Getting started... again.

21 Replies

Hi kind BP folks,

So I'm in the learning phase. I pretty much get through 2 podcasts a day, spend 30-60 minutes daily on BP plus even more on outside sites just getting comfortable with the world of REI, researching what I heard that interested me on a podcast.

Aside from having cash ready (which I'm thinking I'll get with a HELOC), I'm ready to start diving in... again. I say again because we have one duplex right now that we acquired in 2011 in metro Detroit in our first home purchase. We've since moved and are living/renting in Chicago proper (Uptown). My goal is to create cash flow now and equity over time - pretty standard buy and hold. If that means buying a multi-family that needs some love for us live in, rehab and manage here in the city, great! If that means doing all of that except the living part in another market outside , great. Fact of the matter is, I'm not quite sure what's next but I'm eager to get going. Realistically, I'm not getting my license anytime soon, so that's out of the question right now (I know I need it eventually). I'm also busy working a 9-5 (more like 8-6) with a 6 month old like most of you on here. So I have a few questions that I feel are what is holding me back:

1) Any suggestions on what markets and how to start looking for a deals?

2) How can I legitimately comp deals without a license?

3) I have little confidence in making what I am afraid will be interpreted as a "low-ball" offer. What knowledge and data do I need to gain that confidence?

4) How can I learn to accurately estimate rehab expenses?

I understand the philosophy, the flow and am relatively savvy. I'm also all about data (hence the lack of confidence in how to gather and analyze). Again, I'm eager. I want very much so to get going.

Hey Eric great to hear you are jumping back in! I myself am new so it's always cool to hear about those who have already gotten their feet wet taking the plunge!  I purchased the book on estimating rehab costs and so far most people say that is a very good resource and it was a great read. Good luck with your plans!

HI Eric,

Welcome to Chicago! 

Getting started can be difficult but you've asked the right questions.  What are you looking for in terms of property style?  That can determine where you start looking.  You can start with Baird and Warner's website.  They have a great feature to show what properties in the area you settle on sold for they give solid comps.  Start making offers.  After awhile you won't care what people think if you know that the offer is based on real comps.  You can also work with an agent that can get you the comps.  That is a free service and once you start making offers they can see you are serious.

Finally I would say you can start to price things that are commonly changed in a rental, kitchens, baths flooring.  These things can be priced and are usually similar in price anytime of the year.  You can buy them in bulk or seek out places that allow for you to use store credit so that you can buy when you need them.  Overall you must get started getting comfortable analyzing deals and making offers.  Hope this helps!

@Eric La Pratt

Welcome back to the real estate world again! Once you start and see great returns it is hard to ever give up! If you are looking at investing out of state.....

@James Wise has a team of agents that I work with and get a great returns on purchase prices. We share a lot of the same clients, that have been pleased with his knowledgable team. 

Jerry Padilla, Lender in NY (#NMLS 1084877)
585-204-6923
jerry.padilla[email protected]

@Eric La Pratt great questions. 

I would say invest in the area you know best. And if you are not too familiar with your chosen area, you can get a pretty good idea using Google Earth, drive-bys and assessor's data. I use GE for marking out large general areas (good and bad) and for marking parcels.  Esp in combo with the assessor's data - you can make it do some nice things. 

Best of luck, and keep us posted!

@Eric La Pratt

Welcome to BP!

1) Any suggestions on what markets and how to start looking for a deals?

That will depend on your budget, goals, and risk tolerance.  This is a personal decision that you need to be comfortable with.

2) How can I legitimately comp deals without a license?

Depending on where you invest you may have redfin.com. Besides realtor.com this is the only other website with direct MLS access. Run you search and filters, to the right it will populate a list of all properties that match your criteria, and at the bottom of that list you can download and export the file.

3) I have little confidence in making what I am afraid will be interpreted as a "low-ball" offer. What knowledge and data do I need to gain that confidence?

Determine your minimum ROI/cap rate and don't offer anything above that. If you have no emotional ties to the property it should be pretty easy

4) How can I learn to accurately estimate rehab expenses?

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Brie Schmidt, Real Estate Agent in Wisconsin (#57846-90) and Illinois (#471.018287)

hi eric. have you ever wondered where the term " lowball" came from? its a baseball term referring to a pitch that is so low, the batter thinks its a ball, but it just barely comes within the strike zone. the ump calls it a strike and the batter never swings. funny thing about these lowballs that no one swings at........ they never get a home run from them either. as a pitcher, if you never throw a lowball, you never get that strike on the batter. as abat ter, if you do not swing at the low ball, you are never gonna get a hit either. you need to throw that low ball once in a while and see if that batter swings at it. getting started again is hard, but you already know some of the game from trying a previous time. so, you should have less fear going into it this time around. you have watched all the podcasts, read all the books, now get out there and do what you want to do. no one stays in school their entire life, you have to get out there and apply what you have learned or all that learning is useless. get out there. if you fall on your face, then get back up. the only way to learn to do anything right is first learn how to do it wrong. then you know what not to do. good luck to you 

Originally posted by @Doug M. :

@Eric La Prattgreat questions. 

I use GE for marking out large general areas (good and bad) and for marking parcels.  Esp in combo with the assessor's data - you can make it do some nice things. 

Doug, what do you mean marking? And why would and how do I combine that with assessor data?

Originally posted by @Mark Elliott :

hi eric. have you ever wondered where the term " lowball" came from? its a baseball term referring to a pitch that is so low, the batter thinks its a ball, but it just barely comes within the strike zone.

I never put two and two together... Thanks!

Originally posted by @Brie Schmidt :

@Eric La Pratt

Welcome to BP!

Brie - this is a huge help. Thanks for answering them like that, too.

To dive a bit into your first response, it's not such a black and white answer as to what I want. Obviously I want the best deal possible, so that goes without saying. I have a high tolerance but don't want to be in dangerous neighborhoods. If it's a 2 flat on the north side where one unit covers the mortgage, taxes and insurance, then fantastic. If it's a 4 family in Milwaukee, great! I'd like to focus on one area, realistically, but Chicago seems so expensive whereas Milwaukee has more bang for your buck. I'm only saying Milwaukee just as a driving range example being only 90 minutes away.

What are your thoughts about how to zero in on a place? How do I analyze and then compare? Where do I pull the data from? Are there any spreadsheeta that can help assemble and make sense of the data?

Thanks again! 

@Eric La Pratt It's a hard question to answer, what works for me might not work for you and vice versa.  There are areas I don't like but others are very successful there.

Some people look at unemployment and job growth, some look at population statistics, some look at development.  There are a ton of factors that go into a good market and we might differ on what we feel is a good market.  

Some markets are great because you have appreciation potential, generally low expenses, and easy to manage tenants.  The downside is the units are expensive, the rent generated vs cost is good, but not great and they might be tenant friendly markets.

Other markets might be great because the rent generated vs cost is great, it is very landlord friendly, and the cost of entry is low.  But there is little chance of appreciation, higher expenses, and it's a high touch market so you need very good property management.  

Every market and sub market within that market is different.  

Brie Schmidt, Real Estate Agent in Wisconsin (#57846-90) and Illinois (#471.018287)
Originally posted by @Eric La Pratt :
Originally posted by @Doug M.:

@Eric La Prattgreat questions. 

I use GE for marking out large general areas (good and bad) and for marking parcels.  Esp in combo with the assessor's data - you can make it do some nice things. 

Doug, what do you mean marking? And why would and how do I combine that with assessor data?

 Eric - I put all of the assessor's data into a GIS system and make usecode kmz's for GE. Then I start driving GE from 600 ft altitude (not streetview) block by block with a polygon marker, bounding general areas. 

I do this because it helps me become intimately familiar with my farming zones - I use this data while driving, and I can see lot lines, usecodes and historical sales data 'overlaid' while out and about. 

It's very powerful, and you can use this in a lot of other ways. To find OO's, to find serial investors, to find (approx) equity - I have 290,000 records for this county. Every parcel and owner, for free.

Drop me  a line if you want - good luck!

@Eric La Pratt :

 Welcome to BP! There's lots to learn and you are on a great track by listening to the podcasts posted here. I see that others have recommended the book on estimating rehab costs which addresses your question and how it was advised to use James Wise's team of real estate agents for comps. I would also suggest for markets that James Wise's team doesn't cover to build your own team of professionals (contractors, real estate agents, and investors) to get a good idea of the market. You can use public records to see what other investors have paid for homes prior to fixing up and what the property sold for after renovations were done for fix and flips. You can also use Zillow to estimate rental prices for buy and hold investments. No matter what investing you choose to do, the advice given was great and essentially the choice is yours! Happy learning and earning!

Stephanie Dobbs

Originally posted by @Eric La Pratt :

Hi kind BP folks,

So I'm in the learning phase. I pretty much get through 2 podcasts a day, spend 30-60 minutes daily on BP plus even more on outside sites just getting comfortable with the world of REI, researching what I heard that interested me on a podcast.

Aside from having cash ready (which I'm thinking I'll get with a HELOC), I'm ready to start diving in... again. I say again because we have one duplex right now that we acquired in 2011 in metro Detroit in our first home purchase. We've since moved and are living/renting in Chicago proper (Uptown). My goal is to create cash flow now and equity over time - pretty standard buy and hold. If that means buying a multi-family that needs some love for us live in, rehab and manage here in the city, great! If that means doing all of that except the living part in another market outside , great. Fact of the matter is, I'm not quite sure what's next but I'm eager to get going. Realistically, I'm not getting my license anytime soon, so that's out of the question right now (I know I need it eventually). I'm also busy working a 9-5 (more like 8-6) with a 6 month old like most of you on here. So I have a few questions that I feel are what is holding me back:

1) Any suggestions on what markets and how to start looking for a deals?

2) How can I legitimately comp deals without a license?

3) I have little confidence in making what I am afraid will be interpreted as a "low-ball" offer. What knowledge and data do I need to gain that confidence?

4) How can I learn to accurately estimate rehab expenses?

I understand the philosophy, the flow and am relatively savvy. I'm also all about data (hence the lack of confidence in how to gather and analyze). Again, I'm eager. I want very much so to get going.

 Eric, why not get more multi's in metro detroit? just curious since your ready to get cash flow right now..  you have the one up with being familiar with the area and know where to go and not to go? We both know the cash flow is here without a doubt. You and your family can live happily away from michigan, if you know what you are already getting into..

Originally posted by @Eric La Pratt

1) Any suggestions on what markets and how to start looking for a deals?

I'll leave it to others for suggestions on what markets.  How to start looking for deals:

  • Establish a relationship with an agent- Much of what you'll find on websites like Zillow, trulia..... are listed properties.  You can spend time browsing the internet looking for deals on these sites or just have an agent send them to you automatically.  Some agents also have pocket or off market deals.
  • Multifamily Investors- Find investors who specialize in selling multifamily deals & get on their buyers list.  Some of the deals may be turnkey ready; others may be properties you have to renovate before you can occupy.
  • There's a ton of other ideas for finding deals that you'll learn over time

2) How can I legitimately comp deals without a license?

  • Establish a relationship w/ an agent.  If you make the relationship win/win- the agent will provide you w/ the comps you need
  • Redfin is a good resource for developing comps.  
  • Invest in Core Logic- There are some companies that provide services to real estate investors for a cost.  No license is required, just $ to cover fees.  The services will provide you w/ the ability to start pulling your own comps.

3) I have little confidence in making what I am afraid will be interpreted as a "low-ball" offer. What knowledge and data do I need to gain that confidence?

  • Never worry about whether your offer is "low ball"- Does your offer support your business plan; Return on Investment, Risks, Equity,....  
  • You should study the market before making offers- i.e. is it competitive w/ multiple offers being submitted on one property;  are offers being accepted above or below list price on average.  Is average days on market low or high.  Bottom line:  get some data on the market you're competing in.  The data will tell you if "low balling" will work.  

4) How can I learn to accurately estimate rehab expenses?

  • Always expect to be wrong trying to estimate rehab expenses.
  • There's some resources on BP; not sure how accurate they are
  • Start working w/ GCs & handymen.  After receiving enough bids on renovations you'll start to get an idea of what things costs.  It will be different from market to market.
  • Another source we use when we go into a market for the 1st time is  Home Wyse.
  • Eventually over time you'll develop a backoffice w/ tools that will get you in the ballpark.

@Eric La Pratt

If you are looking at the Milwaukee market you really need to work with someone who is active in that market.  Like every metro area there are many sub markets.  You need to understand what they are and what to expect in each of those neighborhoods.  You can make money in every neighborhood if you know what you are doing but that doesn't mean every neighborhood is a good fit for you personally.  Are you more concerned about cash flow or appreciation? 

I am an agent and investor. If you are serious about investing in Milwaukee and want help figuring out this market, message me.

-Troy

@Eric La Pratt

 you could also listen to @Brie Schmidt 's recent podcast #132:) She's a Chicago investor investing in Milwaukee currently. Regarding lowball offers, there's a saying on the podcasts that if the offer doesn't embarrass you then it was too high. Regarding what to invest in, you'll find tons of opinions on BP, most hinge on whether you are going for cash flow or appreciation or some combination of the two. Good luck!

What I have found it to make friends with local GCs. Have coffee with them, ask them about all of their projects and suggest you want to work with them. When you need them they may make themselves available to you for estimating rehab cost, real cost not just guesses. The best place to invest in the Chicago Area are West, North , Lake View and the infill areas. Anything close to those areas will mean good appreciation and plenty of renters who have jobs and can make good on the lease payments. Look at those areas with a microscope and you should find the properties that need improvements, offer add value opportunity and can usually be bought for under comparable market once you can establish a reliable ARV.

You want the most bang for your buck and you get that with slightly more expensive properties than in South Chicago but much better neighborhoods and a greater percentage of economically upwardly mobile population. Your cash flow may not be as high but far more reliable and sustained and of course your appreciation will be better. That is better than paying $120K for a property what will be worth $70K within 18 months. 

Chicago property taxes are generally high just make sure what your property taxes are based on. There may be opportunity to be reassessed but no one will listen to you if you do not become the actual owner of a property. Don't dream calculate on present day conditions and expenses and figure they will also go up, expenses I mean. Don't go out on the edge because you will get swallowed up by the big economic black whole that can just appear out of nowhere. 

Try not to get stuck with heating bills. Allot of landlords in Chicago offer paying for heating to attract tenants but if you stick to the areas where you get tenants who have good paying jobs they can afford to pay their own utilities. Also do not be so attracted by prices because a very high percentage of Chicago real estate is very old. They were built back in the 20's, 40's and 50's. Allot of residential buildings have brick because it takes the weather well but when brick needs to get replaced it is very very expensive. 

Originally posted by @Troy Owen :

@Eric La Pratt

Are you more concerned about cash flow or appreciation?

Troy, I'm more interested in cash flow so as long as appreciation matches or beats inflation. Truthfully, diversifying would probably be best, anyway, so having strong performers in each category would be best.

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