Real Estate Investment Thread

Blazin

Blazin

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Just made my first RE investment in years and it's largest yet. I have avoided residential over my career partly because the more affordable investments at the time are just not the class property I wanted to own and I don't want to be dealing with day to day managing of renters and I didn't have the capital for a property where management could be taken off the plate. The office market holds no interest for me anymore as we are so over built at least in my neck of the woods. So long story short I made an investment I couldn't have done myself so went in as a partial owner of a pretty large complex.

Been a hard decision as this investment will now matter to my future rather substantially , I wanted to make a move that I could stick with for a long time maybe even never sell it and leave to my estate.

Equities have been great for me but they are also rather tax inefficient and subject too much to my meddling. With RE I can be much more long term. As I ran the numbers on this investment it becomes very clear that with large properties like this more of the investment success is tilted to asset value accretion than to operating income. Not that operating income doesn't matter but how I feel about it 10 years from now is going to be almost entirely driven by asset value or the dollars lack there of.

As many know I have a large aversion to borrowing/leverage the big step of this by having a managing partner is for me to be comfortable with using debt at arms length rather than me borrowing personally. This deal is 70% LTV but I'm not going to be stressing over the mortgage payment.

Its over 250 units and is about a decade old, higher end of the market for the area about $1600-1700/mo rents and 95+% occupied.
 
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Kiroy

Kiroy

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Blazin said:
Just made my first RE investment in years and it's largest yet. I have avoided residential over my career partly because the more affordable investments at the time are just not the class property I wanted to own and I don't want to be dealing with day to day managing of renters and I didn't have the capital for a property where management could be taken off the plate. The office market holds no interest for me anymore as we are so over built at least in my neck of the woods. So long story short I made an investment I couldn't have done myself so went in as a partial owner of a pretty large complex.

Been a hard decision as this investment will now matter to my future rather substantially , I wanted to make a move that I could stick with for a long time maybe even never sell it and leave to my estate.

Equities have been great for me but they are also rather tax inefficient and subject too much to my meddling. With RE I can be much more long term. As I ran the numbers on this investment it becomes very clear that with large properties like this more of the investment success is tilted to asset value accretion than to operating income. Not that operating income doesn't matter but how I feel about it 10 years from now is going to be almost entirely driven by asset value or the dollars lack there of.

As many know I have a large aversion to borrowing/leverage the big step of this by having a managing partner is for me to be comfortable with using debt at arms length rather than me borrowing personally. This deal is 70% LTV but I'm not going to be stressing over the mortgage payment.

Its over 250 units and is about a decade old, higher end of the market for the area about $1600-1700/mo rents and 95+% occupied
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why not commercial property? As a leasee of a number of spaces both retail and warehouse it always seemed like it had a ton of upside with NNN being pretty much universal now
 
Blazin

Blazin

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Kiroy said:
why not commercial property? As a leasee of a number of spaces both retail and warehouse it always seemed like it had a ton of upside with NNN being pretty much universal now
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Just nothing that has caught my eye as of late, in my area the market has strongly moved to warehousing and on a very large scale, million sq ft and up stuff. In addition, the properties I can afford expose me to a lot of single tenant/few tenant risk that makes it less appealing. I've been quite bummed about the warehouse I sold, property was very good to me and I made a mistake letting it go. (I only did because I thought I was going to be moving and didn't want to manage a property from thousands of miles away, then I ended up not leaving)
 
Jysin

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Blazin

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Jysin said:
View attachment 605936
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Crazy how true this has become, a young family could rent a 2 bedroom in the complex I just bought into for $1700/mo. and the shittiest shit houses half falling apart would be $2200/mo and it's not at all apples to apples in living standard. The apart is new and high end has amenities' the house is built in 1925 and has a dirt basement.
 
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fris

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someone related question, but anyone have their mortgage through Wells Fargo? they have an option to make a payment early, or add extra principle to a payment. part of my "emergency fund" has been to make payments early. I was about 8 months ahead. I assumed since the payment was going in early, that reduced principle would result in less interest accrued each month. i've stopped making payments for about 3 months, made some repairs/maintenance to my truck before giving it to my son. and my principle in the last 3 months, my mortgage hasn't gone up at all. i'm not asking for a payout statement, so maybe it's there?
 
Fogel

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fris said:
someone related question, but anyone have their mortgage through Wells Fargo? they have an option to make a payment early, or add extra principle to a payment. part of my "emergency fund" has been to make payments early. I was about 8 months ahead. I assumed since the payment was going in early, that reduced principle would result in less interest accrued each month. i've stopped making payments for about 3 months, made some repairs/maintenance to my truck before giving it to my son. and my principle in the last 3 months, my mortgage hasn't gone up at all. i'm not asking for a payout statement, so maybe it's there?
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Your mortgage payment will always stay the same. The only thing that changes when you pay principal early is how long before payoff and the ratio that is split between principal/interest. There's tons of amortization calculators you can use to test it

Amortization Calculator

This amortization calculator returns monthly payment amounts as well as displays a schedule, graph, and pie chart breakdown of an amortized loan.
www.calculator.net www.calculator.net
 
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Unidin

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fris said:
someone related question, but anyone have their mortgage through Wells Fargo? they have an option to make a payment early, or add extra principle to a payment. part of my "emergency fund" has been to make payments early. I was about 8 months ahead. I assumed since the payment was going in early, that reduced principle would result in less interest accrued each month. i've stopped making payments for about 3 months, made some repairs/maintenance to my truck before giving it to my son. and my principle in the last 3 months, my mortgage hasn't gone up at all. i'm not asking for a payout statement, so maybe it's there?
Click to expand...
You'll want to talk to Wells Fargo as well. If you tell them it's making a payment early, they will sometimes just sit on it until that payment is due then apply it at that point.
 
Daidraco

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Blazin said:
Crazy how true this has become, a young family could rent a 2 bedroom in the complex I just bought into for $1700/mo. and the shittiest shit houses half falling apart would be $2200/mo and it's not at all apples to apples in living standard. The apart is new and high end has amenities' the house is built in 1925 and has a dirt basement.
Click to expand...
My brother and I were talking about something semi-related last night. Across the board, the single family homes and apartments have had to have their rent decreased in order to get a tenant in them. The loan range equivalents of properties under 350k in payment to be specific. The properties we have above that seem to have not needed a decrease in rental price. (SW/Central Virginia in particular when discussing numbers, where the median house price is roughly 264k for reference, to compare to your location.)

Its not hard to follow the bread crumbs to the root cause. These large apartment and condo builds that have sprung up across the area, much less the US - have basically over saturated the typical Americans income bracket.

The idea is to renovate our properties and the apartments as tenants move out. But under scrutiny, the market isnt saturated enough to warrant the investment at this time. Theyre beating out our rental prices by 100-200 per unit over our old rates, and theyre brand new. We're under cutting them to keep the tenants interested - but the increase in rent that we would receive from renovation would take years to recoup under the current scenario. I have noticed a 60 unit complex is undercutting again here recently, but the conclusion we reached last night was to just stay firm and let them get to capacity.

This whole situation has put us at a position that we're limiting out investments. Instead, using that money to pay down our current debts. Why? Because both of us, without discussion, came to the conclusion that these big housing projects that are being built everywhere are going to go belly up. At least some of them will in the next 5-10 and its better to have the collateral to buy them at a break neck price when they do.

(Unless, and this is just a shot in the dark - someone here can explain how these large builds arent as "risky" as my brother and I are thinking.)
 
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