Lets beat this dead horse....

Vijaianand Thirunageswaram

OP

Investor · Cypress, TX · Member since 2015 · 143 posts · 144 votes

6y

@Anita Fulton, nobody got cold feet. I don't need a new partner, it was for the inexperienced who should be looking. If you're ready to go, then go find a deal and you can find a partner. Bring it to the group or if you already know someone experienced. I'm here to help anyone who wants/needs it....and yes, I have plenty of deals under my belt :)

1 Reply

Real Estate Broker/Owner & Property Manager · Sugar Land, TX · Member since 2013 · 660 posts · 459 votes

6y

@Chris Hopper You hit the nail to the core. Let me hit it much more harder.

I see this same problem with many of new investors. I usually don't meet with investors for coffee or lunch unless they are really serious. Even then, I don't hear back from them after few emails and follow ups. They cry day and night about not finding deals. Well, there are deals out there if you look close. They worry about losing, taking risk and whether they making right decision.

First, we are all humans. We are prone to make mistakes whether you have 100 deals on your belt or not. No one will be perfect. I still miss my numbers and predictions like many other veterans. I don't want to sound like preacher but at same time new investors should know that we all have crossed the bridge in the past and continue to weather the storm when it comes through. If we can do it, You can do it. Just need Patience, Persistence and Perseverance - 3 P's.

It's new year and new decade!! (whether some agree or not).

Let's go people, get started on your Real estate/financial goal!!!

TAKE ACTION - Whether you partner up with someone you are comfortable or you jump on the deal. DO IT NOW otherwise it will be too late.

6 Reply

Brendan Flannery

Rental Property Investor · League City, TX · Member since 2011 · 59 posts · 23 votes

6y

@Chris Hopper great post. I can relate. Only took me 5 years to jump in and last year I completed 3 BRRRRs, 2 single family and 1 triplex. 2020 is going to be an even better year.

8 Reply

League City, TX · Member since 2019 · 37 posts · 17 votes

6y

Speaking of fears as a newbie - yes lots of them! I really like the idea of partnering with an investor experienced in the areas and types of deals I’m interested in. I’ve never partnered with someone on a business deal so that is also something on my mind. I’m looking forward to meeting other investors and building rapport. The founder of the company I work at for my day job valued partnerships and win-win deals for all parties and he built a multi billion dollar business over his lifetime based on that principle.

At the moment I’m working on a draft business plan and it is really helping me zero in on what I’m looking for, set up some rules, guidelines, exit strategies and timeframes. It’s helping me identify and study up on areas that I don’t have at least a basic understanding of. Of course the plan will change over time but it forces me to set up a framework in which to evaluate deals as opposed to finding a property and winging the analysis.

I’ve got my financial documents ready to go for lending pre-approvals so once I have my business plan in good shape, I’ll be visiting brokers and bankers in the area.

I’m also building connections with RE agents, looking for property management companies, and contractors.

As you said, all the reading and studying in the world won’t be enough. It still takes real-world experience so getting that first deal I feel like will be the hardest and most important one.

Mike Dymski

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes

6y

Fear and comfort are powerful and keep us from trying new things.

11 Reply

Cody L.

Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes

6y

Originally posted by @Chris Hopper:

The new year has arrived, so let's discuss one of the dead horse topic I see here time & time & time & time again -

I'M DOING MY RESEARCH AND HOPE TO PURCHASE SOMETHING WITHIN THE NEXT YEAR (OR TWO, OR 6 MOS, ETC).

For those newbies who are just getting started, great! Glad you're getting interested. What is it exactly that you are looking at, researching, team building, getting your ducks in a row, etc. What is holding you back from buying something right now? I've seen folks be presented with 100% true deals and pass on them. Yet they turn around and make a post here or on FB asking for deals? One of the contractors I use has been asking for deals for over 2 years now and still hasn't bought anything. I've presented him with absolute deals just to get him started - even offering to partner just for the security factor for him (buy the way, I've bought every deal I sent him).

So I'm wondering rather than spending so much time putting all the other stuff mentioned above into play, why not focus on what's truly holding you back? I believe one of the biggest (probably THE biggest) factors is people are just scared. And that's ok, and is the point I'm trying to get to. So why not just mention that and partner up on the first (or few) deals until you get comfortable, until you find good contractors, until you know how to refi out a rental? You can spend countless hours watching podcasts, reading books, going to events, etc and spend 6 mos "learning" before buying your first deal ------ only to realize you're still going to make all the mistakes! You might overpay because you don't know the market or submarket, got screwed by a contractor, didn't estimate repairs correctly, unexpected delays or repairs you weren't aware of, and a number of other issues that can and WILL pop up. Now, not to say any of these can't happen with an experienced partner, but the risk will definitely be minimized a great deal.

So rather than waiting 6 mos to buy 1 deal yourself, wouldn't it make more sense to partner up with someone RIGHT NOW and start learning hands on? 1/2 of something is better than 100% of nothing. 6 mos from now you could have 1-3 deals under your belt and now ready to run 100% on your own.

If you can do basic math, you're ready to go - I can buy it for "x" amount and sell it for "y" amount with "z" amount of repairs....Is there a profit there that I'm happy? If so, it's a deal! Everything in between (including the "z" number) isn't something you can read or study your way into. You need the real world experience to be successful. Don't let your ego or greed stop you from partnering with experience.

Now, don't just jump into a partnership with anyone! Ask for proof. Have them show you stuff they've bought, any rehabs in process or houses on the market, etc. There's plenty of guys with good names out there who can help. If they can't show you proof of experience, move on quickly.

Happy new year everyone and good luck in your journey.....just don't take forever getting started, that drives me crazy! Buy something now.

lol this post is beyond accurate. It should just be the front of biggerpockets.com and left there with no forum posts.

I used to help as many people as I could via "can I take you to coffee' and people calling, etc. Due to time constraints I had to chose to either:

1) Charge some nominal fee for my time (to at least weed out people who were not serious) or,

2) Tell people I'd only help them IF they have something under contract

Since I don't feel like charging people to help them (since I was always helped for free), I reply back that I'll spend time with them after they go under contract with something. It's been crickets since.

People are scared to move forward. No matter how 'slam dunk' the deal is, SOMETHING will be bad about it ("I don't know, the AC looks kinda old"). So yeah, if you see people who have been looking for years, they're not buyers. They never will be. And that's 100% OKAY. This business isn't for everyone. No business is.

7 Reply

Lunenburg, MA · Member since 2017 · 11 posts · 4 votes

6y

I’ve only been here a couple days so I don’t have experience with the type of posts OP wrote about. I may fall under the umbrella of this thread or I may not. But I have do RE as a 3-5 year plan (outside the “forever home” I bought in ‘18). I also have no issue with posters who haven’t pulled the trigger but have longer term aspirations.

Personally without much financial guidance in my early career I started a 401k a couple years ago in my late 20s which is the main driver of my long term investing strategy. It's funded automatically and almost completely passive in nature which is why I'll keep it as my lead strategy. I recently began to understand how RE fits into a successful long term investing strategy and why. I strongly believe I'll pursue it. First I need to understand the fundamentals better specifically around analyzing deals and the tendencies that lead to negative results. More importantly I want to have a solid financial foundation for my young family before using capital in RE which means achieving goals in a set of criteria I have for myself. When that criteria is satisfied I'll be able to better focus on using capital required for REI and that focus I'm confident is the difference between flaming out and succeeding.

League City, TX · Member since 2019 · 37 posts · 17 votes

6y

Ok here is a real world example of something I'm interested in. 2315 Colonial Court South, League City, just listed on MLS. Listed at $120k, I'd guess ARV around $175k give or take. I know this area well And I live pretty close. Good school district, convenient to the big employment centers in the area, well kept neighborhood for the most part and a low(ish) tax rate for the area of 2.375%. After rehab, would rent somewhere around $1650 for buy-and-hold. I get an NOI of around $650/month - I included 8% vacancy, 10% maintenance, 5% capex, $4k/yr taxes, 10% PM fee (of gross rent), $1750/yr insurance and a small HOA $150/yr.

So before I even analyze purchase price, rehab and finance costs, I know $650/month NOI is basically cash flow neutral to negative after considering financing but the equity stake looks great to me. Let's assume for sake of argument you put it under contract for $110k and everything from inspection is cosmetic, you may put $15k into rehab and be all in for $125k plus any financing costs. At an ARV of 175k, it looks like a potentially sweet deal either as a flip or as an equity play.

How far off the mark am I? I’m writing this on my phone so I couldn’t include the detailed analysis.

Final note - I’ve listened to a quite a few podcasts and I’m learning some investors do not want excessive cash flow for tax purposes. In my situation, I don’t necessarily want more taxable income right now, I want equity for future 1031 exchanges into cash flowing properties for income in early retirement.

League City, TX · Member since 2019 · 37 posts · 17 votes

6y

@Adam Saball I’m in a similar position as you. I have a young family and we Have been utilizing the 401k to the extent that we can stuff pre-tax dollars into it. I am confident we will be in a lower tax bracket in retirement so we fully enjoy the ~30% tax deduction up front on a sizable chunk of income. Our employers match portions of the contributions so that’s also awesome. We also save a lot into a non-retirement trading account where I generally follow the Boglehead philosophy. With the market’s incredible gains over the past year, I realize I need to not only diversify in the stock market, but diversify into assets not directly tracking the market. Hence here I am trying to learn real estate investment.

Ethan G.

Attorney · Katy, TX · Member since 2014 · 397 posts · 215 votes

6y

That could be a good deal. Any idea how distressed they are and how much cheaper you can get it for?

Originally posted by @Michael Barry:

Ok here is a real world example of something I'm interested in. 2315 Colonial Court South, League City, just listed on MLS. Listed at $120k, I'd guess ARV around $175k give or take. I know this area well And I live pretty close. Good school district, convenient to the big employment centers in the area, well kept neighborhood for the most part and a low(ish) tax rate for the area of 2.375%. After rehab, would rent somewhere around $1650 for buy-and-hold. I get an NOI of around $650/month - I included 8% vacancy, 10% maintenance, 5% capex, $4k/yr taxes, 10% PM fee (of gross rent), $1750/yr insurance and a small HOA $150/yr.

So before I even analyze purchase price, rehab and finance costs, I know $650/month NOI is basically cash flow neutral to negative after considering financing but the equity stake looks great to me. Let's assume for sake of argument you put it under contract for $110k and everything from inspection is cosmetic, you may put $15k into rehab and be all in for $125k plus any financing costs. At an ARV of 175k, it looks like a potentially sweet deal either as a flip or as an equity play.

How far off the mark am I? I’m writing this on my phone so I couldn’t include the detailed analysis.

Final note - I’ve listened to a quite a few podcasts and I’m learning some investors do not want excessive cash flow for tax purposes. In my situation, I don’t necessarily want more taxable income right now, I want equity for future 1031 exchanges into cash flowing properties for income in early retirement.

Kulton Jackson

New to Real Estate · Auburn, AL · Member since 2019 · 8 posts · 5 votes

6y

@Chris Hopper have you ever seen somebody partner up on a VA loan house hack deal?

Cody L.

Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes

6y

Originally posted by @Michael Barry:

Ok here is a real world example of something I'm interested in. 2315 Colonial Court South, League City, just listed on MLS. Listed at $120k, I'd guess ARV around $175k give or take. I know this area well And I live pretty close. Good school district, convenient to the big employment centers in the area, well kept neighborhood for the most part and a low(ish) tax rate for the area of 2.375%. After rehab, would rent somewhere around $1650 for buy-and-hold. I get an NOI of around $650/month - I included 8% vacancy, 10% maintenance, 5% capex, $4k/yr taxes, 10% PM fee (of gross rent), $1750/yr insurance and a small HOA $150/yr.

So before I even analyze purchase price, rehab and finance costs, I know $650/month NOI is basically cash flow neutral to negative after considering financing but the equity stake looks great to me. Let's assume for sake of argument you put it under contract for $110k and everything from inspection is cosmetic, you may put $15k into rehab and be all in for $125k plus any financing costs. At an ARV of 175k, it looks like a potentially sweet deal either as a flip or as an equity play.

How far off the mark am I? I’m writing this on my phone so I couldn’t include the detailed analysis.

Final note - I’ve listened to a quite a few podcasts and I’m learning some investors do not want excessive cash flow for tax purposes. In my situation, I don’t necessarily want more taxable income right now, I want equity for future 1031 exchanges into cash flowing properties for income in early retirement.

If it's worth $175k ARV and you can buy+rehab for $125k, and you're not concerned with cash flow, why not BRRR it? 80% of $175k is $140k. You could buy it, fix it, refinance, have $0 left in the property of your own cash, AND have a cash flow property (though not a lot -- noting that your projections were conservative).

Imagine having 100,000 cash flow neutral properties all over. At $150k each that's $15b in RE. Even if there is no cash flow, you have $25 million a month of appreciation assuming 2%/year. And you have hundreds of millions in equity gain from debt reduction

Obviously you're not going to buy, much less even find, 100,000 properties. But if you can find ones that you can get at a price that allows you to refi your cash out, then cash no longer becomes an issue. Finding deals is the issue. So maybe you can't get 100,000 but can you get 1000 of them? 100? I bet the answer is "yes"

4 Reply

Lunenburg, MA · Member since 2017 · 11 posts · 4 votes

6y

@Michael Barry I don't see a lot of 401k talk on here yet (again - the new guy...) so it's nice to see I'm not the only one picking this up after starting a traditional career, family etc.... If this isn't the appropriate outlet to temporarily veer the conversation I apologize, but you suggested use of a Traditional 401k for tax benefits because you will be in a lower bracket post retirement. How come you're confident about that? I'm funding a Roth 401k because I'm unsure for myself so I'm curious about your criteria.

Steering back to RE, these 401k funds are what I'd be using to save for my first REI if I started today and with a lot of fundamental learning ahead I don't think directing that capital to another investment vehicle for the purpose of getting into REI in 3-5 years makes sense right now.

OP

Investor · Cypress, TX · Member since 2015 · 143 posts · 144 votes

6y

@Michael Barry, exactly what @Cody L. said. If you can get in a property with $0 to little money down, then take it all day. For one, your PM fee is high and 10% maintenance and 5% capex are high. I always budget in fixing EVERYTHING that may need fixing in the next couple of years. Then it's all brand new so you can lower those maintenance fees a bit. Regardless, I would say that's a deal for a beginner. Not much cash flow (but it will be positive with correct fees in place), but good equity and good appreciation. Would probably be one you'd only hold for 3-5 years and get rid of it. Put the 70-80K equity in your pocket and use that to buy 15 more. I say pull the trigger.

League City, TX · Member since 2019 · 37 posts · 17 votes

6y

@Ethan G. No I don’t have more information. See, this is how much of a newbie I am, I don’t have a RE agent yet. I can reach out directly to the listing agent for details but I feel like an agent would be able to extract better intel.

Rohme Williams

Accountant · Orcutt, CA (93455) · Member since 2019 · 58 posts · 21 votes

6y

I enjoyed reading the opening post. I fall in the category as a "newbie" but I am definitely not scared to jump in. I have two businesses and I understand the highs and lows. I have been reading, studying, and watching all about REI the past 4 months and feel as though it's time to jump in and test the fires.

2020 Goals:

*Have at least my FIRST REI by June 30, 2020 by 5pm

*Have two more by the end of the 2020 year December 31 by 5pm

Im willing to give up personal time, money and friends who don't fit into my timeline goal.

As we speak Iam in the process of getting finances secured and figuring out the right type of loan to pursue my deals. Im hungry and I am definitely not AFRAID to fail. The only thing I am afraid of is: REGRET. I won't die with regret.

Thank you for this post. It put a little more pep in my step today.

Cheers for a great 2020

3 Reply

OP

Investor · Cypress, TX · Member since 2015 · 143 posts · 144 votes

6y

@Adam Saball yes, you fit into this post! I see all the classic buzz words - you want analyze tendencies, understanding fundamentals, long term plan, etc. All you need is a basic understanding of math and then it's time to pull the trigger. Again, partnering up with someone will get you further down the road than any podcast, book, social event, etc. YOU CANNOT STUDY YOUR WAY OUT OF MISTAKES. Period. You will make them, everyone does.

Don't buy into the long term plan you mentioned. Real estate is a right now plan. Buy as much as you can right now, and then your long term plan is to enjoy the fruits of your labor with positive cash flow and huge equity. You won't need the 9-5 anymore. Why wait?

2 things can fix ANY real estate deal - time and/or money. It's as simple as that. You mess up the budget, you pay more money and get it fixed. If it was supposed to be a flip and it's busted, then keep it as a rental until the right time to sell or take a smaller profit and learn. As a beginner you should be looking for 150k and under properties, so they should easily cash flow as a rental if you get stuck with it. Beginners shouldn't be looking at 250K and up houses (in the Houston market anyways).

OP

Investor · Cypress, TX · Member since 2015 · 143 posts · 144 votes

6y

@Michael Barry go see the house and see what kind of work it needs. Take a contractor with you if needed. But you should be able to eyeball repairs. Be proactive. Then buy it.

@Rohme Williams why is your goal June to buy first house? This is what I'm talking about. You need to buy something this month. Your worried about getting loan info and don't even have a property. That stuff can change at any time. So whatever loan product you're looking at now, when you actually do have a house under contract 4 mos from now it may be completely different. The absolute first thing you need to be worrying about is finding a house. Everything else is easy. Like Cody mentioned, you won't get much help until you have something under contract. When you do, plenty of people will walk you through it and help. Your goal needs to be have a house under contract this month or next, not June. You've already wasted 4 months watching podcast that quite honestly probably won't help you one bit.

Get a house under contract. Between then and closing is when you can get all your numbers together with your contractor to be set to go once you close. If you're unsure, bring it to a partner. That's the best way to learn on your first couple of deals.

League City, TX · Member since 2019 · 37 posts · 17 votes

6y

@Adam Saball basically in retirement, my taxes will be on my investment net profits and my 401k income. We save somewhere around 40-50% of our income so in theory, we will only need at most half of what we make now in retirement assuming we have a good nest egg. Kids will be grown and out of our pockets (hopefully) so it’s just my wife and I sitting on our lanai in a paid off house in Hawaii, traveling a few months each year...or something like that. So I just expect our living expenses to be much lower so our income and tax bracket will reflect that. Of course, tax brackets can change. Roth’s are great hedges for tax uncertainty but I prefer to save 30% on taxes now and let the magic of tax-deferred compound interest work to my favor.

@Cody L. and @Chris Hopper your advice mirrors my thought process on the equity stake and neutral cash flow. I would be perfectly happy with 20-30% equity and no out of pocket money at the end of the deal for my first deal.

Lunenburg, MA · Member since 2017 · 11 posts · 4 votes

6y

@Chris Hopper Good to know! To me a meaningful difference exists between fear and strategy. Wouldn't you recommend taking time to learn how to analyze deals and understand tendencies that lead to failure before investing the first time versus buying into a project one knows noting about? In a way saying no is suggesting someone should buy a property before they know they want to be an investor and before they know anything about it because mistakes can be corrected down the road. A period of research and understanding is simply due diligence IMO.

That said, I wouldn't waste anybody's valuable time looking for specific help until I was willing to dive in and financially ready to do so. Personally I'm not starting this journey by hacking and I don't want a partner, at least right now. I'd rather build up the capital on my own over the next 3-5 years and look for deals after I've taken the time to understand how to look for them.

Rohme Williams

Accountant · Orcutt, CA (93455) · Member since 2019 · 58 posts · 21 votes

6y

@Chris Hopper. I don't want to jump "too soon", June 30 2020 is a Goal. I still have a few things to learn so that when I negotiate I feel comfortable. Same way I look at my current business. Im not just going to go and buy equipment unless I know that it will be effeciently used to make my company a profit. However, If I see something and have done all the math and it makes sense next week I will definitely get it under contract and then find the money somehow. Heck I have even considered quitting my day job and crossing the river and burning the boat so I have no other choice but to succeed. Reading is knowledge to me. I guess I need to go out and find some deals. Thanks for calling me out..... I need it.

By the way. I just closed on my house at the end of November (primary). So, I have jumped. Just not in an investment property just yet.

OP

Investor · Cypress, TX · Member since 2015 · 143 posts · 144 votes

6y

@Adam Saball due diligence one thing, fear and analysis paralysis is another. Tendencies that lead to failure in real estate is not knowing the market, paying too much, under estimating the rehab. That's about it. All of these can be learned very quickly. To your point, what could you possibly learn over the next 3 years that you can't learn within the next 7-30 days? If it's about the capital, it doesn't make sense either. This goes back to 50% of something is better than 100% of nothing.

Finding out whether you want to be in real estate or not is one thing. But I can absolutely tell you it doesn't take 3 years of due diligence and learning to do a real estate deal. That's just ego wanting to think you'll just do it on your own. If that's the case, don't get a partner, pay for a mentor. Then you can keep all the proceeds.

This may have came across brash and that's not the intention at all. I've just never understood what new guys are expecting to learn in 3 years that can't be learned in 30 days.

OP

Investor · Cypress, TX · Member since 2015 · 143 posts · 144 votes

6y

@Rohme Williams, you say you still have a few things to learn -- what are they? What are you not comfortable with? This is exactly what this post was meant to bring out? When are you planning on learning it? What steps have you taken to learn it? No need to quit your job (unless you just want to!). Get a couple under your belt first.

If someone brought you a deal right now with 85K purchase price, 25K rehab, ARV was 145K, would you buy it? If not why? You say you wouldn't buy equipment without knowing it will make you money, this is making you money so would you do it?

Lunenburg, MA · Member since 2017 · 11 posts · 4 votes

6y

@Chris Hopper Not brash at all, I enjoy and appreciate the directness. Will it take 3 years to learn fundamentals, of course not. I agree with you. The 3 year metric allows me to build the capital necessary to approach REI in the way I want to do it, if I decide I want to do it at all. There's a lot of nuance to consider. In your scenario REI is someone's top priority but they're too afraid to begin. Analysis paralysis is real, I agree there too. In my case REI is potentially a second arm of my investing strategy. I travel a lot for my career so I choose to max out other vehicles that are more passive and automated first. Before I take on a partner or buy on my own I want to know I'm invested and I want to bring knowledge and capital to the table. I'm okay with being patient so that I can offer those elements to a partnership or to have for diving in on my own.