I have time, How Can I Help???
Hey guys, I'm "momming" for the next few days so I have stepped away from my work and will have the freedom to give a few people who are ready to make moves some personal attention in moving forward with a deal. My goal this weekend is to help at least ONE...no THREE people get an accepted offer on a deal that will work for them.
Please help me achieve my short term goal to help YOU!
I invite any of my other BP'ers who have some time to jump in and also offer help. Can we get three newbies an accepted deal before Monday morning????? Challenge accepted!!!!
To everyone reading following this post. This has been written to encourage people to take action and invest. I totally support and mean that. However, I have been seeing trends in what I called a slow down, then a correction, then recession...and I listened to a podcast today from a woman and man who I think are the brightest minds in reading the REAL data in real estate and they shook my tree.
https://www.realwealthnetwork.com/learn/real-wealt... episode 555
Why this quick change? Because with all other trends commercial investment properties ARE the safest to get into (when purchased correctly like ALL other property). But, it is so much more profitable with the risk diversified amongst hundreds of renters and their diverse set of jobs, the growth of the Millennials staying renters and the Boomers following suit, the lowest home ownership rate in years, and the overwhelming number of foreigners coming in buying investments...at least these investments should be good! Right? Now, its a maybe...
I have two posts that I put in different parts of this site explaining why I'm a little shaken and why I am liquidating some of my portfolio. Except in my blue collar midwest rentals that I bought right and cashflow nicely.
https://www.biggerpockets.com/forums/311/topics/42...
This is not meant to tell you not to invest or to sell everything...its to HAMMER HOME you need to buy smart. Deals can't be for appreciation alone. Beware the sand states, they ebb and flow hardest and fastest in these swings, and be a student of this. Its not easy making money investing alone, you need your network, mentors, advisors, and you TEAM to all be willing and able to see the possibilities. Good luck out there.
@Jill Haselman are you looking for commercial loans? Yes, once you become self employed or live off a portion of your passive income...you are best to move to get commercial loans. Have you tried that? Thank you for investing the time into your question to give me the full picture.
I don't know what you are trying to get loans to do (flip?rent?BRRR?build?) You shouldn't have to go and use hard money if you don't want to.
Tell me more.
@Noelle Yarn I didn't like the numbers when I first read them either. I also think we are in for a real estate correction so, your plan to only live in it a few years and then rent it out scares me. For your first investment/rental I would lookat a duplex that may just need cosmetic updates. That way you can have a little more control over how you exit it. You may live in one side, fix it up, increase its rentable value and move into the other unit. When you do your analysis, even for rentals, I like to use the BRRR calculator...just incase I want to improve the property and take all my cash out by doing a refi. This also gives you a look at different interest rates. ALWAYS LOOK AT THE DCR OR DSCR for any financial analysis...if you can find one that is at 1.25 or above before renovating a cosmetic fix property...you should be sitting well. Thanks for jumping in with such great advice @Patti Robertson. Its great she had some local knowledge.
@Al Phillips, Patti nailed a lot of concerns again. BUT, lets highlight the positives first.
No competition for one beds...that means you can charge the same as local two beds if you update the cosmetics. Don't know your area specifically but are their little things you can do to make your location better. (ex. in some of my properties a bike rack or storage is a simple perk, or adding laundry that isn't coin operated (I don't even carry cash let alone ever have change). What you can bill back to the tenants as their own utilities will more than cover the cost of "free laundry" in house. Are the tenants M2M because you have to follow the lease they signed (if they have).
The value of the property will be impacted by local CAP rate and profitability. (don't buy anything for less than a double digit CAP) Also, I don't know Michigan law but older homes are starting to get blamed for lead poisoning in children. IL and IA have had laws on the books and EPA has every right to come in and test if any child who has as much as PLAYED at your property tests positive.
All things to use in your negotiation. I just had a owner financed property offered to me (5 plex, separate meters except water/sewer/garbage) for $145k and they paid $400-$500. Protect yourself by negotiating all deals with plenty of meat on the bone. You can get a shareable link to your analysis at the bottom left of the finally analysis. Post that here and let's dissect it further.
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@Noelle Yarn - Sounds like it needs very little. Have you looked at HUD? Those are some of the best deal now and owner occupants get a first look before investors. You are going to find that Va Beach is the most competitive city in our market and investors are paying high prices and grabbing the deals as soon as they hit the market.
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Real Estate Agent VA (#0225186139)
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Hello Meghan, this is an awesome way to pay it forward and very kind. Have a wonderful weekend!
Hey Meghan,
I'm still very new to real estate investing am am currently putting together some ideas on how to act fast in my area. I have a close personal friend who is interested in partnering with me on what will be the first deal for both of us. My question for you is, what is, in your opinion, the best niche and strategy for us to start out with? We are in the Nashville area in what seems to be a pretty hot market and both interested in long term buy and hold, but would we be better off holding out to buy something until the market declines? We are also open to other strategies. That is just what we hope to accomplish in the long term. Any information is greatly appreciated. Thank you in advance for any input you may have.
Thanks,
Matt
@Yolanda Armstrong Hi Yolanda, I'm new to the site as well, just started today! I saw that you can add your picture by going to settings-->change profile picture. Hope this helps!
https://www.biggerpockets.com/calculators/shared/694070/e7ef1b7b-8cfc-471d-b450-3ba5d7b1224f
Hi Meghan,
I think I have attached the link to my analysis on the property. Also, I discovered that two of the five units are 2 BR units but the owner has not raised the rents in the units because the tenants have been there for over ten year. I just see a huge value added possibility here with low rents, separated utilities that are not billed to the tenants, and an exclusive market.
OK, I think I have the link copied correctly this time.
https://www.biggerpockets.com/buy_and_hold_results/30063
Thanks Katien Rodriguez. I just couldn't get it, so I will just be invisible for a while. It may be a big deal to some, but what I came on this site for, I am getting; and that's knowledge and to talk to others who have my same desire. I look forward to learning much if the picture never goes up. Thanks so much though for reaching out and WELCOME.
@Patti Robertson @Meghan McCallum
How would you guys recommend I go about making offers on properties? Ive heard 60% of ARV minus repair cost. What would have been a better offer on that short sale property?
Yes Patti I will keep looking on hud.gov and sites like homepath.
Also can I purchase a home by auction using conventional financing?
Originally posted by @Patti Robertson:
@Noelle Yarn - Inspections cost time and money. Short sales offers have a high percentage of rejections. I would never pay for an inspection without a bank approval.
Kempsville Lakes did experience significant flooding. See this news story. http://wtkr.com/2016/10/10/flooding-caused-by-hurricane-matthew-still-a-problem-in-kempsville
What's the condition? What work needs to be done? Unless it is close to perfect, it's not a fit for an investment property, in my opinion. What formula are you using to decide if something meets your rental criteria?
Thank you Patti!! I read the article. It is on Marlwood.
@Matthew A. what your strategy and your specific property type to focus on is as different as you are. What do I mean by that...
There are specific personality traits that will naturally make you better at one than the other. Focus on what drives you and your strengths...depending on how new you are you may have no idea.
I'm currently working on a program that gives you a personality test for real estate investors then makes a suggestion of what property class and investment strategy may work best for you. You should look at how you feel about risk,what your resources are, and why you want to be an investor in the first place.
Investing is very locality based. You can make money ANYWHERE as an investor.
What are you drawn to doing?
@Noelle Yarn, my best advice is to work your numbers and keep making offers. Sometimes your best offers are the ones you didn't get. I will also often look on the MLS and find the properties that have been listed there the longest. I email my agent a list of 3-5 properties and make "love it" offers on each of them.
Every property is worth something...when you remove emotions and work everything by the numbers a like it price is one where its an average deal and may make $100/unit....hence...it works. A "love it" price is one that despite not really liking the property (except its location) you would brag to everyone you know that you got it, they will look at you crazy for buying it, but your numbers have told you you just stole it. If you even have someone comeback negotiating near your number you have a winner.
I have done things on almost 100 properties in the past year. If you get one this way you are ahead of the game. The key is to find a real estate agent who is also an investor and is comfortable presenting low offers that could possibly "offend" the seller. You aren't doing it to be cheap, or mean, its just how the numbers turn out. I have face to face told many people I may not be the best seller, I'm just the best seller if you want out easy and fast. Other wise you could likely spend '$X and X amount of time freshening it up can becoming code compliant and then you may make a few thousand more.
I sometimes get the contract.
I have been looking at your deal. Do you have $ to perform some cosmetic updates to these units? Its GREAT that two are two beds.
I would ask for the gas bill and include that into your analysis also. You have to value the property for its current profits. I think its great you can get owner financing! But, you should take all the current costs to the seller and explain why their price is too high.
If you got rid of a tenant...how easily do you think you could fill it? I would look for a property manager in the area and start the interviews even of you didn't plan on using one right away. Once you had a vacancy, showing the unit would be a bear. I would see if I could get it for $125k because you risk turn over telling the renters that they have to pay their own utilities. I have had experience getting them to take them over, but they really put up a fight. Would current rents be this high if they had to pay their own utilities? Are the rents comparable to other rentals that don't include utilities?
https://www.biggerpockets.com/buy_and_hold_results/300631
@Meghan McCallum, I have updated the calculator with the purchase pricing (assuming the seller will take it). I have also added the gas bill (ave is $200/mo., some months $70 and some months $300). I also checked surrounding apartment rentals. There is nothing available for over 50 miles in all directions. Those that are available outside of this area are in the same price range and all include the utilities. With that in mind, I may not be able to have the tenants pay all of the utilities...maybe just the gas or electric. I would always manage the property myself as I have a management company now managing over 200 units. I have also changed the calculator by using my own money for the down payment instead of using the seller 2nd that is available. This should entice the seller to accept the lower amount as he is getting more money at closing with no risk of default on a 2nd mortgage. Thoughts??
That share didn't work. Try copy and pasting the URL.
@Al Phillips If i were to buy it I would approach the tenants and say instead of raising rent you will be having them move the gas bill into their names. You can then go in and put LED bulbs in and low flow faucets to save on what is likely outlandish bills.
Then the next year I would pass off the sewer and water on them as a ratio based bill but in exchange take out the coin-op laundry and tell them they are getting free laundry (but make them sign an agreement that they will not do other people's laundry, or let their friends do so. Then they will love you (despite the next bill they are paying for...no one like having to have quarters). Then the third year...its time they took over their own electric bills. You can ease them into it because you had previously installed the LEDs and you can show them what a dramatic reduction in cost you have already provided them. Of course you will likely have turned over a couple units by then making it even easier. Taking a survey of the residents may also key you in on somethings they would like or fix...doing this upfront before raising costs of things help keep happy tenants.
Even buying the property something like a picnic table is seen as a very positive gesture...look for less expensive ways to get the people living there a value add.
Your profitability (NOI) increase that your building sees has a 10-12x value add to the property itself.
So, save $2000 a year on expenses and raise rents $2100 annually ($50 for the two beds and $25 one beds) and the property is now worth about $45k more.
Do you know what the age of all the cap ex is?
https://www.biggerpockets.com/buy_and_hold_results/300631
Thank you for your advise. I have tried again to attach the financial analysis. I like the idea of doing the property improvements and then increasing rates. The picnic table is a good one as there is a fenced back yard with nothing in it.
Sorry, I am not familiar with the cap ex. I am researching that now!
Ex. roof, mechanicals, house cladding...etc...
@Meghan McCallum My goal is to do some residential and multi-family flips (duplex, tri, quad). I actually hadn't considered commercial lending, but love the idea. Can you point me in the right direction?
@Jill Haselman set appointments with 5 small banks and credit unions' commercial loan officers (total, not each) they tend to have better service AND terms. (Yikes, today I got 5.993% financing on a 20 unit :( ) They can typically close faster, they get to know YOU and I can make a phone call to my loan officer and she can close me in 26 days!!!!
One of my best allies.
@Meghan McCallum thanks so much! So you don't recommend hard money simply because of the high rates? Even for a flip?
@Jill Haselman I think you present a situation where yo shouldn't need hard money.
My bank will allow me to put 25% down of the purchase cost, give me an interest only loan on the cost of the house and the rehab. It costs me NO points and the % is almost half. I don't pay any interest on the construction loan until I take a distribution to pay my contractors. Some banks may not fund flips...even the fastest ones take at least 2x long, and the bank (if you can find one to participate) MUST get paid back monthly.
So, the hard money has its advantages AND disadvantages. If its the only way for someone to make money then do it. But, I REALLY like my bank.