I’ve been investing in real estate now for about 15 yrs. I don’t buy to sell at all. My goal is to cashflow a property from day one, and constantly raise rents. An income property building for us generates a few thousand dollars of cashflow per month, and my experience has always been that trying to buy the most expensive building on the block is a hit or miss affair - either it will sell with massive appreciation, but then you have to start the whole process all over again, or you get the lesser value building in the lesser value neighborhood, but ride the cashflow on the building for the next 30 years. The latter has always been our strategy.
Hence if you approach REI from the point of view of cashflow, the clothes you wear are not relevant when dealing with tenants. However I would suggest that if you are trying to sell the property, then it might be a different story. For me, I’d never kill the goose that lays the golden eggs though…
In 1993, I paid 227K for an REO, 22.7K down, with the bank financing 90% at 7%. Cash flow comes to 10K a year the first year, on an 22.7K investment. Rents gone up 50% since '93.
Nothing to sneeze at even without the appreciation.
But I think a 600K gain is a nice icing on the cake. However, it’s not a gain that I can make in a bad area. And a lot less work and agggravation.
On the other hand, in a bad area, I can buy stuff year in and year out. In good areas, I have to wait for the right time and opportunity.
If you were me, would you take 600K off the table, pay some capital gains, maybe 1031, instead of making 15K/year??
Rememeber, Hillary Clinton will raise the captial gains from the current lows, to pay for Health care or whatever. But the mortgage market is bad now, which pushes rents UP UP UP…
Now we are talking REAL info!!! I love to hear real stories of people’s gains, etc. as it really helps validate why we are here.
I know its not on topic with “Dress & Behavior”, but I’d look at it this way…
50% raise in rents over a 15 yr period of time is a big worry for me, but the equity gain is certainly nice. The problem though is that if you sell the property now, and cash out, you have this big bundled of cash. However if you then have to put it back into real estate investments to continue the cashflow, you’ll probably have a hard time buying enough properties with the appropriate amount of down payment that will give you the same cashflow that you are currently getting.
If I’m mistaken on that assumption, please prove me wrong. That’s one of the best benefits I see in this forum. To stomp on assumptions that make no sense or miss out on specific facts.
But I still stand by our strategy to buy in lower income neighborhoods and get income properties that pay us month after month after month. Equity is really only good to me when I can use it to buy more properties, and I’ve always lived by the rule that “You make your money when you buy real estate, not when you sell it”.
I’m glad I’m able to finally have a discussion with a REAL investor.
I was a bad boy this year, filed an extension on my taxes, and just picked up my returns from my CPA last week. We spoke about my RE investments.
I was pleased with my gains in the crazy RE market here, and remarked that in view of the high prices, returns are LOW. How many businesses would tolerate a return of 15K/year on a 850K asset.
My CPA said selling is not a bad option considering market cycles, and I already have gains not due for another ten years RIGHT NOW. I told him that I went thru the last down market, the bottom 1993 (down from the last 1986 peak), it wasn’t till 1997 that prices went back up past it’s 1986 level, and zoomed from there.
I realize if I took a 600K gain, I’ll wind up with roughly 450K after taxes. BUT, just making 15K/year on rent. that’still taking the rental income for the next THIRTY YEARS up front. And not bad if the belief is RE prices have peaked.
It’s almost like if you won the lottery, you can take 15K/year for the next 30 years, or a lump sum of 450K right now, invest it, which would you pick??
My dad considers RE speculation, though he owns ONE commercial property, and plows all the rental income into “triple tax free municipals”, not more RE, and the last we spoke, it was yielding over 4%. That’s 18K/year tax free on 450K, NO WORk, no visits to tenants, no rent checks to chase, no toilets, no vacancies, no drug dealers, no graffitti vandals, no taxes to the federal, state or local authorities, compared to 15K/year with all of the above.
And you have to worry about tenants suing, passersby slipping and falling, suing, and hiring some illegal alien, who has no insurance, injuring himself doing work, suing.
With 450K in municipal bonds, who’s going to sue you.
Of course, the counter argument that my wife makes, is in 30 years, the place be paid off, and we’ll make the 15K/year, PLUS still have something which by then be worth $1.5 million.
If I paid you what’s the equivalent of the next 30 years in rent, TODAY, and you invest the money, MAKE MORE than than what you make in rent, TODAY, pay NO taxes at all to anyone, don’t have to run over to chase drug dealers, or yell at tenants trashing your place, would you do it??
The other worry is sometimes good areas may turn bad very quickly. Say someone lets loose a dirty bomb in NYC. What will it do to RE prices, and for how long?? That was one reason why if I diversify myself in RE, I might go “out fo state”, to better cash flow areas.
If you believe that real estate has peaked in NYC, then it makes sense to sell. You could then make that $18K per year as the value of real estate in your market declines. In a couple of years, after a bottom occurs you could buy the property back (or another similar property) and you would not experience the depressed value of your property for the 10 years it takes on average for inflation adjusted prices to return to the previous high after a real estate bust. My research indicates that it takes about 2 years for prices to hit bottom and then another 10 years for inflation adjusted prices to reach their previous high. That is apparently similar to your experience from the last downturn.
Assuming that cycle is true, if you sell now (at the top) and the property declines in value, you wouldn’t lose 12 years of appreciation. You could wait 2 years to the bottom and then buy the property back (or buy a similar property) as prices once again start to appreciate. That makes more sense to me.
Are you guys going to meet bankers, realtors…etc or are you going to meet MOTIVATED SELLERS?
I have not had a single problem going in Jeans and Pollo shirt. Thats my usual dress code and I am there for them to convince me I should buy their house not impress on them to sell me their house.
We’re all shaped by our life’s experiences. I don’t work many of the drug infested neighborhoods described in the posts above.
I’ve been stopped and asked what I’m doing in certain neighborhoods. But when I’m in the “city inspector - agent” disguise, I’m often asked “can we help”??, in a more respectful tone.
This contrasted to an unfortunate workman who had to retreive a tool from the backyard of one of my rentals. Got a call one evening from a excited neighbor, with his body building son, who tackled a “prowler”. They called me while holding the guy, and the caller said “we caught a guy claiming to do work for you, and we’re going to put him on the phone”. I heard a frightened guy pleading for his life, saying he’s only retreiving some tools, and please explain it to them.
Later I heard this guy was tackled, thrown to the grown, and they sat on him while the call was made. they told him if he tried to run, they’ll knock his lights out.
I had to drive my dad to see his attorney during a weekend in an “Italian” neighborhood in the Bronx, NYC. Parked two blocks away, we were stared at, stopped a few times, and asked “who we’re there to see”. We politely told them who we’re looking for, and on each occasion, they’ll say “OK, he’s the next block over”.
I’m sure if I looked like “John Gotti” in a polo shirt, like you, I woud not have a SINGLE problem. Unfortuntately, I’m a uglier version of “Jackie Chan”…
In my real estate endeavours, I do driveby’s, and often walk around properties where I don’t have appointments. What if some neighbors rush out to tackle me, then try to get the owner on the phone"?? Possible. What if the owner said “This guy said what?, I’m a motivated seller?? I don’t know what he’s talking about. Never heard of him”.
Obviously, the workman didn’t look like he belonged in the neighborhood. and I certainly didn’t look like I belonged in that Italian enclave.
Am I going to shout “This is America, I can walk anywhere I want, and wear anything I like”, after I get tackled and my nose broken?? No, I’m only a RE investor, not “Martin Luther King”.
OR would it be easier if someone just walk up to me and ask “Is the town checking out somthing else again”??, and me replying “no, my company is looking at some investments in the area”.
I’m also saying if I’m a “white guy” walking through a white area belonging there, I won’t have a problem. But what busines does a black, Hispanic or Asian guy have in a white neighborhood?? Oh!!, if I have to explain myself to a neighbor, I’m looking for a motivated seller to bring “these people in”?? Good idea or no??
Better to have others assume I’m a city inspector rather than a prowler.
Dude… you have issues… Either you live in a racist city, or you are racist yourself. Either way I am not going there because it is pointless.
As far as what happen to the worker of yours, shit happens. It doesn’t mean it is the norm. If you are so paranoid that something wrong might happen one of these days, then get a desk job.
As far as being stopped, don’t go in houses uninvited. Even if it is vacant. Thats trespassing on others property and yes they have the right to stop you. Feel free to look from the outside but don’t go into the house or their backyards. If you do, as many do, then you do it on your own risk.
I have no clue what all this has to do with the dress code of the investor.
it seemed as though at first it was a reasonable topic of discussion…and it is…to a certain degree…but Frank…i think you might be taking it a little too far…
What I’m saying is when I go somewhere, I give folks the respect they’re due. That’s all.
Nowadays, I think people are sincerely protective of their neighborhoods, not racist. I go to neighborhoods or all types, and better be safe (paranoid) than sorry. And when I look right, and respectful, people are helpful.
And if you don’t, what happened to that workman can happen to you.
I apologize if the topic made some people uncomfortable.
People though they claim not to be racist tend to treat individuals of a certain ethnicity a certain way, that’s life. On Long Island where some of Frank’s properties are you can bet a minority poking around would get more attention than a caucasian doing the same thing…it’s a fact of life. While people nowadays tend to be more tolerant of other races than they may have been 30 years ago predjudices still remain and people still act and react colored at least in part by those predjudices. You might think Frank is being completely nuts in his observations but he’s not that far off base from reality.
I go into Jamaican neighborhoods where most wouldn’t dare tread to get food and I get the same treatment Frank gets in affluent white neighborhoods…“who are you and what are you doing here?” looks. Racism is still everywhere, its just not as overt as it used to be.
I agree Rich. People dress, and should dress, to reflect their personality and occupation. You can often judge someone by the way they look and the way they are dressed. In our area, when you see people wearing baggy pants that require one hand to hold them up, they are saying that they are a druggie and a loser and I’m not renting to them. When someone shows up with K I L L tattooed on their knuckles, they are showing their personality and I’m certainly NOT renting to them. I judge people by the way the look all the time and I can spot a drug dealer by their look from a block away. The way people dress says a lot about them.
Frank is absolutely right - your dress says a lot about you.
It’s true that all of us judge people based on their physical appearance right away. However, I don’t think people should stick to that bias unless they have something to support their initial claims. Times are different; I won’t immediately think if someone had baggy pants on that he’d be a menace and unreliable as a tenant. It’s true you guys could’ve had your share of problems with “these types” but should take it as a person by person case. If a person wants to rent from you, do all the necessary credit/background/etc. checks and see if there’s a reason why you shouldn’t rent to them.
I don’t know if it’s more of an elder’s way of thinking (old-fashioned, no disrespect), but the younger generation is fused with urban culture nowadays and you just won’t know if that person not dressed conservatively might be a UCLA student, majoring in business economics taking a break from school to study real estate investing.
I’m with Mike on this one, I can spot a drug dealer 2 blocks away. There is a big difference between those that wear “hip-hop” wear and the obvious drug dealers. I can drive through a neighborhood that is 100% “urban” clothing and spot drug dealers, they make themselves obvious for a reason not unlike McDonalds…to keep customers coming to them. Obviously if they wear Rocawear jeans you can’t decide not to rent to them in an urban environment as 96% of the residents of that neighborhood dress like that. I don’t see any point in doing further screening if you see obvious signs that they are a crackhead, dealer, or other degenerate lifetime loser.
And as far as your comment about an elder’s viewpoint…I’m 27 and 90% of the music I listen to is rap/hip hop, etc. I’m not exactly a fuddy duddy old guy and I do know what’s current with fashion. I do however have a good degree of accuracy in quickly assessing people and their body language to tell what type of person they are.
PS- Despite my taste in music my clothing all fits, my underwear do not hang out and the waistline of my pants is squarely around my WAIST.
heh I like the clarification in the PS. I also agree. My point of the post I made is that you don’t have to get out of your way to look professional, and there is no specific dress code. You just need to look clean cut and presentable.
This is something that is hard to explain because I have seen people who dress well, yet they look so amateurish, and some dress in shorts and look professional. Haven’t seen one with his underwear hanging out looking professional though. If thats their usual clothing style, then absolutely, change before you go visit clients.
I agree it is all in the body language and the overall fit and personality. I wear tshirts, jeans,…etc but I come across as a serious investor.
Pull your pants down a li’l, you’re flooding man, lol.
Yeah, I see the point you’re making. And concerning the younger generation (I’m 24), I think we’re better able to assess the differences between hiphop and crackhead. But the point in discussion here was the proper dress and initial appearance of a person. Obviously, if a person is dressed in ragged clothing and looks like they haven’t slept in a while and shaking, you wouldn’t rent to them. I’m just saying if someone didn’t have a conservative look, not to judge right away.
OK, I have to admit it, I’m old, and never quite got the hang of “business casual”.
I have of bunch of white or light blue shirts, that I had to get larger and larger collars over the years, I just slip it on, and if I need the professional look, slip a tie on, and I’m done. Maybe in this day and age, overdressed.
But it’s 123, I’m done.
When I tried the business casual though, I look more like an aged hippie on the way to the disco. Someone will get a good laugh.
When I go to work on my rental, I wear my jeans and a pullover top to be ready to tale care of problems. Not exactly the outfit that inspires confidence looking like an investor.
But because of the increased use of business casual, and that I’m older, with gray hair and all, I don’t have that “Bill Gates” geeky look that I used to look like out of my professional duds, so I don’t look as bad and geeky as before .
I noticed when the manager of the local Washington Mutual visited my business, they now have a “casual uniform”, sort of a green pullover top with the banks’ name monogrammed on the shirt pocket. At Chase, the bank tellers got these outfits, in blue, but not the officers, still with suit and tie. At Citibank, the teller are still in white shirt and tie.
I guess, bottomline is, business casual may look more right on some than on others.
As a newbie, this topic really caught my interest. And to help you get a better picture as to WHY this topic grabbed me: I am a non-white, 40-something WOMAN, often mistaken for male (short hair and muscular build). I live in jeans and sneakers. While I was in the IT field, my mode of dress was business casual, usually Dockers and button down. I saw the responses I got during interviews (I did mostly contract work and had to do interviews all the time). I knew my dress took some by surprise, but my general personality, professional manner and attitude were what got me the jobs.
Now that I have become interested in RE, it occurred to me that where I live and intend to be doing drive-bys and looking around, I might run into several of the issues some of you have talked about. On the phone, I might be able to get far. In person, I may put people off a bit. It didn’t stop me before; I could talk my way through and get what I was after. I’m hoping this will still be the case.
Being a minoirty investor, the issues of safety is one on the top of my mind, in vew of the need to visit different geographic areas. In high crime areas, the concern is criminal residents, in affluent areas, the concern the “fear” by the residents of visitors. and possible over reaction.
Female realtors are quite common, and nowadays. I believe they out number their male counterparts. I see "husiness causal as the norm, i.e. no jeans and sneakers. I still see realtors, both male and female bring clients in jeans and sneakers. Maybe I’m old fashioned, but feel it’s somewhat disrespectful.
My wife and I used to take turns doing open house showings for rentals. Then, a dozen years ago, we did one where the former tenant hasn’t moved, a young couple with a new baby, the husband a police officer. Since the officers’ wife was a stay at home mom at that point, my wife figured she’ll have some company for the open house.
As it turned out, the officer husband took time off to join them, wearing his gun holster with a gun. It was hilarious as he also wore an apron cleaning the bathroom and kitchen that day. With his tree truck sized arms. It was an inconguous sight indeed.
Talk about paronoid, we thought he overreated, lost his marbles. But he told us if we only know what he knew. he’s seen it all, and for open houses, you just don’t know if the next guy coming in the door is a serial rapist or murderer, better be safe than sorry. Then we read stories of a female realtor found murdered in an empty house.
Thereafter, I’ve done most of the open houses, both for safety reasons, and because the wife feels I have a better gut feeling picking tenants. Still, a lone woman, in an empty house, with strangers of all types coming by, gives me pause.
This contrasts with realty offices, where customers are known and qualified, then goes out with the realtor, the risks lower.
I know there are many female REI out there these days, and perhaps a few minority females, and I always wonder how they feel about and handle the safety issue.
I know “propertymanager” wears a gun, but here in the NY area, it’s difficult to get a permit, And women often keep guns in a purse, when they carry one, so it may not be that accessible when needed quickly.