All Forum Posts by: Adam K.

Originally posted by @JPaul Mills:

Dont listen to this man. Unlicensed middleman? For real. I think that is kinda harsh for nocking on the wholesaler that is out there busting his/her butt off to get deals under contract to send to you the investor so that you can get great properties that not every dick and Jane has their eyes on. Then again if ou enjoy the auction block and putting huge down payments in the game and having to buy it sight unseen within 24hr then by all mean have at it. But knocking is hussleing wholesalers that's just bad joo joo my friend. 

I am not knocking anyone, you may be a little too sensitive and not focusing on the point of the post. I can repost and leave that space blank so you can insert a different term but it is what it is. Sorry if it upset you.

 A wholesaler is a unlicensed middleman and a real estate agent is a licensed middleman. Is that better? Both can get the job done but experience is what is important.

I'm not sure what you mean by the auction block and huge down payments. I purchased 3 properties from wholesalers, walked the property and didn't put down "huge" down payments. Huge is relative to the return.

Focusing her effort on more obtainable goals when just starting out will probably yield her better results. Maybe its not said enough but wholesaling is hard work. Wholesaling an apartment complex?  Negotiating a finders fee with the cash buyer could be a option too.

Originally posted by @Max Shepherdson:

So if you had a $300k median home value for a certain city, then most people would only go down to $150k areas as generally they find any lower than that to be war zones.

I would really like to know what your version of a war zone is.

Originally posted by @Chris Martin:

Play around... pick a crime, any crime... and see if your bias is statistically correct or not;)

And then go to the middle and higher end areas to look at the crime. Look at violent crimes and look at theft. You might be surprised. What the maps don't show is white collar crimes. That would be a fun map to look at!

First off don't base any decision on general numbers of a city. Every neighborhood and section has its own numbers and any property can be a good investment if purchased and managed properly.  My investments have been in working class neighborhoods valued way below the city median price range and the coc returns have not been less than 30% annually. The gains on sale have been 300% plus.

Low income and higher crime neighborhoods take experience and skills to work in.  Lower income and home values don't always equal proportionately higher crime. I don't have any investments or conduct any real estate activities in these types of neighborhoods but I do have 15 years experience as a Firefighter/EMT in these neighborhoods. People ask why are these buildings even here and why doesn't they city tear them down? Because people live there and they make money that's why.

 If you want to invest in these areas you have to see past your personal life, preferences and preconceived notions of what makes a neighborhood "rough".  Customs, courtesies and facts of life will probably be drastically different than what most people are used to.  Teachers, social workers, cops, firemen, and business owners that work in low income areas know what they are getting into and why they are there. If you don't know what you are getting into or spent any time in the area then you will probably fail. Patience and understanding are probably the biggest traits a person needs to do any kind of work in a low income area.

If someone owns a vacant multi family property your yellow letter will most likely get thrown in the recycle bin with the hundreds of other junk mail pieces. Start a LLC, register a business and buy a few rental properties and your mail box starts filling up with junk faster than you can empty it.

Before looking for the owner find out why they are vacant. The City may have already condemned them for demolition,  they may be bank owned, probate, lawsuits, asbestos, interior fire damage not visible from the outside, etc.

Once you identify and actually contact the owner you will be deceiving them by proceeding as if you are purchasing for yourself.  If the owner is ok with working with an unlicensed middleman for selling their non performing commercial asset you then have to evaluate the value of the property if your going to make any kind of offer. A apartment complex is valued by the income it produces so you will need to research market rents, rehab, expenses, taxes and the 100s of other factors that go into purchasing a apartment complex.

Every owner of commercial property I have spoken with, even if they are out of state owners who inherited a dump, they know the value of property. They usually have a inflated perception of the value of the property. Not to discourage you or say it cant be done but if I were you I would focus my efforts on single family properties first for wholesaling or get a real estate license. You can do it online in a few weeks for less than $1000.

Not over doing the rehab will maximize your returns. Salvaging what is still functional is how you accomplish that. I don't know your market area but from the pictures the kitchen counters look decent enough. If the cabinet doors are in good shape just paint them, replace the sink and piping, get a new dishwasher, stove and vent hood and that's done. You can order new cabinet doors online if needed and keep the rest as is.  If your area is a higher end than you may need to put in new counters or granite and all the other higher end stuff.

*The connection coming out of the wall at the floor where the stove goes doesn't look right.

What could really hurt you is day labors with no experience or supervision swinging the sledge hammer freely. Taking a home run swing at the sink and piping can break off the pipe past the elbow inside the wall. If that happens your cost of a new sink install just multiplied. The day labor assistants of the granite installer recently did that for 3 of my sinks. A quick pipe connection then turned into cutting sheetrock, cutting more pipe, adding new fittings and took 3 times as long. Whether you pay the plumber by the job, by the hour or do it yourself your cost and completion time has increased.

Same goes for the bathroom. If the tub and toilet are still good damaging the piping and connections in that room will blow your rehab budget. The tile surround needs replacing and again being to aggressive with the sledge creates more work.

Strategic demolition and systematic deconstruction is the goal if your not a TV show with unlimited rehab funds.

Decent quality tile that is Correctly installed in the living and wet areas will hold up for years. $0.59 a sq/ft tile that is thrown in by day laborers will be nothing but problems. The skilled tradesmen are fading away because Jack of all trades are undercutting them.

Tile over the vinyl is always a big debate so that is an area for demo savings if the conditions are right.

Tenant Proof? Maybe Tenant Durable but nothing is human proof unless you built a caveman style house made of concrete with no utilities. Screening, Qualifying, Investigating, and Verifying your tenants is what will keep your property in shape. Do the same for your contractors and you minimize the chance for problems. Having a strong lease that details and requires the tenants to act like adults minimizes your repair costs and phone calls.

MLS information is only as good as the agent entering it. There is several phases of the foreclosure process and the MLS may not accurately reflect what stage of the process that property is in. Some websites list "pre-foreclosure" which may just be a lazy investor that was on vacation and forgot to pay his non escrow county tax bill and its now 1 month delinquent. The algorithms for the website search engine may turn up all delinquent taxes as "pre-foreclosure". Unpaid taxes will eventually lead to a foreclosure but a late payment doesn't.

I purchased 3 properties from wholesalers before becoming licensed and will do it again if they have a good deal. I have no problem with wholesalers if they know what they are doing. Unfortunately many are only internet and podcast educated with no experience and do nothing but waste a distressed homeowners time and deepen their anxiety and apprehension for anything real estate related. Check out my recent post on Professionals, Wholesalers and Professional Wholesalers.

Some lenders look at the tax return for the property, not just your expenses and rent collected. Depends on what your buying and what type of lender you use. If you leveraged the purchase, rolled a big rehab into the loan and claimed big (allowable) losses on the tax returns then your property can be an IRS loss on paper even if it cash flows $400+ a month. I had this scenario where the property created additional debt that counted against my income for loan purposes and It cash flowed over $400. Even with the 75% of the rent calculation it still showed me cash flow positive over all expenses but the depreciation of the roof, hvac and rehab tax write offs killed it on paper. The individual depreciation schedule for each item and property differs and is not an easy thing to figure out. Find a good real estate accountant if you plan to keep purchasing or you might be surprised when looking for loans. This is for rental properties that you already own and have filed a return for.

Some lenders look at the tax return for the property, not just your expenses and rent collected. Depends on what your buying and what type of lender you use. If you leveraged the purchase, rolled a big rehab into the loan and claimed big (allowable) losses on the tax returns then your property can be an IRS loss on paper even if it cash flows $400+ a month. I had this scenario where the property created additional debt that counted against my income for loan purposes and It cash flowed over $400. Even with the 75% of the rent calculation it still showed me cash flow positive over all expenses but the depreciation of the roof, hvac and rehab tax write offs killed it on paper. The individual depreciation schedule for each item and property differs and is not an easy thing to figure out. Find a good real estate accountant if you plan to keep purchasing or you might be surprised when looking for loans.