Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 16%
$32.50 /mo
$390 billed annualy
MONTHLY
$39 /mo
billed monthly
7 day free trial. Cancel anytime
×
Try Pro Features for Free
Start your 7 day free trial. Pick markets, find deals, analyze and manage properties.
All Forum Categories
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

All Forum Posts by: Marcus Auerbach

Marcus Auerbach has started 160 posts and replied 4693 times.

Post: Out of state cash flowing rental markets

Marcus Auerbach
#3 Buying & Selling Real Estate Contributor
Posted
  • Investor and Real Estate Agent
  • Milwaukee - Mequon, WI
  • Posts 4,811
  • Votes 6,958
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:

You're honestly better concentrating your capital in an above average market(AZ, NV, etc.) and putting more down(yes cash at risk, for you guys that faint on that) or pivoting to equities or an alt source of an investment than doing anything in the midwest.


The math on that does not math. Assume you put enough down on something in Phoenix to reach $0 cashflow and calculate the return on equity, then do the same in the Midwest. Midwest wins every time. In fact if I were going to do the first, I'd prefer to just be in the stock market. Especially considering that you need much more reserves (dead idle cash) when doing these appreciation-focused plays in low cashflow markets.

That's the problem. Midwest cash flows on paper, never does in real life.

Phoenix will likely yield a true gain in appreciation. The math more than maths in practicality.

I must ask, do you have something to sell Midwest based?

I think I know what you mean when you say the Midwest does only cash flow on paper: if you are talking about cheap hood properties that are 100 years old, you are correct. But that is only a small part of our inventory (which unfortunately keeps attracting blue-eyed OOS investors)

The Milwaukee metro area has seen very steady appreciation between 7% and 8% for the last 10 years. And given the increasing heat and water shortage in the south, more people are migrating here. 

How do I know? We are the leading relocation team in the area and I always ask people why they move to Milwaukee. Family is the #1 reason, followed closley by #2  heat/smoke/storms and fresh water - so as an investor I am pretty bullish for the next decade

Post: Using a real estate attorney instead of an buyer's agent in California

Marcus Auerbach
#3 Buying & Selling Real Estate Contributor
Posted
  • Investor and Real Estate Agent
  • Milwaukee - Mequon, WI
  • Posts 4,811
  • Votes 6,958
Quote from @Kelly Byrd:
Quote from @Marcus Auerbach:

Why?? That makes no sense, neither financially (because even in CA the seller almost always pays for the buyer's agent) 

Being blunt, I think you're simplifying too much both about "seller pays" and attorney skill

Regarding seller pays:
A reasonable seller is looking at their net proceeds. As a I buyer I know that. So me offering $1M (this is CA after all) and asking the seller to cover 3% buyers agent fees is not as strong an offer as a $1M offer with and no agents fees in the offer. That matters. If I can cover my end of the transaction with a flat fee by trading off my own time and effort, I can make a cleaner offer with more money net to the seller and they're more likely to accept.

I agree that buyer's agents have value in most situations. In my particular situation (both the specific market I'm in and what I'm looking for) I believe my highest chance of success is cold outreach and social networking locally, then making offers to off market properties. I may be wrong about that, we'll see. If I am, I'll adjust the plan, hire an agent and pay that agent accordingly.

Re: attorney skill in transactions. Not all attorneys are the same. Why would I hire "the average attorney"? My post specifically mentioned "real estate attorney". From my brief looking around after my first post, some practices have folks that specialize in real estate transactions. I haven't gotten one on the phone yet, but I'm going to ask them about their previous work to get a sense for their experience with these.

The reason I posted is I'm looking for flat fee options as a buyer. It's not that I don't value what buyer's agents do, it's that I in my exact situation, I expect to find the deal and do all the negotiation myself, I feel like the amount of work I'm asking for is fixed and I'm willing to pay based on that. If I need to make multiple offers, or have things fall thru that's on me to sort out. As others have suggested, a fixed fee agent or broker would work in this situation too.

Yes of course I am simplifying to make a point without writing a novel. But the same can be said about your point on negotiations vs 3% of 1M. 

Most buyers assume that list price and fair market value is the same. So if you negotiate 50k off that million you scored a great deal, right? What if I tell you that you still paid 100k too much?

This is a tough one and frankly many agents struggle with it. A ton of experience is the only thing that helps. It's the old argument we have here on BP if a seasoned investor actually needs an agent. And we are comparing investors who have done several hundred deals and do this full time with agents who got licensed last year and did 3 deals so far. Experience matters, so yes, a seasoned investor is probably more skilled.

Many off-market deals you find in these price ranges are substantially overpriced. That's why they are off market. The seller interviewed 3 agents who told him 800k and now he wants to list if FSOB for a million because that is what Zillow says. Zillow has a median error of about 20% according to their disclaimer (at least for Milwaukee, you'd have to look up CA)

Here is the thing: I believe in free markets and that the best solution wins. We live in a time where old solutions get replaced quickly. Look what happened to taxis after Uber got launched. Within a couple years, taxis were almost obsolete in most countries of the world. 

Despite the fact that 80% of real estate agents are NOT very good and MANY attempts to come up with a better way to transact RE market share for agents is still not only holding, but even slightly increasing. FSBO is down to about 7% (from like 20% in the 80s) and that includes family internal transactions.

You can absolutely buy a house on your own, a lot of people have done it, you can also use an attorney to help you with paperwork (frankly, filling out a form is probably the easiest part of my job) and fingers crossed, it will be a smooth deal and you will probably be fine. Ultimatley, we will never know, because you can't run the same transaction twice and see if you get the same outcome.

I am not here to discourage you from your plans, but to provide a different perspective - fingers crossed!

Post: Using a real estate attorney instead of an buyer's agent in California

Marcus Auerbach
#3 Buying & Selling Real Estate Contributor
Posted
  • Investor and Real Estate Agent
  • Milwaukee - Mequon, WI
  • Posts 4,811
  • Votes 6,958

Why?? That makes no sense, neither financially (because even in CA the seller almost always pays for the buyer's agent) nor based on knowledge or skills. And I am pro-attorney all the way: for example, I would never do my own evictions, we have a very good attorney for that.  

So why do I say that? We close on average a little over 100 transactions per year here in Milwaukee and very few involve an attorney, but when we have an attorney involved, it's usually pretty bad. Best case just cumbersome, worst case a preventable poor outcome for the client.

The issue is that attorneys don't do real estate for a living, it is something they have covered in law school, but that knowledge is about as useless as what you learn when you study for your real estate license and find out that you have passed and don't know the first thing about anything.

Your average attorney knows about as much about real estate deals as your primary care doctor knows about dentistry: they learned about it in school and you'd never get a root canal from your primary.

I've been an investor long before I got licensed and I know firsthand how hard it is to find a really good agent. 80% are somewhere between useless and dangerous, because they complete between zero and 3 transactions a year and lack experience. I would say proficient starts with about 20 deals per year. 

A good agent knows what red flags to look for already at the showing, what a property's fair market value is and when you can negotiate vs when you have to offer high.

There are a lot of things I would call my attorney for, but a real estate transaction is not on that list.

Post: 💰 Are You Really Middle Class? Here's What the Data Says 💰

Marcus Auerbach
#3 Buying & Selling Real Estate Contributor
Posted
  • Investor and Real Estate Agent
  • Milwaukee - Mequon, WI
  • Posts 4,811
  • Votes 6,958
Quote from @Theresa Harris:

Interesting. I wonder how many people fall into those groups.  I could find numbers for 2023 that said it was 51%, down from 61% in 1971 (more recent numbers show more at the top and bottom).

I looked up the info for Canada (where I am) and what I found interesting were not the numbers of the number that defined each group, but how many people are in each group. Annual incomes between $57,375 and $177,872 are considered to be middle class according this article, so starting at $57,375.

This is household income, so includes lots of single people:

1% household income earn $315,911

5% household income earn $162,210

10% household income earn $125,942

25% household income earn $81,184

50% household income earn $46,151


    No wonder Americans are upset. IDK how a family with kids can live well for under 125,000 gross -  that's 8k net a month, you are doing okay, but definitely not taking the kids to Disney! And that's only the top 10% of the population!

    Post: Really? New AC refrigerants? Again??

    Marcus Auerbach
    #3 Buying & Selling Real Estate Contributor
    Posted
    • Investor and Real Estate Agent
    • Milwaukee - Mequon, WI
    • Posts 4,811
    • Votes 6,958
    Quote from @Jay Hinrichs:
    Quote from @Marcus Auerbach:

    I am just getting hammered with failing AC systems this year, we just got the 9th repair request in basically the last 2 months. And I am learning that once again we are changing AC refrigerants, which means no backwards compatibility, higher cost and apparently also new tools for installers?

    Here is the gist, wondering what you guys are doing to deal with this. In hindsight, I should have stocked up on ACs.

    In 2025, new air conditioning systems will no longer use the older R-410A refrigerant due to environmental regulations. Instead, they will utilize refrigerants with lower global warming potential, primarily R-454B and R-32. These new refrigerants are classified as A2L refrigerants, which are mildly flammable but still considered safer than older refrigerants like R-22.

    Phasing out R-410A: The EPA is phasing out R-410A due to its high global warming potential (GWP).

    New refrigerants: R-454B and R-32: These are the primary replacements for R-410A in new systems.

    A2L Classification: These new refrigerants fall under the A2L classification, meaning they are mildly flammable.

    Safety Measures: New HVAC systems using A2L refrigerants will incorporate safety features like leak detectors and automatic shut-off valves.

    No Retrofitting: Existing systems cannot be retrofitted to use the new refrigerants.

    Cost Implications: New systems using A2L refrigerants will likely be more expensive due to the new technology and safety features.

    I am not against reducing greenhouse emissions, but it seems like we are really barking up the wrong tree with AC refrigerants - meanwhile, we are burning more coal than ever, I believe 8 billion tons per year, and we are trying to save the planet one AC system at a time...


    that and gas stoves  :)  cows  and lawnmowers .  small airplane engines burning 100% lead gas are next.

    Nuts! I already went through this in my former career with the diesel engines on our excavators: at EPA Tier IV Final the particle count allowed in the exhaust was less then the average ambient air in a city - which effectivley turned the diesel engine into an air clearner.. 

    Post: Really? New AC refrigerants? Again??

    Marcus Auerbach
    #3 Buying & Selling Real Estate Contributor
    Posted
    • Investor and Real Estate Agent
    • Milwaukee - Mequon, WI
    • Posts 4,811
    • Votes 6,958

    I am just getting hammered with failing AC systems this year, we just got the 9th repair request in basically the last 2 months. And I am learning that once again we are changing AC refrigerants, which means no backwards compatibility, higher cost and apparently also new tools for installers?

    Here is the gist, wondering what you guys are doing to deal with this. In hindsight, I should have stocked up on ACs.

    In 2025, new air conditioning systems will no longer use the older R-410A refrigerant due to environmental regulations. Instead, they will utilize refrigerants with lower global warming potential, primarily R-454B and R-32. These new refrigerants are classified as A2L refrigerants, which are mildly flammable but still considered safer than older refrigerants like R-22.

    Phasing out R-410A: The EPA is phasing out R-410A due to its high global warming potential (GWP).

    New refrigerants: R-454B and R-32: These are the primary replacements for R-410A in new systems.

    A2L Classification: These new refrigerants fall under the A2L classification, meaning they are mildly flammable.

    Safety Measures: New HVAC systems using A2L refrigerants will incorporate safety features like leak detectors and automatic shut-off valves.

    No Retrofitting: Existing systems cannot be retrofitted to use the new refrigerants.

    Cost Implications: New systems using A2L refrigerants will likely be more expensive due to the new technology and safety features.

    I am not against reducing greenhouse emissions, but it seems like we are really barking up the wrong tree with AC refrigerants - meanwhile, we are burning more coal than ever, I believe 8 billion tons per year, and we are trying to save the planet one AC system at a time...

    Post: 💰 Are You Really Middle Class? Here's What the Data Says 💰

    Marcus Auerbach
    #3 Buying & Selling Real Estate Contributor
    Posted
    • Investor and Real Estate Agent
    • Milwaukee - Mequon, WI
    • Posts 4,811
    • Votes 6,958

    According to this, you need to be at least middle-class to qualify for one of our single family homes at 3x rent in Wisconson..

    Post: My rental in California has a fuse box panel. Do I need to upgrade it?

    Marcus Auerbach
    #3 Buying & Selling Real Estate Contributor
    Posted
    • Investor and Real Estate Agent
    • Milwaukee - Mequon, WI
    • Posts 4,811
    • Votes 6,958

    Yes. And everything else. 

    One of the great perks of REI is that you have control over your assets. Most people start out investing thinking "rehab as little as possible" and after a few years you learn that "as much as reasonable".

    You can kick that can down the road as long as your insurance or local regulations don't mandate it, but it's not safe. And that means risky.

    What you need to know is what a reasonable rate is. I pay about $2,000 to $2,500 for a new panel, depending on the size. But that is Milwaukee.

    Post: To HELOC or get a traditional mortgage

    Marcus Auerbach
    #3 Buying & Selling Real Estate Contributor
    Posted
    • Investor and Real Estate Agent
    • Milwaukee - Mequon, WI
    • Posts 4,811
    • Votes 6,958

    A HELOC is like a credit card - it's great, as long as you can pay it off relatively soon with a BRRRR. Do not carry a balance long term!

    If you just buy a property using down payment from a HELOC you are just 100% financed aka totally overextended

    Post: Where Should I Invest $200K for Cash-Flowing Rental Property in a Good School Distric

    Marcus Auerbach
    #3 Buying & Selling Real Estate Contributor
    Posted
    • Investor and Real Estate Agent
    • Milwaukee - Mequon, WI
    • Posts 4,811
    • Votes 6,958

    @Nicholas L. Agree, but there is one more component that I personally factor in and that is the weather. That's the reason I never wanted to invest in FL - floods and hurricanes was a bet I was not willing to take. Now it seems to materialize in form of higher insurance cost. And what has always concerned me with Vegas is the economic dependence (I was there when they shut down the Aria mid construction) and water. You can't sustain a city without water and every time I go out to Hoover dam there is less water and you can see the bath tub rings where it used to be. I don't think it is verylikely, but the risk is greater than zero and it would render REI completley worthless - low probability / catastrophic risk