@Bruce Woodruff , JD is too busy telling me while I will fail. He spent making 3 "so-valid" points about how I have no experience in real eastate, and no one said I was experienced in real estate. I said my business-plan was created from experience. No one said it was realestate experience and no one said it was my experience in real estate. Trying to catch in me some epic lie is not why i joined this site. That was his assumption which assumptions are driving those responses. I do not relate to that. Nor have I have even discussed my plan in any fashion. I joined biggerpockets as anoter layer to add to my tools for my new business. I got the answer I wanted, and thankful the rest is other like this pushing their opinion, which is fine. However opinions need to be relevant. I have the skills that I need, and tools that I need. And my tools are other people who have understand my mission and are good at what they do. From there, I run the business aspect of it. Others opinions and assumptions have their place, and some are misplaced.
I focused my attention on those who succeed in what I want to accomplish.
@Kiel Martin it appears you already have your mind made up. I have been on this site for awhile and no one here is trying to prevent you from doing anything. They are giving you professional advice which is what many newbies come here for. It appears that you are getting defensive when people are merely attempting to explain things that you really need to know. There are multiple investors that have lived there, invested there and have multiple experiences there. I have always invested in class D communities and have extensive experience in Baltimore. I doubt anyone is insisting that your plan is bad, but for a newbie, it does appear you are approaching it from a very simplistic aspect. There is so much to it and I know those price and free/clear sounds super cool in theory, but it comes with an extensive degree of chaos. In so many cases and scenarios people chase those prices and end up losing more than they could ever imagine. People from all over the world think they will pick up 20k Baltimore properties, pay a laborer to fix it and collect extensive cash flow a month later. Most tend to lose at this and I have no logical reason to make it up. Either way, congratulation for going at it and I do wish you luck. One thing I will advise is to at least entertain what others tell you. Don't be so dismissive if you don't feel it fits what you are doing. I have been in the game a long time and most of my success is due to networking and collaborating with others. I sincerely wish you the best!
@Michael P. thank you..... I know it is possible because I have seen it, seen the numbers, and seen the risk. This is how I created my business plan for learning from others. So thank you for making comments like this. It is important that everyone in life understands that successful methods are not written in stone as the only method. And the more I succeed in what I do, the most important thing that I have learned is most people repeat information they read, and repeat actions. I run things from the perspective of understanding the business very deeply. My mind is teadious in that fashion. Thank you very much for letting others know it is possible.
@Mark Cruse .... there is not one defensive aspect coming from me. That is an assumption that no one usuallt makes when talking to me, you would be the exception. How you came to that, i cannot see it. I just responded to the contex being pushed, and in fact I could say that others were defensive towards my posted question. But there is no need to me to say that, becuase if I was defensive, I would be repeating things like "I know what I am doing". Instead I mentioned that I have others who know what they are doing as part of my team. The real question is whom is trying they hardest here to convince? Do you really hear me trying to justify to others why my idea will work, or is it others trying to tell me why it will not work.
Like I said, people repeat. And for me, I had a simple question. Most of the responses are not even answering the question. But that is ok, but I go the direction that I needed. And I thank you all whom answered my question.
Well they were trying to educate a newbie on several things many new comers fail to account for. For real, I wish there was a Bigger Pockets when I started in the game to help me navigate madness. Nearly everyone here with experience has stated pretty much the same. I'm a person that invests there and has done what you are attempting and I concur with what others have said. Not one thing presented was false. It's obvious that you didn't want to hear it but people are naturally going to respond with their experiences to educate others when they present questions. That's what we are here for. For me, the closing has varied depending on several factors. For what you are talking it could easily be 5k to 15k but as stated, it depends on other stuff. I will not preach to you any longer and as stated before, congratulations. So many just talk and never pull the trigger. I want you to win!
@Mark Cruse , First of all, no one here knows what my plan is because no one asked. Assume how I percieve the outcome all they want, but this is a 20year plan that i created and not my first rodeo, but my first real estate business. I just finished a 10year goal putting my career in a manner where I could buy houses with cash. That type of disciplin most cannot speak of, which I am not done yet. I trained my body to sleep 6 hours a day so I could spend 2hrs when commuting, 8 hours at work, and 8hrs on my plan. That is 8hr mon-fri and 15hrs every saturday and sunday for 10years, not missing one day. I wrote 3 books on how to succeed and created Success=time + Sacrafice. And now this year is the end of that 10year goal, which took me 12 actually. Owning a business is risk. I do not manage my risk as most due, and I do not cary debt, period. None of my 4 businesses have I had to carry debt, because i made it my priority not to. And like other businesses, losing money is possible, and I run my business to learn the business, not to make sure I do not lose money to the point I am scared to make choices. I have not made up my mind, I made a business plan and I am going to follow it. And I will re-asset that plan after 5 years. We are way past the point of being productive with this post. Out of all of them, only a few really answer the question that was posted. If you read the sequence of post, you will see clear as day how off topic it became and it was not because I asked.
You know when I ask questions on other forums, do you know what the first question most ask? They ask about my background, and they ask about some of my past experience and my past industry. Here, not one person asked any questions, but gave alot of answers. In fact, they gave a lot of solutions to a problem they was not even existing. So in order to base an opinion that did not exist, the problem was conjure. And after saying this, anyone can go back and re-read this post and clearly see how a problem was conjured just so a response of "it will not work" came into play.
As for advice givers to newbies, I am not kidding when I say, that the delivery of some of these responses who create a serious negative vibe. I might be new to real estate, but I am no way new to being a business owner. So I do not scare easily. Find me the post where someone was asking me what my stradegty was? And think about yourself, as you are telling me about how:
"People from all over the world think they will pick up 20k Baltimore properties, pay a laborer to fix it and collect extensive cash flow a month later"
I am not one of those people, and the assumptions have been the sole drive of this post. And in reality, It should of been about the question that I had ask. So this will be my last post on this, so the draw-out-ness comes to an end. Thank you everyone who answered my question.
@Mark Cruse ...thank for the "pull the trigger" remark...... said most gracefully
I love it see the issue is “most” investors never grew up in the city they called c and d neighborhoods so they can’t fathom that you can find good people in bad situations. So they call it the “ghetto” and don’t do that and don’t do this because of they own fear. I’m not in Baltimore so I can’t comment on that, but I started buying cash houses like this and did the section 8 program and honestly I look at it like helping people just like my mother. People see a brick wall and you see a solution
@Leroy Norris why bring in all these accusations and assumptions for no apparent reason? You have no idea what the people have been through or where they grew up. Also, I saw no one express any sense of fear or anything you are alluding to. This is a forum where real estate professionals share information and elaborate on multiple elements based on personal and direct experience. At least i do. I for one would never say it cant work since I have made it work before. People were explaining that its not so easy and were contributing honest and accurate facts. Many people come here to ask others who have been down the road before to help avoid problems. If people are not interested in that there is no plausible reason to be here. Where did anyone say there are no good people in this area? I lived in these areas myself. Again, I wish I had this forum back in the day and I appreciate anyone wanting to provide guidance. I could have avoided some of the issues I had based on the very same input people are mentioning here. If the information is not welcome and people know it all its all good. However, there is no reason to make things up, insinuate things or insult people because you disagree........
Did you just come to bottom and read my comment or did you bother to read others? The 3rd comment down he described a neighborhood in America as a “War Zone” everyone is trying to discourage him about his plans… he never asked for input about his plans he asked for input about closing cost…
@Kiel Martin I also like buying with cash and hope your plan works out for you.
There are definitely some minimum closing costs. It costs the same to close escrow and do title searches and record docs, draft deeds, etc whether the value is a million bucks or a hundred. My typical closing costs buying with cash are about $700 but it's customary for the seller to pay for title insurance and transfer fees here. Buyers may pay more of these costs in your market.
I had 2 dozen rural c class rentals for 18 years. Bought for about $25k per unit and a 14 cap. A couple lessons I learned were to buy solid buildings and screen well. 75% of landlording is solved with decent tenants.
Maybe @Jim K. will have a sec to drop some pointers as well.
Good luck and please keep us posted. I like your plan and your passion to do it!
@John Underwood , thank you for this information. I did not know I could do my own title, that is something that I might not have time for, but it is something that I will be researching how it done. This is the type of information that I was looking for. Thank you very much.
@Leroy Norris , this is my opinion as well, but I kept it to myself. However, I am very happy that you mentioned it. Thank you for expressing it. It is comments like this that makes it clear that I came to the correct place.
Closing cost when you buy for cash is usually a more fixed cost as someone previously pointed out. You can call a title company and asked them how much they charge to do escrow and title search etc. I’ve bought 30k property for cash and 200k property for cash and the closing costs are basically the same. I budget $1000 for closing when I run my numbers
Just curious. You’ve mentioned several times that no one has asked what your business plan is so I will. What is your plan? How will it minimize the risks that some of the other members pointed out. I think everyone truly wants you to succeed. They are just providing some advise so you won’t lose all that you’ve worked for grinding the last 15 years. Best of luck.
@Steve Vaughan , omg, now this I thank you for. Now i can say this.... $15k to $40k is just a guideline to start looking. I have estimated that I at the $40k range will be harder to find as a renting solution, and must likely will be as $70k on a more realistic average. I am sure that the the one around $15k will not be a solid structure, but I have no idea. With that being said, I will be searching for the $40k mostly to not spend all my money on my first perchase for unforseen issues. I do not want to have an issue hold up things for too long. And I just read about your 75% landlording average the other day. This was sent to me buy someone in my area. So thank you for solidifying that for me.
@Stone Jin , oh.... I did not know that that price could be the same for such a price differnet. Now that is something I needed to hear. Thank you for your comment.
what you asked me about my plan, there is alot of history there. There is also tons of philosophy on how I see business. Everyone claims to be this and that, but I have always done one thing when running my businesses, and that is honesty. When running my HVAC business, it was my honesty that started pulling customers in. When working for other HVAC companies, I was always number 2 in sales. I was a service tech, and I even beat out the salesmen. And I never sold one day in my life with doing HVAC. There were two types of customers. 1) Who would get upset when I pulled out there fan motor and it had 10yrs of caked dirt in it. 2) the customer who just knew that I did not know what I was doing. This is just one story out of thousands and most of them are not related to my HVAC days.
- 1) These customers would walk outside while I was cleaning the motor and saw how badly it was caked with dirt. They would be upset because they had been paying for a service contract for 10 years, which they would get an inspection twice a year. I always spent an hour doing an inspection because I checked everything that I was supposed to. These customers would call the company and question why they are paid for a service contract for 10years and I was the first person who spent an hour checking everything while every other tech was out of the house in 10 minutes. These customers would ask to only have me as their service tech from here on. I was brought into my manger’s office because this was their belief of the situation. My manager told me and I quote “Whenever we get customers asking for specific techs, it is because that tech was bad-mouthing other techs.” All I could say was, are you serious? I did not have time to even say hello, I was too busy doing my job.
- 2)The second type of customer deemed me as an idiot and would call the company and demand that I would not come back because I did not know what I was doing. What a strange scale I was on. Completely on one side of the scale or the other. The reason they came to that conclusion was because I took more than ten minutes doing their inspection and on my back on a their concrete with my head inside there furnace looking for hair crack which will cause carbon monoxide. A very serious outcome which I took very seriously.
I was fired for doing my job because the other service techs made me an issue. And it is hard to have problems with service techs, since it is a job where you work alone. Pretty hard to complain about someone who you never see. But there agenda was about not looking bad, which was the farthest thing from my mind. My agenda was providing a good service and moving ahead. I am in the IT field now. I started this back in 2009 as a 10year goal to get my salary to $150k. I worked my plan backwards from what I needed to 0. And then I worked my way upward. This 10year goal put me in a place where I would be able to take risk when I was still in my mid-40s, which I am 46 now. The worst thing in the world is to watch someone spend 20 years paying for their house, and lose it because they lost their job which they were faithful to. Nothing is worst then getting a divorce and lose things that you paid for. Nothing is worse than shutting down your company that you spent all your time on, with 4hrs a sleep a day 7 days a week, lose everything, and having to go back to work so you can pay off the $100,000 in debt because you took out loans to save your business which did not come out the way you wanted to.
This is the philosophy and the experience of life in general. There is no special formula. You take research and past experience and try your best to turn it into tangible dollars. This is done by failing, learning from those failures, adapting, and gaining those little successes along the way. Success – time + sacrifice, a formula I created via experiencing business at an early age. No one to guide you, just trail, error, and determination. Success is a combination of failures, personal strengths, self-awareness of personal weakness, and a million failures combine with tiny little successes mixed in. One thing that I have learn is when you see success like this, then failure is part of the formula, so it is no big deal. It is part of the whole.
With all that being said, advice 90% of the time is not advice. It is someone’s emotional agenda to justify their purpose for giving that advice. Less than 10% of advising really give advice that is relevant to the situation.
Watching a customer kick me out of their house because I was not done in 10 minutes, and labeled me as an idiot, was a true eye opener for me. And the first time was just a crazy dude, and the 100th one was a pattern that this is a human trait. It set a lot of wheels in motion with me. I still deal with this in the IT field, where agenda falls to my feet with great punishment. And I done with dealing with people always trying to obtain with no attempt to achieve. My life now is a mission based on providing homes for people who need them, and providing me an income as the byproduct. A mission I have spent the past 12 years working on so I could have the capital without trying to leverage. If I do not have the money, than I cannot afford it. There is no learning lesson with not doing because someone advised you not to. A lesson is a lesson. A wrong action is priceless compared to never doing the action due to someone’s advice. It amazes me that others have such a hard time understanding this. It comes down to them being scared to fail.
My expert exam which is called Cisco CCIE was an 8hour real-equipment lab that cost $1,600 to take. Everyone based their taking the exam on “I got to pass, I can only afford to take the exam once” I did not focus on the money, I focused on get the certification. I failed the exam twice and passed it on the 3rd. I do not use money to not use it. Nor do I not use money as an excuse to not do or not achieve. I use money as tool to build skillsets that provides me with what I am trying to obtain. When I talk to salesmen, they think saving me money is them looking out for me. I am not a salesman, yet always beat out the salesmen. Why is that? Because I did one thing they did not, I cared more about what they needed instead of saving them money. And that is how I treat all my customers. So giving me advice that saves me money, is you talking to the wrong audience.
I am buying income, and that is it, and that is the plan. If I spend $40k on a house and $20k on repairs and rent it out for $1000. I invested $60k to get $12k a year, not counting the vacancy, repairs, and so on. To me, that just makes since. No loans, no leveraging, just something simple, and grow from there. That is it, I do not care about the return on my investment like most do. If I was, I would receive my money back in 5 years, if I did care. I am buying income, and that is what my plan was created for. All the way back since the day when I was listening to Carlton Sheets “No Money Down” course. That course got a bad rap because everyone focused on the no money down part and not the course. I focused on the information, which was abundant and well worth the price. In fact, it was underpriced. The no money down aspect, I never pay one bit of mind to. Because even then I knew life was not about obtaining without achieving, which was not Carlton Sheets lesson. It was about being clever about the situation and solving problems and most would not do to their binary thinking. What I did learn was that I needed steady capital to make this happen. In 2009, at 35 years of age, I set my plan in motion. To become an expert in my field. Get expert certifications and get my salary up to $150k. Lower my expenses and start my real mission of life. Make homes for the unfortunate, and build my retirement. And I got 20 years to do it. And this year, it begins.
Generating cash flow is not the same as building wealth. The former is an income statement issue and the latter a balance sheet issue. The price of any asset is a function of supply and demand. The cost of building a house from scratch today has got to be rock bottom $80 per square foot. This means that a 1,500 square foot house with the cheapest materials available costs $120,000 to build assuming the value of the land itself is zero. So, what does it mean to buy a 1,500 square foot tenant ready house anywhere in the U.S. (Baltimore or LA or in the middle of the Mojave for that matter ) for $15,000, $20,000 or $40,000? At base level, you will have to buy land for some amount greater than zero and pay someone $120,000 + transactional costs for an asset that, when complete, will be worth $15,000, $20,000 or $40,000. It also means that you will have no incentive to make any capital expenditures as those expenditures will not add to the value of the house. In a normal world, this is the definition of insanity. However, largely because of government programs that overpay the amount of rent that the market would naturally set (i.e. section 8) you have an arbitrage opportunity for so long as you keep the property in tenant ready shape (enough to satisfy the city). You will generate cash but it's hard to see how you will ever build meaningful wealth through this strategy as there comes a point where the properties become uninhabitable due to underinvestment.
Evaluate the areas very well, and examine your rehab costs. Additionally, your exit strategies...i.e. buy and holds for renting, or flipping. Take all of this into account when purchasing homes at the price point. Ensure you're not just talking to a wholesaler who wants to get your money, but someone who knows the value of a fixed up home in those areas. Also depending on where you are, Baltimore (the city) is block by block...outside of the city I'm not too familiar with...but I'd encourage the same if not more due diligence.
@Darius Ogloza ... i read your comment twice. Not sure your comment relates to what I was saying. Not sure if you were using building a house as an irrelevant example to make a relevant point.
@Moises B. Thanks for this information, now I have to ask, if I am going through a realtor, will i have to worry about wholesalers. I do not have wholesalers in my thought process, but would like to know who wholesales could affect me. If you have time, please elaborate. Thanks in advance if you have time.
@Kiel Martin Didn't mean to go all zen on you but, yeah, I was trying to get you to think about your business plan a little harder. What do you do when the time comes to improve the properties years down the line. Can you actually build real wealth pursuing this strategy? I believe real estate investment is about building wealth. If throwing off some monthly cash is the goal, probably cheaper and easier to open a laundromat.
Originally posted by @Kiel Martin :
Watching a customer kick me out of their house because I was not done in 10 minutes, and labeled me as an idiot, was a true eye opener for me. And the first time was just a crazy dude, and the 100th one was a pattern that this is a human trait.
You got kicked out of 100 houses as a service tech? Hmmmm..... Red flags anyone.....?
Thanks for sharing and congrats on getting the ccie. I failed the ccna twice in college and ended up in software consulting but really enjoyed networks and making things connect and talk to each other
I 100% understand the buying stream of income perspective. I used to take on projects and what got me through was figuring out how many houses I can buy with the income from the project. If I can acquire 2-3 houses per project I’d do it no matter than challenges.
With that said I’m pretty much retired after grinding for a decade taking money from consulting and buying houses. Working 50 hours in consulting and self managing a portfolio of houses across 2 different states. What I’ve learned is this:
1) like closing costs certain expenses are fixed. For example an Hvac or roof is roughly the same for a 20k house or 150k house. Cashflow on the other hand is not the same between a 20k house and a 150k house. I can still make money after a new Hvac for the year on the
higher rents where the loss would be huge for the small house. I remember the years that a particular house operated at a loss due to either large expense or vacancy. The feeling sucked to realize you worked for free. With better properties you get higher rent and usually much much less headaches. Besides it sounds like you are trying to achieve financial freedom, do you want to do it with 50 junk houses or 15 solid b class houses?
2) as Darius mention. Cashflow and net worth are different things. There is a reason why that house is 20k. The intrin￼sic value of it and the neighborhood will not allow it to appreciate. even if you cashflow your net worth will likely not see the appreciation. With appreciation comes options. You can trade into bigger and better opportunities. Example the condo I bought for 30k 10 years ago I sold for 150k and used that money to buy 3 single family homes and my cashflow went from $600 a month to $2000 for just that one property.
I’m rooting for you. Good luck
Originally posted by @Kiel Martin :
@Steve Vaughan, omg, now this I thank you for. Now i can say this.... $15k to $40k is just a guideline to start looking. I have estimated that I at the $40k range will be harder to find as a renting solution, and must likely will be as $70k on a more realistic average. I am sure that the the one around $15k will not be a solid structure, but I have no idea. With that being said, I will be searching for the $40k mostly to not spend all my money on my first perchase for unforseen issues. I do not want to have an issue hold up things for too long. And I just read about your 75% landlording average the other day. This was sent to me buy someone in my area. So thank you for solidifying that for me.
I mostly wanted to share and provide a it can be done story because I did it before BP, in 2003. Had BP existed and I asked, I'm sure I would have been dissuaded virtually in addition to physically. Are you f ing nuts was the general consensus when I shared. I stopped sharing pretty quickly.
Probably many differences though with rural and urban c class assets. I was dealing with small town assets that used to be many commercial uses like an old hospital, theatre, doctors office, etc that shifted purpose to survive. They were management and vacancy turn around stories. The structures were solid, just old.
I saw a housing documentary that covered a lot of Baltimore as well as Levittown and it's discriminatory practices. Anyway, in Baltimore you may have opportunities to purchase entire blighted blocks. They profiled a house flipper looking to do that as a form of giving back. @Michaela G did similar in Atlanta. Turns them into 'creative communities'.
All this to say the caveat to my $25k per unit apts were not in the 'hood'. Small town struggles are probably different than urban ones so be careful👍