nonsense and just care about getting results. Its like what stop and frisk was to NYC public safety but for my RE portfolio!

 

Jokes aside, I swear like 50% of landlords I talk to have a problem with pot smokers lol. Just cuz its legalized doesnt mean folks should feel entitled to smoke inside property that isnt theirs. You get walloped if you smoke in a rental car...why do these deadbeats think they can smoke in a rental unit? I guess again its probably somewhat area related. Certain parts of the country people always seem to need to have a chip on their shoulder and sense of entitlement. Those types also dont really care about their communities so theyre less likely to stand up to a neighbor who's being a dipshit. Other places...that sort of behavior doesnt last long before life gets uncomfortable for those types of people. Personally, I tell all my tenants the same shit. I dont care what you do in may unit, take a sledge hammer to all the walls and BBQ in your living room for all I care. Just make sure the unit is in the same shape when you leave as it was when you got there. Otherwise, do what you want provided it doesnt get me in trouble. 

[rkbabang]

 

2 hours ago, Gregmal said:

Its not going public anytime soon because the tech driving the tenant selection filter would be protested, called discriminatory, maybe even racist and probably censored from being available on any platforms. So I will just keep it to myself since I dont care about any of that nonsense and just care about getting results. Its like what stop and frisk was to NYC public safety but for my RE portfolio!

 

Jokes aside, I swear like 50% of landlords I talk to have a problem with pot smokers lol. Just cuz its legalized doesnt mean folks should feel entitled to smoke inside property that isnt theirs. You get walloped if you smoke in a rental car...why do these deadbeats think they can smoke in a rental unit? I guess again its probably somewhat area related. Certain parts of the country people always seem to need to have a chip on their shoulder and sense of entitlement. Those types also dont really care about their communities so theyre less likely to stand up to a neighbor who's being a dipshit. Other places...that sort of behavior doesnt last long before life gets uncomfortable for those types of people. Personally, I tell all my tenants the same shit. I dont care what you do in may unit, take a sledge hammer to all the walls and BBQ in your living room for all I care. Just make sure the unit is in the same shape when you leave as it was when you got there. Otherwise, do what you want provided it doesnt get me in trouble. 

 

 

Go public, but keep 51% of the shares yourself.   That way you can tell shareholders who make a fuss where to go.