Rental Property Investor · Tucson AZ / Nice FR / Washington DC · Member since 2016 · 1k+ posts · 1k+ votes
I'm interested in seeing what others are up to in terms of volume. How many deals do you do per year, and what methods do you use? It does not matter if your buy and holding, flipping, or wholesaling.
I'm doing around 20-30 buy and hold deals per year, I'm on track for 30 this year, mostly townhouses, but we do get the random apartment deals now and then... We use MLS/Agents, letters, and networking to find deals.
Real Estate Agent · Woodstock, GA · Member since 2016 · 2 posts · 3 votes
10y
28 single family homes so far this year. 40 last year. Hold/rent 80% of my deals a year before selling (some renovated before or after renting) to save money on taxes (long term capital gains). Balance are bought and resold quickly (30 days total) with my Roth IRA owned LLC (tax free flips).
Leads from Homevestors franchise (direct mail, billboards, pay per click and television advertising).
Investor · New York City, NY · Member since 2015 · 7 posts · 2 votes
10y
Would be awesome to hear how you are doing these 20 deals... I'm working real hard on my first of the year I can't see how to scale to another 5 this year even. And then there's funding. Etc.. so to answer your question I'm at 1 BRRR for the year but I'm aiming at 1/month!
I'd be interested in how you evaluate these deals... especially the apartment houses
Just like everyone else... income statements and desired cap rates. Do some DD and get it for a deal with current ops, then improve for the win.
We make a lot of offers and get a lot of rejections. A lot!
Last month we put an 24 unit apartment under contract for 2.3 million, owner was looking for 2.7. We did the numbers and came to 9% cap pre roll up.
Townhouses are more fun, market don't matter, we make offeres we like. Like the two townhouses we closed on in NOVA this month. 80k for one, 85k for the other, same street. The bank came back with 160k appraisal on both of them, we will improve both units with about 10k-15k in remodeling, rent them out at 1.2k/mo.
@Levi T. What area are you doing 30 Buy-and-Hold deals in this year? I see you're in VA, What type of returns are you getting on those 30 deals?
I don't target for deal volume in my portfolio, I target for ROI per deal.
NOVA man, Fredericksburg all the way to the DC line. At one time I was all over the east coast, retracted to NOVA in the last few years, it's a great market!
I think my last post will give you a good view of my deal types, but most our deals in terms of townhouses run around 50k - 100k or less for properties that are appraising in the 80k to 160k, we rent them out for $900/mo to $1,500/mo (depending market and location), all properties are rehabbed once we buy them.. Right now we are averaging in the mid 60% for yearly COC, been that away for a few years now, and likely where I'll keep it for a nice blended level of growth. ROI is standard as wheel on the car, as profit is to business. Once you have a successful process, replicate it as fast as it will grow, that's all I've done. If it's right you can do a bunch of deals, sell a few off and do a bunch more.. if it's not, you will run out of money and get stuck.
I'm sure others will chime in here soon with much higher deal flow. Really was not expecting to make the thread about explaining my operations, but I did not want to start a thread without contributing after asking the question, as it would feel lopsided otherwise.
Real Estate Agent · Woodstock, GA · Member since 2016 · 2 posts · 3 votes
10y
28 single family homes so far this year. 40 last year. Hold/rent 80% of my deals a year before selling (some renovated before or after renting) to save money on taxes (long term capital gains). Balance are bought and resold quickly (30 days total) with my Roth IRA owned LLC (tax free flips).
Leads from Homevestors franchise (direct mail, billboards, pay per click and television advertising).
Investor · Marysville, WA · Member since 2016 · 13 posts · 2 votes
10y
I am amazed to see how you guys are doing so well, if you can answer a question for me, that's a lot of deal you guys are working on and a lot of capital involved, how and you guys must have a lot of capital already, I'm closing on my 4th and it has been very difficult, what am I doing wrong and how are you guys again, doing 20,30 in one year or less any input would be great, thanks
I am amazed to see how you guys are doing so well, if you can answer a question for me, that's a lot of deal you guys are working on and a lot of capital involved, how and you guys must have a lot of capital already, I'm closing on my 4th and it has been very difficult, what am I doing wrong and how are you guys again, doing 20,30 in one year or less any input would be great, thanks
If you operate on the idea that the property is worth market, and that's what you pay, you wont make it far in this business, or it will be hard going. For someone to win, someone must lose. Make sure you're on the winning side.. always remember that.
You will notice everyone who is really good at this business in their respected niche of real estate or property type will spend a lot more time marketing. Last week I contacted over 300+ people to see if they wanted to sell their property for 50% less than it was worth.. It's a numbers game, 5 people responded.. 2 people told me never to contact them again if I'm going to make such a lowball offer, 3 others said they would be interested, so tomorrow I'm walking 2 properties and will be making an offer, the 3rd owner I'm still in talks with.. I expect at least 1 of them to close, but very likely all 3 will accept my offer as we have our process down pat.
If I get all 3 properties at 50% less than market, rehab, rent, then sell one of them in x time, I have capital to buy 2 more properties, or more.. This leads to my other post above where I got 2 properties for 80/85k each, worth 150-160k each.. Do the math, and you will see you could buy 2 property, sell 1, take that capital and buy 2-4 other properties (In that example I could sell both and buy 7 more deals) , sell 1 more, and buy 2-4 more.. I call it the two-step, buy two properties (or more), sell one, and buy two more... and that's how the business get's done. If your good at it, you can buy/sell one, buy 10, off you go... When you really get this, you start to understand market price means nothing.
Investor · Edmond, OK · Member since 2016 · 29 posts · 5 votes
10y
Levi, you are my hero!
Congratulations on your success!!!
I'm just a small individual buyer that works full time in another industry. I buy one buy/hold property a year (I started in 2015). In 2017 I plan to buy my 3rd buy/hold & build 2 new buildings on lots I already own in OKC metro. Again congrats
Real Estate Investor · Orlando, FL · Member since 2016 · 50 posts · 21 votes
10y
@Levi T., funding will be less of an issue as you get more experience. Also, I find most investors don't know how to "put a bow on their deals", meaning, how to package them so a lender will feel excited and safe about the deal. Essentially, if you invest with the eyes of an underwriter and know how to assemble info about the deal (data-drive info, not smack: photos/video, sales comps, rental comps, cash flow summary in case you can't flip it, comprehensive rehab scope, security instrument samples and default steps for the lender to feel safe (define the worst-case scenario), your experience/bio, etc. Regardless how you expect to exit the deal, or whether you even use the package above, it is a great exercise to help you mitigate risk on your own deals and the package will help you wholesale and raise money. If the deal is fat enough and packaged properly, you won't have any problems finding money.
Also, like Levi says, you need a narrow, but deep approach to marketing (not a bunch of superficial trials), then, continue to optimize the same approach.
We flip 20 to 30 properties per month (mostly SFR's). Some we take possession, rehab, and sell. Others wholesale. Some sub2 deals. Some seller finance...and many a combination thereof. Most marketing is done online (SEO and paid traffic).
@Levi T., kudos. Sounds like you have a true business. @Oscar J Osorio, funding will be less of an issue as you get more experience. Also, I find most investors don't know how to "put a bow on their deals", meaning, how to package them so a lender will feel excited and safe about the deal. Essentially, if you invest with the eyes of an underwriter and know how to assemble info about the deal (data-drive info, not smack: photos/video, sales comps, rental comps, cash flow summary in case you can't flip it, comprehensive rehab scope, security instrument samples and default steps for the lender to feel safe (define the worst-case scenario), your experience/bio, etc. Regardless how you expect to exit the deal, or whether you even use the package above, it is a great exercise to help you mitigate risk on your own deals and the package will help you wholesale and raise money. If the deal is fat enough and packaged properly, you won't have any problems finding money.
Also, like Levi says, you need a narrow, but deep approach to marketing (not a bunch of superficial trials), then, continue to optimize the same approach.
We flip 20 to 30 properties per month (mostly SFR's). Some we take possession, rehab, and sell. Others wholesale. Some sub2 deals. Some seller finance...and many a combination thereof. Most marketing is done online (SEO and paid traffic).
Nice, all with SEO and SEM. Never would have figured that much marker opertunuity for REO in SEM.
Investor · Marysville, WA · Member since 2016 · 13 posts · 2 votes
10y
Hi John I guess my problem is then how to package the deal to the underwriters and make them feel for me to look and learn exactly how to do this and move forward, by the way thank you for all the info and it leaves me with a lot of questions
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
10y
We will do hundreds. The most important number we focus on though is how much money is made on each deal. Some people fall into the trap of doing deals just to do deals but make little money. That is crucial to avoid.
Vendor · Middlefield, CT · Member since 2015 · 55 posts · 50 votes
10y
@Levi T. Potential deal volume via SEM can depend a lot on your market - low population density can mean low search volume, for example, and some markets are very resistant to REI-style marketing (Salt Lake City is one that springs to mind as having been historically difficult online).
BUT - The technical barrier to entry for SEM means there's typically far less competition for investors that are able to get it done, whether that's with paid ads, SEO, or both.
In the average local market, that means about 5,000-6,000 well-targeted searches a month. For a well managed, relatively low-budget local ad campaign, that typically adds up to somewhere on the order of 10-30 leads, with an average close rate of 1 out of 15-20. So, about a deal a month.
For organic, you can triple that number (again, assuming someone's putting in the effort and so on). There's quite a bit of variation, depending on the size of the area you target and your budget, but even with lower amounts of spend, there's a lot of potential deals online (after all, last time you needed to do something, where did you look - your mailbox? or Google?)
Real Estate Agent · Woodstock, GA · Member since 2016 · 2 posts · 3 votes
10y
Someone once told, if you have a good enough deal the lending will be easy. He was right. We buy at 65% of retail minus repairs. So a $100k home that needs $10k in work would be $55K buy price.
We use hard money for every deal that we don't buy with our IRA owned LLC. The IRA owned LLC is stacking up because we do our wholesale flips (30 day turn around) in these accounts and they are tax free because they are Roth IRAs.
Have you spoken to your plan provider and/or CPA about UBIT taxation?
Even a Roth IRA is subject to tax when, rather than engage in passive investments, it is engaging in a trade or business on a regular or repeated basis. Flipping would be such an activity.
Rental Property Investor · Indianapolis, IN · Member since 2016 · 200 posts · 87 votes
10y
Was a hobbiest doing 1 deal a year. In april went full business and have completed 6 deals since May plus have 2 more deals in the pipeline. Of those 8 three will be buy and holds until my renters move out then I sell them. The other 5 will hopefully get flipped.
For 2017 I am hoping to do 15-20 and 30-35 by 2018.
Investor · Harrisburg, PA · Member since 2016 · 51 posts · 16 votes
10y
@Kurt Johnson Would you mind suggesting a plan administrator for your LLC owned IRA etc? Also another other resources to learn about the process of self directed plans. I am looking into starting this. thanks
I would be cautious about working with a plan provider that established the structure for Mr. Johnson. As I noted above, his Roth IRA LLC that is executing multiple flip transactions per year is likely subject to UBIT taxation. When an IRA is operating a business such as flipping houses, the gains are not entirely tax-free, even under a Roth IRA. Passive investments such as rental income, interest on hard money loans, etc, would be fully tax sheltered.
While I have no firm confirmation, I would posit based on his posts that is not something Mr. Johnson was previously aware of.
That is a tremendous oversight with potentially severe tax consequences. Whether his plan provider was aware of his intended investment strategy or not, they should have been thorough enough in presenting their IRA LLC program to touch on this topic of UBIT exposure so their client would not be caught unawares.
You may also want to consider the solo 401k over the IRA LLC if you qualify for it.
Following are the similarities and differences between the solo 401k and the self-directed IRA.
The Self-Directed IRA and Solo 401k Similarities
Both were created by congress for individuals to save for retirement;
Both may be invested in alternative investments such as real estate, precious metals tax liens, promissory notes, private company shares, and stocks and mutual funds, to name a few;
Both allow for Roth contributions;
Both are subject to prohibited transaction rules;
Both are subject to federal taxes at time of distribution;
Both allow for checkbook control for placing alternative investments;
Both may be invested in annuities;
Both are protected from creditors;
Both allow for nondeductible contributions; and
Both are prohibited from investing in assets listed under I.R.C. 408(m).
The Self-Directed IRA and Solo 401k Differences
In order to open a solo 401k, self-employment, whether on a part-time or full-time basis, is required;
To open a self-directed IRA, self-employment income is not required;
In order to gain IRA checkbook control over the self-directed IRA funds, a limited liability company (IRAL LLC) must be utilized;
The solo 401k allows for checkbook control from the onset;
The solo 401k allows for personal loan known as a solo 401k loan;
It is prohibited to borrow from your IRA;
The Solo 401k may be invested in life insurance;
The self-directed IRA may not be invested in life insurance;
The solo 401k allow for high contribution amounts (for 2016; the solo 401k contribution limit is $53,000, whereas the self-directed IRA contribution limit is $5,500);
The solo 401k business owner can serve as trustee of the solo 401k;
The self-directed IRA participant/owner may not serve as trustee or custodian of her IRA; instead, a trust company or bank institution is required;
When distributions commence from the solo 401k a mandatory 20% of federal taxes must be withheld from each distribution and submitted electronically to the IRS by the 15th of the month following the date of each distribution;
Rollovers and/or transfers from IRAs or qualified plans (e.g., former employer 401k) to a solo 401k are not reported on Form 5498, but rather on Form 5500-EZ, but only if the air market value of the solo 401k exceeds $250K as of the end of the plan year (generally 12/31);
When funds are rolled over or transferred from an IRA or 401k to a self-directed IRA, the amount deposited into the self-directed IRA is reported on Form 5498 by the receiving self-directed IRA custodian by May of the year following the rollover/transfer.
Rollovers (provided the 60 day rollover window is satisfied) from an IRA to a Solo 401k or self-directed IRA are reported on lines 15a and 15b of Form 1040;
Pre-tax IRA contributions on reported on line 32 of Form 1040;
Pre-tax solo 401k contributions are reported on line 28 of Form 1040;
Roth solo 401k funds are subject to RMDs;
A Roth 401k may be transferred to a Roth IRA (Note that from a planning perspective, it may be advantageous to transfer Roth Solo 401k funds to a Roth IRA before turning age 70 ½ in order to escape the Roth RMD requirement applicable to Roth 401k contributions including Roth Solo 401k contributions and earnings.);
Roth IRA funds are not subject to requirement minimum distributions (RMDs);
The fair market value (FMV) of assets held in a self-directed IRA is reported on form 5498;
The fair market value of assets held in a solo 401k are reported on Form 5500-EZ;
At termination, the solo 401k is required to file a final Form 5500-EZ and 1099-R; and
At termination, the self-directed IRA is only required to file a form 1099-R.
Enrolled Agent · Richmond, CA · Member since 2016 · 225 posts · 148 votes
10y
@Mark Nolan, thank you for posting this list of similarities/differences! I just may need to turn this into a chart and make a pdf to keep on hand for my clients.