Building A Real Estate Empire

It seems the US property market is in a very unique position. There's no way this could work in Australia. A small 2 bedroom house in my area sold for $695,000 a couple of weeks ago, it makes $1600 a month rent. Loan repayments would be in the area of $3000 per month at todays low interest rates of ~5%. You're pulling the same income from properties worth less than $100k.

What kind of interest rates do you get on home loans over there? Does your model continue to work if interest rates say double in the next decade or so?
 


icestationzebra said:
It seems the US property market is in a very unique position. There's no way this could work in Australia. A small 2 bedroom house in my area sold for $695,000 a couple of weeks ago, it makes $1600 a month rent. You're pulling that from properties worth less than $100k.

What kind of interest rates do you get on home loans? Does your model continue to work if interest rates say double in the next decade or so?
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It varies so much depending on what part of the country here as well.

In the midwest (central ohio for example) you can buy houses for $30k-$50k that rent for $500-$650/mo but the appreciation over time is 0 or very little, but you can get a nice positive cash flow and can buy a city block for the price of a shack in a city on either coast.

Where I live in Seattle, it's $350k for a similar house, rents for around $1800/mo. But appreciation over time is high.


The biggest landlord I knew in Ohio owned 380 units, mostly single family homes, many worth under $30k, then he'd lump 20-30 of them together under 1 line of credit and just write checks for new houses/apartments/commercial units.

Also I always bought foreclosures with holes in the walls, turds in the toilets, etc, and would gut the plumbing/electric/gas/and windows and roll it into the mortgage. Maintenance hasn't been a problem. In Ohio it was cheap as fuck, pay someone skilled $30/hr for plumbing/electric for a couple grand.
 
You can all get stuffed. Here's what things are like in Vancouver:

This boarded-up Vancouver home is a shambles and is due for the wrecking ball. Asking price: $25.8-million | National Post

G4LmJ8v.png
 
shindig said:
It varies so much depending on what part of the country here as well.

In the midwest (central ohio for example) you can buy houses for $30k-$50k that rent for $500-$650/mo but the appreciation over time is 0 or very little, but you can get a nice positive cash flow and can buy a city block for the price of a shack in a city on either coast.

Where I live in Seattle, it's $350k for a similar house, rents for around $1800/mo. But appreciation over time is high.


The biggest landlord I knew in Ohio owned 380 units, mostly single family homes, many worth under $30k, then he'd lump 20-30 of them together under 1 line of credit and just write checks for new houses/apartments/commercial units.

Also I always bought foreclosures with holes in the walls, turds in the toilets, etc, and would gut the plumbing/electric/gas/and windows and roll it into the mortgage. Maintenance hasn't been a problem. In Ohio it was cheap as fuck, pay someone skilled $30/hr for plumbing/electric for a couple grand.
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Where in Ohio is your friend?

We FINALLY have got to the point where a bank is not only interested but pressing us for business. Their terms were much better than I Would have had to expect, so things are looking very up for us.
 
cucaloco said:
I buy 60 miles east of Los Angeles. I wouldn't call it a weak market, but it really swings.

The reason the expense ratio is shocking, you have a $50,000 house that rents for $1,000, a roof still costs $4,000. In Santa Monica you have have a $1,000,000 house that rents for $4,000, a roof may cost $5,000. There are a lot of costs that are fixed and not variable. An eviction on a $500/month unit, costs the same as an eviction on a $4,000/month unit.
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Looks like you hit that area perfectly. Good rent/purchase price and underlying appreciation as of late. Have you considered selling dome into the current market?

How much does potential underlying appreciation, and the likely associated increases in rent, affect your decisions? At the current values are you still buying in that area? I am guessing the ratios will look different in a hotter market (that is likely to give appreciation), like Austin, TX.
 
schockergd said:
Where in Ohio is your friend?

We FINALLY have got to the point where a bank is not only interested but pressing us for business. Their terms were much better than I Would have had to expect, so things are looking very up for us.
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The guy with 380 units was in Coshocton (45 min northeast of Zanesville) and I knew him through the landlord association. I still own a shack in Zanesville but sold everything else when I left the state.

After moving to Seattle I started a business dismantling old barns in eastern central OH and selling the lumber out here. It was a lot of fun.
 
X-RAYED said:
Looks like you hit that area perfectly. Good rent/purchase price and underlying appreciation as of late. Have you considered selling dome into the current market?

How much does potential underlying appreciation, and the likely associated increases in rent, affect your decisions? At the current values are you still buying in that area? I am guessing the ratios will look different in a hotter market (that is likely to give appreciation), like Austin, TX.
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Appreciation has been extremely kind to me. I wasn't counting on much and we got a lot, my best deals are worth triple my cost now. The part I didn't factor in is wholesale price/margins have substantially compressed as the market get better and hedge funds got involved. I could buy at 65% (less repairs) of market value before, now I fight to get 75% (less repairs). Many investors I know are paying 82-85%.

I am still buying 30-40 houses a year, a lot more selective. I am buying markets that are still pretty depressed in value. As I started before, I have been shifting more of my money and time to commercial projects.

Without looking, I would venture to say, my market saw more price appreciation from 2009-2014 than Austin, Tx. Moving forward, maybe not, but we are up a lot from the bottom. California has always spiked (up and down) way more than Texas.

Rent increases have been 10-15%. I think we will see more as rental inventory is low.
 
shindig said:
The guy with 380 units was in Coshocton (45 min northeast of Zanesville) and I knew him through the landlord association. I still own a shack in Zanesville but sold everything else when I left the state.

After moving to Seattle I started a business dismantling old barns in eastern central OH and selling the lumber out here. It was a lot of fun.
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Coshocton is a pretty small town to have 380 units in, quite barron level really :D
 
schockergd said:
Coshocton is a pretty small town to have 380 units in, quite barron level really :D
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We moved there from fucking san diego when I was in high school...

The funny thing is the guy still works as an executive at the power plant there cause he gets killer retirement/medical/etc.

He drives a truck that cost probably $3k-$5k (90's half ton ford), his wife had a jaguar.

He has some beefy guys that do his evictions and other people that manage the tedious shit.

Of the 380 units around 120 are a nice retirement community. The rest are single family and he had some small commercial strip malls. The rest are single families though.

At the beginning he bought shacks, but as he built up equity he bought nicer places. He was also in his 40's when I lived there, he started young. He was notorious for not fixing shit.

I bought my first house there for $34k and it was massive, had a parlor room with double doors and narly woodwork. Rented it for $525, only issue was the tenants got in a fist fight with the hillbilly neighbors over the easement driveway.

I had a couple other issues with easement driveways that were nearly violent and involved police and court. People are fucking nuts about the stupidest shit.

My mom bought a couple dozen houses when I was in high school so I had some experience when I turned 18 and inherited some money.

Then I moved to Maryland which was a disaster, made some money flipping houses before the real estate bust but it was a nightmare living there. Never live in a city with a prison. In addition to buying in a rough neighborhood hoping for it to improve can really blow up in your face. (Eastern shore was nice though, but anything within an hour from DC/Baltimore/Philly is bad news.)

In MD the code enforcement was a bunch of nazis. I bought a duplex to fix up, split into 2 units and sell. The tenants of 7 fucking years called the code enforcement the month I bought the unit, and got me written up for busted drywall, leaks in a wall and ceiling and window, a slow draining sink I shit you not (leaves clogged the vent), and shit that was 7+ years in the making.

So I sent them eviction notice so I could gut the unit and bring it up to snuff. That turned into a retaliatory eviction suit I lost, and I had to pay them $4k cash and let them live there for 3 months for free.

I said how the hell am I supposed to drywall the rooms when there's 7 fucking people living in the unit with all their shit?

They didn't give a shit and not only did I have to make the repairs with the people living there for free, and give them money, I had to go to extensive lengths to not get dust on any of their belongings or infants. All while the code enforcement was threatening $500/month fines for EACH of the 12 items on their list.

Then after they moved out they broke a window and took a runny shit on the carpet in the living room.

Then I didn't shovel the sidewalk on a house there and when I didn't pay the $80 fine they tried to auction the house of at tax sale to get their $80, after only 30 days.

Just fucking insane. lol
 
shindig said:
We moved there from fucking san diego when I was in high school...

The funny thing is the guy still works as an executive at the power plant there cause he gets killer retirement/medical/etc.

He drives a truck that cost probably $3k-$5k (90's half ton ford), his wife had a jaguar.

He has some beefy guys that do his evictions and other people that manage the tedious shit.

Of the 380 units around 120 are a nice retirement community. The rest are single family and he had some small commercial strip malls. The rest are single families though.

At the beginning he bought shacks, but as he built up equity he bought nicer places. He was also in his 40's when I lived there, he started young. He was notorious for not fixing shit.

I bought my first house there for $34k and it was massive, had a parlor room with double doors and narly woodwork. Rented it for $525, only issue was the tenants got in a fist fight with the hillbilly neighbors over the easement driveway.

I had a couple other issues with easement driveways that were nearly violent and involved police and court. People are fucking nuts about the stupidest shit.

My mom bought a couple dozen houses when I was in high school so I had some experience when I turned 18 and inherited some money.

Then I moved to Maryland which was a disaster, made some money flipping houses before the real estate bust but it was a nightmare living there. Never live in a city with a prison. In addition to buying in a rough neighborhood hoping for it to improve can really blow up in your face. (Eastern shore was nice though, but anything within an hour from DC/Baltimore/Philly is bad news.)

In MD the code enforcement was a bunch of nazis. I bought a duplex to fix up, split into 2 units and sell. The tenants of 7 fucking years called the code enforcement the month I bought the unit, and got me written up for busted drywall, leaks in a wall and ceiling and window, a slow draining sink I shit you not (leaves clogged the vent), and shit that was 7+ years in the making.

So I sent them eviction notice so I could gut the unit and bring it up to snuff. That turned into a retaliatory eviction suit I lost, and I had to pay them $4k cash and let them live there for 3 months for free.

I said how the hell am I supposed to drywall the rooms when there's 7 fucking people living in the unit with all their shit?

They didn't give a shit and not only did I have to make the repairs with the people living there for free, and give them money, I had to go to extensive lengths to not get dust on any of their belongings or infants. All while the code enforcement was threatening $500/month fines for EACH of the 12 items on their list.

Then after they moved out they broke a window and took a runny shit on the carpet in the living room.

Then I didn't shovel the sidewalk on a house there and when I didn't pay the $80 fine they tried to auction the house of at tax sale to get their $80, after only 30 days.

Just fucking insane. lol
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My grandpa worked at the coshocton AEP plant back in the 50s and 60s, my mom's family lived there for quite some time.

There are many anti-landlord states and MD is one of them. Ohio is still awesome, I can get an eviction processed in under a month, and very rarely do tenants ever win eviction suits.

I'm really excited about where we're going, the bank I talked to already warned me not too buy too many in an area that could cause an issue if I decided to sell all the houses at one time. I don't know if that means they think I'm gonna loan a few million in houses a year or what.


Really hoping we can scale this good, I've got 2 guys working for me full time, one was the foreman at a contracting firm and he swears he can hire a half dozen quality guys if I need them. I really want to improve our cash position as I've got a fantastic opportunity to buy a 35 unit apartment complex in a very good neighborhood that also comes with a house, duplex and commercial/retail building. $20k/mo in revenues for $750k.
 
Yeah it's much better for a landlord in OH except in Cleveland. I'd gotten my RE license there at Hondros in Eastern Columbus and they emphasized screw Cleveland.

Small town electrician/plumber/carpet layers were dirt cheap compared to out here, and I never had problems with permits or code enforcement or any of that bullshit.

I used a small savings and loan bank that said I could buy all the cheap houses I was willing to put 20% down on (I was 18-19). For my mom with a solid track record they'd give her 10-20k at closing to remodel the house with, and it would still cash flow well.

I wouldn't worry at all about being able to liquidate instantly out there unless there's some reason the entire population would up and leave. If the houses are covering themselves consider them forced savings accounts others are filling. When they're paid off, don't sell, just use equity as collateral to grow more units and income. It's a solid strategy.

It's always fascinating how people with decent incomes out there don't have the credit to buy a house but can pay 25% - 50%+ above the mortgage in rent. $50k truck in the driveway of a $15k single wide they rent. Priorities.
 
jeffrey said:
I live an hour from Philly and I'm in the middle of Amish Country. Where did you look just out of curiosity?
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Actually only in MD west of Baltimore...Frederick to Hagerstown.

My bad, I guess I was visualizing urban Philly/Camden, which have cheap RE for a reason.

Harrisburg and Pittsburgh are cool.

If you guys ever buy any farms with big barns from pre 1920, send samples of the wood to a forestry lab to get the species. A small barn made of American chestnut or heart pine can get an easy $10-$30k. Big barns worth more. I used Stick Trade | Post and View Lumber Listings, Buyers and Sellers to find buyers. I was buying standing barns for $500 - $1500 in eastern OH. Chestnut ages well, they pull 100 year logs out of rivers and they're like brand new, it's rot resistant.
 
realty newb here. As much as i like this thread it is very tldr and i didn't see the question already. Thoughts on REITs? Would you consider them less risk and less of a management nightmare? Or are they a giant bubble about to crash down? I currently invest in 2 different REITs Inland, and Mission Critical. They're doing exceptionally well so far but still early and a long way from ROI? Any thoughts on those two in particular or other ones you suggest?
 
shindig said:
Actually only in MD west of Baltimore...Frederick to Hagerstown.

My bad, I guess I was visualizing urban Philly/Camden, which have cheap RE for a reason.

Harrisburg and Pittsburgh are cool.

If you guys ever buy any farms with big barns from pre 1920, send samples of the wood to a forestry lab to get the species. A small barn made of American chestnut or heart pine can get an easy $10-$30k. Big barns worth more. I used Stick Trade | Post and View Lumber Listings, Buyers and Sellers to find buyers. I was buying standing barns for $500 - $1500 in eastern OH. Chestnut ages well, they pull 100 year logs out of rivers and they're like brand new, it's rot resistant.
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Good to know man. My old house was built in 1922 so I was close but not quite there. Harrisburg is about a little over half an hour from me. I'm right in between Harrisburg and Philly basically.
 
Just about finished up in the process of getting leverage with a bank. Looks to be in the neighborhood of 1:5 at 5%-5.5% which is better than I could have hoped for.

Additionally it seems the appraiser is of quality, enough so that he understands the market and what we're doing, so getting the money we want out of our properties isn't going to be too difficult.

Good times.
 
Great thread OP and others who have contributed. Keep it going!

One common thing among those who have posted on this thread and who have significant landlord experience is that you lived close to your rentals (or so it seems the way I read things in here). Is it crazy for me, living in Vegas, to buy rentals in central OH (or somewhere else far away - pick your spot)?
 
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