Lets beat this dead horse....

Houston, Texas
Houston Real Estate Forum
6yFollow

Lets beat this dead horse....

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

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.  

37Reply
132 views

Most Popular Reply

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.

11Reply
See this reply in the discussion

95 Replies

Jump to latestLatest
  • Chris Hopper
    OP
    Investor · Cypress, TX · Member since 2015 · 143 posts · 144 votes
    6y

    @Nick Rutkowski that works great if you're experienced.  My post was geared towards the guys sitting on the sidelines not doing anything because they're still "studying" or listening to podcast, or whatever.  If you've done deals, then great that's always a better way to go.  But if you haven't done any deals and think you know better than someone has, that's a good recipe for failure!  

    0Reply
  • Michael Barry
    League City, TX · Member since 2019 · 37 posts · 17 votes
    6y

    @Chris Hopper I’m glad I came to the same conclusion and didn’t chase this one. 

    0Reply
  • Carlyle Small
    Rental Property Investor · Houston, TX · Member since 2019 · 15 posts · 6 votes
    6y

    @Chris Hopper Great post and I love the way you're lighting a fire under newbies which i still qualify. I bought my personal residence and first rental property in '15 and '16 and have spent the last couple years building a rental arbitrage business. A few months ago i decided to go full steam ahead for BRRRR. I've got some liquid cash plus pre approvals on conventional and hard money loans. My hurdle has been finding good deals. I've got a demanding 7-6 full time job so I've relied on wholesaling companies, Facebook, and a realtor to send me deals. These "deals" seem to have no meat on the bone with inflated ARVs and claimed rehab costs that I think are too low ie 20k est. rehab but needs a roof, HVAC, and has been flooded or has foundation issues. The couple good deals i find I've been outbidded. I know the Houston market has been active but its been eye opening. I haven't got to the point where i need a contractor yet, but i def need to make some connections on that sooner than later. Perhaps I'm just being to conservative and need to dive in since I'm doing BRRRR and I'm in a better position than a flipper. Any suggestions for someone in my position?

    0Reply
  • Chris Hopper
    OP
    Investor · Cypress, TX · Member since 2015 · 143 posts · 144 votes
    6y

    @Carlyle Small yep - look at deals you passed on last year or the year before. You'll kick yourself for passing on it. Someone like yourself with full time job will be hard to market and find your own deals (not impossible, just requires more work and time). Buy from a wholesaler if needed. Pay a little extra now, but if it's cash flowing that's ok. You'll reap the benefits in a few years. Houses are only going to get more expensive! Look at some deals from 2 years ago and run the numbers if you had paid retail back then. You would still have good equity now! You have to think ahead and not get stuck on today's numbers if you're planning on BRRR. Today's numbers don't matter.

    0Reply
  • Vijaianand Thirunageswaram
    Real Estate Broker/Owner & Property Manager · Sugar Land, TX · Member since 2013 · 660 posts · 459 votes
    6y

    @Carlyle Small I am a full time IT Consultant which kinda of helps me to analyze the deals and communicate while I am working but I cannot check on the deals. So I use my wife who is loan officer has my eyes and ears to check them out during weekends. As you know wholesalers always schedule showing in the middle of day to avoid traffic. It has worked for us many times. What @Chris Hopper said was 100% right!! I don't waste my time marketing for deals and compete with other wholesalers who spend 1000's of dollars in each market. Instead I use them as the resource and created relationship and filter out my deals to make it happen if numbers work out. yes, they might be 10k higher than if I would have marketed it but I rather do that way instead of spending $10k and wait to get 1 or 2 deals done. 

    Another thing, people are stuck with BRRRR strategy and they only have 10-20k to start their investment. BRRRR strategy won't work if you don't have full cash to buy from my experience unless the house is livable and can be appraised. It has to be almost ready to move in except few cosmetic changes so you can get loan and make the updates. With wholesalers, you need cash to most part and many properties needs updates so you need to cash to run with it. Keep that in mind.
     

    1Reply
  • Carlyle Small
    Rental Property Investor · Houston, TX · Member since 2019 · 15 posts · 6 votes
    6y

    @Chris Hopper Gotcha and you are absolutely correct. I suppose even if i leave 10 or 15K in a deal it's less than the 20-25% i would have to put down conventionally anyway. I'm committed to being under contract before the end of the month so thanks for the kick in the pants.

    @Vijaianand Thirunageswaram my plan was to buy using hard money then refi and my lender does 75-80% of ARV. If you're not using BRRR how do you avoid running out of capital? I'm single and have good income but i hit the ceiling pretty quick dropping 25% down on conventional investor loans.

    0Reply
  • Troy Egar
    Member since 2019 · 14 posts · 5 votes
    6y

    Hey @Chris Hopper, thanks for starting this thread - it's a great one! You've certainly helped to give me the motivation to start making offers myself. Been making strides on deal flow such as reaching out to wholesalers and running dozens of deals a day on the MLS. I try to take new action every day.

    I'm currently ready to buy and have been making offers but it's very competitive out there - especially for someone like me trying to use traditional financing. Would love to partner on a BRRRR, that would fix my financing problem, just looking for the right partner who's willing to do so! By consistently going to meet-ups and REIAs, I'm sure the time will come very soon.

    Hope you've had a healthy and happy new year. 

    Oh and any advice is always appreciated - thanks!

    0Reply
  • Kevin Chan
    Member since 2019 · 89 posts · 64 votes
    6y

    Assuming a newbie is able to partner up with someone to gain some experience, what type of written contract should the pair obtain?

    0Reply
  • Chris Hopper
    OP
    Investor · Cypress, TX · Member since 2015 · 143 posts · 144 votes
    6y

    @Troy Egar why are you using traditional financing for the purchase? Typically I've seen people want to do that because they let their greed get in the way and think HML rates/fees are too high. They are, but they're also quick! Not many sellers are going to want and wait for a traditional loan, and a lot of houses would t qualify anyways. Take it down quickly with HM or private money and redo it later. Don't miss a deal trying to save an extra 2k or something.

    @Kevin Chan that’s up to the partners.  If you’re both going on the loan I would say a simple partnership agreement laying out the terms.  Doesn’t have to be anything too special.  If you’re too worried about the contract and stuff with your partner, it’s probably the wrong partner!  Most of my partner deals we don’t even do a contract.  I partner with reputable people and with social media today if anyone ever screwed anyone, they would get blasted all over!  Not worth it.

    0Reply
  • Michael Barry
    League City, TX · Member since 2019 · 37 posts · 17 votes
    6y

    @Account Closed read my later posts. 

    0Reply
  • Vijaianand Thirunageswaram
    Real Estate Broker/Owner & Property Manager · Sugar Land, TX · Member since 2013 · 660 posts · 459 votes
    6y

    @Carlyle Small I been using all different kinds of arsnel to build my portfolio and other investors. Let me share about my portfolio. I have bought 3 properties in 2018, 2 from pocket listing via traditional loan using 25% down and 1 from Wholesaler with cash and cashout refi. In 2019, I added 1 more rental and 2 Owner finance to it. Rental was added because that property couldn't be sold as flip or owner finance and rental was my back up plan. We bought that property through private lender and I did cash out refi and able to use built in equity to reduce my out of pocket. 2 owner finance, 1 again private lender and cashout refi and another one full cash. 

    Yes, HML is one of the ways to do BRRRR. But I was fortunate to have some cash from the profit from my flips which I used to buy rentals (similar to HML) and do cash out refinance. I have found and used few Private lenders who are much more easier and less expensive than HML. You are right, you burn all your cash if you continue to do 20-25% if you want to buy multiple properties in same year.

    For investors who only want to built rental portfolio and don't venture out with flips and other investments, BRRRR method using HML and Private lending helps even though it has high cost associated with it. Otherwise you need to plan and save cash to buy 1-2 rentals every year and build your portfolio which is not bad idea to start with as well. It's all up to the investors risk tolerance level.

    1Reply
  • Adam D Rinehart
    Investor · Houston · Member since 2019 · 153 posts · 139 votes
    6y

    @Michael Barry you inadvertently hit on a topic/strategy issue when you spoke about being afraid of a property in the Houston metro area because of a foundation issue. You are not unique in this mindset but I recommend you start rethinking this. Retail buyers run from foundation issues because they want a perfect/near perfect condition home so it's move in ready for their family and don't have a lingering fear that the house will break in half and fall on them suddenly one night while everyone is sleeping. That said, if you want to be an investor I would recommend you use that irrational fear and capitalize on it since most of the time it will limit the competition for purchase. I'm not an experienced investor that's done dozens of homes with foundation problems, but I do have the educational background to know what's going on and how to fix it so that its not a fear of the unknown but a budget issue. Most pier and beam foundation homes can be leveled in a couple of days for less than $4,500 and a concrete pier foundation specialist can do the same for a slab on grade with the price getting up to maybe $7,500 depending on the extent of damage and number of piers needed. But guess what happens next? You now have a house with a repaired foundation that will come with a lifetime transferable warranty to make your buyer/tenant feel nice and safe/secure. So long as the buy price accounts for this work or your ARV and cashflow analysis support the overall rehab with the foundation work, you'll come out ahead every time.

    That said, if you come across a slab on grade home that has greater than 6" of deflection from one side of the house to the other you absolutely need to call a plumber to TV the sanitary mainline to make sure it hasn't been compromised. Typical construction for slab homes is 6", not counting the perimeter footer or grade beams under the interior load bearing walls for two-story homes, so any measurement equal or greater than 6" should trigger an additional checklist in your head of additional due diligence to damage or becomes the go/no-go point on buying or walking on a foundation issue house. FYI, many of the concrete pier companies will come out and do free inspections and quotes.

    0Reply
  • Michael Barry
    League City, TX · Member since 2019 · 37 posts · 17 votes
    6y

    @Adam D Rinehart you are speaking my language, I’m a PE mechanical.  I’d enjoy chatting with you about this topic in detail.  I’m not educated enough at the moment to know how to evaluate the required repairs.  So of course as an engineer I started doing research immediately.  This particular property was pretty gnarly.  Had a prior foundation repair 15 or so years ago but there was what appeared to me to be a ton of work needed to the structure after repair of the foundation (uneven ceilings, wall buckling, broken windows, etc.).  I just didn’t feel comfortable making an offer at this time. I could have bid with a structural engineer assessment as a contingency. 

    0Reply
  • Amber Smith
    Investor · Bakersfield, CA · Member since 2016 · 70 posts · 38 votes
    6y

    @Rohme Williams

    I think you are on the right track and have a healthy amount of delay in you haha. One thing I would highly recommend for your first purchase is to buy in the winter months, preferably December/ Xmas New Years time. That is when I have bought every single one of my properties and the potential for deals is much higher. Summer is the height of the market. Lots of buyers looking to buy & move while kids are out of school & lots of sellers selling for the same reason & getting top dollar. The pool of buyers is much lower in winter Bc most people don’t want to make a huge purchase and move right around the holidays. I have gotten great deals during this time and am actually in escrow for my latest flip that I got for 20% off list price with an offer I submitted 1st day it hit the market. 
    I know that doesn’t fit your timeline & goals, but just something to keep in mind. Good luck! 

    0Reply
  • Rohme Williams
    Accountant · Orcutt, CA (93455) · Member since 2019 · 58 posts · 21 votes
    6y

    @Amber Smith thank you. I appreciate the words of encouragement. Plus, I appreciate the insight of highs and lows when purchasing.

    After talking to @Chris Hopper on this post. I went ahead and put in two offers this past week. Denied on one and waiting to hear back on another. Now I am hooked. After crunching numbers on the two offers I realized I just have to jump in and start swimming, eventually I will be taking the floaties off and doing backstrokes soon enough. Thanks for the response. Have a great day.

    0Reply
  • Chris Hopper
    OP
    Investor · Cypress, TX · Member since 2015 · 143 posts · 144 votes
    6y

    Good job @Rohme Williams, that's what you should be doing!  Can't buy anything without offers.

    0Reply
  • Vijaianand Thirunageswaram
    Real Estate Broker/Owner & Property Manager · Sugar Land, TX · Member since 2013 · 660 posts · 459 votes
    6y

    @Amber Smith You are absolutely right about that. Winter months are the best slow months for investors to hit the market hard and agents are willing to listen and take the deal because there are not many buyers around. 

    0Reply
  • Lola Aboyeji
    Member since 2019 · 9 posts · 1 vote
    6y

    I'm looking to househack first, so I've started looking at properties that would work for me. I have analysis paralysis since most multifamilies in Houston are overpriced while there are hardly any in Sugarland/Katy. 

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free