Real Estate Investment Strategies: Amir Hermelin

By Amir Hermelin

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    Silicon Valley Investors Club has fantastic experienced investors. We have launched the Investor Spotlight as a way to provide real estate investment tips and perspectives from fellow investors to our community.

    Today, we are highlighting fellow investor, Amir Hermelin, who shares how he has tried all types of real estate investment strategies and what he learned from his experiences.

    The Investor’s Background

    What’s your current role? 

    VP Products and Data at SoFi.

    How long have you been an active real-estate investor? 

    I bought my first investment property in June 2012 in Fort Worth TX, for a little over $150k. Since then, I’ve done a few flips, invested in syndication, and also tried a few online SaaS RE platforms. Today, I own over 10 investment properties and a few that are being constructed.

     

    Why did you decide to invest in real estate? 

    Steady income, capital appreciation, relatively low overhead, and to augment my more active/volatile portfolio with longer-term investments (e.g. balancing out volatility of options and crypto).

     

    What type of real estate investments do you typically make? (buy & hold, flip, wholesale, REITs, etc) 

    I’ve tried all of: buy-and-hold, flips, syndication (e.g. via LLC), and online SaaS platforms. Of these, my buy-and-hold have greatly outperformed other investments; the flips worked out well but had I held on to them they’d be worth more than 3x today; and the syndication deals are performing poorly. I’ve invested in an opportunity-zone SaaS platform, but my money is locked up due to the project going south, and so I’ve lost faith in that specific platform and will heavily scrutinize other “pretty UI, clunky business metrics” platforms.

    First investment

     

    When and where did you make your first RE investment? How did you finance it? How long did it take you to find it? 

    DFW in June 2012, financed via a mortgage with 20% down, and it took me about 2 weeks to find once I settled in the area of DFW. I signed up for updates from a local realtor at a time when I didn’t need to jump on every deal asap before others got to it.

     

    What did you learn from your first investment?  What advice would you give someone who is aspiring to do so? 

    There are a few things that I’ve learned:

    1. Don’t overthink the first one, especially if you believe there are more to come. You’ll learn as you go, and won’t get it “perfect” the first time.
    2. Do the math yourself, don’t trust others with “this area has X% ROI at least” or the numbers some realtors send that include appreciation. You’ll both ensure you have your best interest in mind, and learn from the process.
    3. If you’re on a “list”, don’t assume you’ll be getting the best deals – realtors know who their best clients (VIPs) are and who can “pull the trigger” very quickly. Instead, make sure you get the same support that VIPs get once you choose something.
    4. Do all the financing math and prep ahead of time. Once you sign, the clock starts ticking.

     

    What is a common mistake newbie investors make? 

    Some common mistakes I see:

    1. Being “optimistic” with numbers: you must make the right assumptions and be somewhat conservative, and consider good surprises as “upsides”. Examples: estimate rent at midrange (not the top of what you see being rented), account for vacancy and repairs, add property management costs if needed, etc.
    2. Herd mentality: just because everyone is buying up in location X doesn’t mean these are great investments. Sometimes it’s the contrary, as hot markets tend to produce fewer and fewer good deals.
    3. Sitting on the sidelines for too long: it’s okay to take your time, learn the markets, do your due diligence, etc. But if you plan on acquiring a portfolio of say 5 investments, you can’t take a full year to acquire your first one. It’s also not the best thing to try and “time the market”. You never know where markets will head or how interest rates will change, not to mention macro-economic variables such as Covid. If you have all the data needed and have identified a good investment, it’s best to proceed and get into the water!

     

    Research

     

    Are there any tools you are using that have made your real estate endeavors easier?

    I used to be more analytical and in fact, in my early investment days used Big Query (circa 2012) to crunch the numbers. I used to pull data using Zillow APIs but I don’t believe those are available anymore.

    Today I mostly evaluate opportunities via Zillow, and some simple online calculators and spreadsheet templates that I have. No rocket science really and it’s some manual labor. I’ve increased the size of my investment targets since there’s overhead to adding 3 properties vs 1, not to mention mortgages are harder to come buy. So I look more favorably at new construction projects. They don’t yield as good of a cash flow, but allow me to get favorable prices on new properties, avoid maintenance for the first few years, and also much easier finding renters. As a general rule of thumb the bigger the investment the lower the ROI, but I’m able to find positive cashflow properties even in areas such as San Jose and Austin.

     

    Name your favorite Real Estate Book, podcast, or any other resource that made you a better investor?

    I’ve never read a book on real estate investing. I’ve found online none biased articles to be helpful, sometimes a quick video or TikTok to point me in some direction (but there’s a lot more digging to be done), and honestly, the best use of time is talking to people who know the market about specific investment opportunities.

     

    How do you evaluate properties?  What are your requirements for investing?

    It really depends on the type of investment (e.g. Airbnb investments have different requirements). But taking the example of good positive cashflow, and not depending on appreciation:

    • Narrow down with the 1% rule – how close can you get?
      • 0.8% is great in today’s market and with today’s interest rates, e.g. $4000 rent on a $500k home
    • Evaluate cashflow after all expenses – finer granularity
      • HOA, management, and other fees
      • Tax rate differs greatly between states and even countries!
    • Area with relatively few rentals on market, longer rent terms (excluding Airbnb investments), good job situation
      • This is of course relative – e.g. if you see an entire zipcode with only a couple of rentals, that probably points to positive indicators on quality of tenants and staying power
    • If family rental, look for decent schools to make sure that population has some stickiness to the house
      • Single folks or couples w/o kids can move on a whim
      • Good schools do indicate stronger family-oriented population
    • Bonus: find someone who has bought in that area with at least 2+ years of experience
      • They can answer many questions that you just don’t see “on paper”, such as weather impacts, insurance increases, population shifts during Covid, etc.

     

    How did you determine the market/s to invest in?

    Initially (circa 2012) it was with a lot of data analysis and number crunching. I ended up picking a few properties in the DFW area for the rent and job stability, and home price stability (granted during Covid everything everywhere appreciated, including DFW). I also prefer a landlord-friendly state: as much as I work with my tenants if they get into a bad situation and need some help, there are ways for tenants to take advantage of laws in tenant-friendly states like California. At the end of the day, I’d like peace of mind and prefer a lower ROI if I don’t have to deal with nasty situations.

    There’s also the question of whether to invest in a new area, vs picking up another property in an existing market. I like diversification and spreading the eggs in more than one basket. On the flip side, there are some economies of scale and less time spent picking up another property in an already familiar area, with a team I’m already used to working with. It’s easier to track property prices and rents if I’m spread across fewer areas. And there are also learnings that can apply to other houses (e.g. Weather-related insurance claims).

    Today I own buy-and-hold properties in the areas of DFW, Austin, Brooklyn, Seattle, and San Jose. I’m occasionally looking for properties in those areas, but also keeping my eyes open for new markets that become more appealing due to Covid. I try to stay away from “hot” areas 🙂

     

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