All Forum Posts by: Alan C.

I agree with @Jonathan Greene. 

You can pay big bucks for a mentor/guru, but most of them are not great teachers. Or you can figure out what skills you have that an experienced investor could use. It may have nothing to do directly with real estate. Maybe you have great computer tech skills, graphic design or are great at figuring out and writing up office systems. There's got to be something that you can offer in exchange for some training--even if it's detailing the investor's car!

You're best bet is to attend local investor meetings and find out who are the senior "players" and then find out what they need. Most likely, they will be open to helping you when you have a way to help them. They could be at a point where they are done and tired of the day-to-day minutiae of investing, but still like to do deals if there's enough profit or they find it interesting for the creativity of putting the deal together. 

But you will need to demonstrate that you are serious. Most experienced investors are constantly approached by newbies who offer to "take them to lunch" so that they can pick their brain. The problem is that these experienced investors put a high value on their time and know that most newbies will never take action to be successful, so they only associate with other investors who are at their level or above.

Show them what you can do for them and they should respond in kind.

Welcome to Maryland!

Not sure what type of closings you do in NC, but in Maryland we use title companies who have their own attorney.

You will want to find investor-friendly title companies who are used to dealing with more creative types of deals. I can tell you from experience that most real estate attorneys will tell you they can handle these type of deals. But when you actually bring them something a little off the beaten path, they either can't do it or try to charge multi-thousands of dollars for the extra time it will take them to actually use a little brainpower to do the paperwork.

I currently use 2 title companies for my wholesale deals, but can't fully recommend them as I am not 100% satisfied with either of them. Most of my deals are pretty straightforward (simple contract assignments), but sometimes I do get creative and get the reactions described above. So I'm still shopping for the best title company.

Your best bet is to connect with local wholesalers and ask around. 

However, if you are doing "simple" assignment/wholesaling deals, send me a message and I can give you names of title companies that you can check out.

If you want to stay within your $150K budget, you will be limited to starter-level houses that sell for $200K or less. And you may wind up only being able to look at the lower-end starter row houses that sell in the $150K-175K range. And first-time homebuyers are not as creditworthy as step-up buyers. Even with all the government financing programs, banks are becoming more cautious as the future economic/employment outlook becomes more and more uncertain.

There's even a bigger problem in that right now the inventory is so low that I think rehabbers are paying too much. 

I'm consistently being outbid for properties that I'm trying to get under contract to wholesale. Sometimes my competitor is a rehabber and the price they pay is the price that I would have asked my buyers to pay. But many times, the price that the seller gets is way over what the property is worth given the work needed. My numbers are on the conservative side, but when I plug the competitor's numbers into my spreadsheet, I don't see how they make any money on the deal.

I'm afraid we're in a situation not too different than 2005-2007 when people overpaid and counted on rising prices to cover their mistakes.

I don't mean to be negative since there are always deals to be had, but sometimes it takes a longer time or more creative marketing to find those deals.

As has been said, your best bet is to connect to Baltimore investors to get a feel for the market from those on the ground. 

I'm not a big believer in the current cold calling systems, but I understand it's the hot new thing. That being said, your are right to check out the DNC regulations or you could be in for some real trouble. All it takes is one angry person to cause a problem. 

Congrats on a really good deal. They are extremely hard to find in this market. 

For a fully renovated 4/2, $129K seems like a good deal (depending on the block). But you won't get $2,000 rent so run your numbers accordingly.

I agree that rental rates in Baltimore in non-premium areas are more like $1400-1600 for a 4 bed/2 bath. Section 8 may pay a bit more, but I've been told that Section 8 rents are now falling into nearly the same range as market rent. 

Renting by the room is a hard way to go in most of Baltimore unless you are doing student rentals. The one that @Tim Jacob has is near Johns Hopkins Homewood campus so he may have Hopkins students. That's very different than renting to random strangers who can't afford to rent even a 1 bed/1 bath apartment. Also, from my understanding, you need a special boarding house license to do room rental. I'm sure it's very lucrative, but it also has more headaches. 

Glad we were able to help you and stop you from making a serious financial mistake. Don't be a motivated buyer. Take the time to get more education and feel free to contact me for any help with Baltimore (or DC) area properties.

That's a rough area. A friend of mine has had steady tenants since about 2003, but is ready to sell and get off of that street.

I haven't run the comps, but I can't believe that any property on that block will appraise for $150K. I would be very careful about any company that is selling you this deal at that price. As has been said, for $150K, you can get a much better property in a much better area. Depending on your cash and down payment situation, you might find even 2 houses at $75K each for much better returns.

And by the way, cap rates are not normally used for 1-4 family residential properties. You can use cash-on-cash returns, but that is not the same number as cap rate.

If I were you, I'd try to get out of this deal and connect with local investors in whatever area you want to own rentals. Spend some time getting to know the market before you invest. And it is helpful to invest in your own area if the numbers make sense. I understand that in many coastal cities (not Baltimore), the housing prices preclude getting a good income from rentals, but I'd still try to stick close to home unless I had trusted friends and family that could keep in eye on any long-distance rentals.

In my opinion, many of the turnkey+management companies take advantage of people in your position of having a full-time job and money to invest. There's nothing wrong with making a profit, but I think they know that their buyers don't often do the full do diligence necessary to properly vet a deal. 

When you say you are starting to wholesale, does that mean you have a deal in the works or are you looking to get a team in place?

I've been wholesaling for about 20 years and have yet to find the perfect title company for some of my more creative deals. Most attorneys are not able to "think outside the box" even if they can do the straightforward type of wholesale deals.

That being said, I am currently using King Title in PIkesville and Crown Title in Catonsville.

I will tell you that you should spend more time marketing and getting your first deal than looking for title companies. Nothing wrong with wanting to have a title company in place, but not if you're using it as an excuse for not making offers. I've seen too many people "getting ready to start" who never do anything because they want to have every piece in place just in case they get an offer accepted. 

My advice is to get your offer accepted and you will be able to find people to help.

Please don't take this as too critical. I'm not just writing this for you, but for all those others who want to get into this business, but fail due to what I've written above.

I wish you success and if when you get a deal, feel free to contact me.

There is nothing "wrong" or illegal with "subject to" or sub2 deals. If you look at a standard (government-approved) HUD-1, you'll even see on line 203 the following: "Existing loan(s) taken subject to." So there is already a place to list the current mortgages which will not be paid off at closing.

However, there is a lot of paperwork involved to do these the right way.

Most title companies and attorneys simply don't want to be bothered with a creative deal. It requires them to actually use some brain power. It's much easier to pull up some standard, boilerplate documents, take a few minutes to fill in some names and numbers and then charge several hundred dollars. There are some title companies and attorneys that are willing to take on deals that are "outside the box," but they are few and far between.

That being said, my philosophy is that a sub2 deal is a moral commitment to make the seller's payments, no matter what. So once you agree to make the payments for someone else, you should be ready to do everything in your power to make those payments. And if you can't, you should be prepared to find a way out of your problem that doesn't involve the seller being put back in the position that they were in before they met you.

Our job as creative real estate investors is to find people with problem real estate (i.e. motivated sellers) and offer a solution. Once the seller accepts our offer, they then stop worrying and trust that the problem is gone. If you stop making the payments, then you have put the problem back on them. That type of behavior hurts the reputation of all the honest, ethical creative investors and makes it that much harder for us to do business.

I know lots of people who do sub2 deals the right way and make a lot of money with this tool. I do think that you are being overly optimistic in thinking you will find 20 sub2 deals a year. But I wish you lots of success in your search.