All Forum Posts by: Andrew Holmes

Ms. Samantha: In the Chicagoland area. Specifically in good very solid areas of Chicago. We look for a minimum of 25% cash on cash. (98% of all properties we down are refied out 100% and still have over 30% in equity on very conservative appraisals)

Minimum of 25% equity after repair

Minimum of $ 350 net cash flow/ month

Debt Coverage ratio or 1.55 or more per property.

There numbers might seem crazy but over the past 5 years we have managed to accumulate a portfolio of 160 + Single Family properties around chicago suburbs. 

We do not buy high crime or war zones at all what so ever.

So here is a typical example.

Purchase $ 60 - 70 K

Rehab $ 20 to 30 K

Refi Appraisal Value - $ 140K.

Because refi appraisal are more conservative on commercial loans we have more equity if we were flipping but I am fine with these numbers. 

The reason we are able to get these properties because we are buying direct at sheriffs sale. Many times occupied properties, with cash no inspection at all. It's obviously has a lot of challenges but the pay off is big if you are willing to deal with all the headaches. 

Andrew.  

Hi Emery. Like a few folks wrote earlier you have a great attitude. It's a huge plus to start out with good attitude please don't lose that as you gain experience. 

Just a couple of simple suggestions

1. Spend all your time looking at houses. Doesn't really matter what you look at in the beginning. Look at short sales, pre foreclosures, fixed up deals. Just look for the sake of looking. Take one area and get to know the inventory. Every single sale. Get to the auction pricing, MLS pricing and other third party sales. Each will have a different pricing structure. You will start seeing patterns. You will start finding people who do multiple flips. If you have access to your local MLS if you have a license or if you know how to down load owner tax data you will be able to sort for all recent sales with seller or buyers. I would identify the ones with multiple sales and I would start observing what they are buying properties for. What they sell them for. Who has been in business for a long time.

2. At the same time start going to local REIA meeting. Talk to everyone and take everything that is said with a grain of salt. Please DO NOT BELIEVE what people say. Look at the long term results. In a place like Baltimore there are hundreds of very successful real estate people at all different tiers. Start getting to know them and start figuring who you want to emulate.

The greatest ability you can learn that costs no money is get to know your market inside out. Every single sale. I mean every single sale in your suburb or area. Then start by making offers. The best way to control deals is get good ones under contract and then it's easy to find partners when you know your number.

Thanks. Hope that helps

Andrew.

Mike: Try not to do lines of credit because you have to renew the lines every year. Specially if you have have a lot of properties it gets to be a pain. Here in the Chicago area there are a lot of bank that will do Cash out refi's for you. You can also get 30 Fixed commercial product. Even though the rate is higher it has a place. Just a suggestion I would use the following strategy. 

Loan #  1-4 I would do residential refi with 30 year fixed.

Loan # 4-8 Commercial loans with 5 year balloon with 25 year term

Loan # 9 -10 Commercial 30 fixed. 

Loan # 11 - 15 Commercial Loans with 5 year balloon with 25 year term

Loan # 16 - 18 Commercial 30 Year fixed. 

Just a suggestion stager them so you have some 30 year fixed in the middle of a few 5 year fixed. 

We use a strategy called 2 5 7. In a 2 years buy 5 properties minimum and pay them all off in 7. We have 168 at this point. Some actually in your area West Chicago. 

Best of luck refinancing because to do refi's without seasoning does require some specialized knowledge but it can be done. 

Congratulation on your success so far. You should be proud.

Andrew. 

Hopefully you are giving the tenants a list of how you will charge when tenants move out in case there is damage or the property is left in poor condition. We give them a detailed list of how they will get charged. The of Chicago and Evanston, IL in particular are totally crazy about the tenant laws so I don't want to say same exact thing applies across the country but in general from the security deposit you can line item out any damage, clean up needed to the property. Also if they are behind late fees and any unpaid rent can be deducted. 

We always give them a report outlining what has been with held and why so there is no issue later.

In case the cost of the repairs exceeds the deposit amount you can ask the tenant to pay. If they do not you have to take them to court. 

Damn frustrated because I keep thinking our numbers are off. We switched to HD from Menards for better tracking but keep feeling that the total numbers on materials has grown. I don't know why. We do 70 to 80 projects a year and I am damn frustrated. 

I don't know what the hell to blame. My self. The guy who runs the projects for us or the real estate Gods. 

Anyone doing volume rehabs any suggestions. 

Mr. Thomas: You can find commercial loans from small banks and trusts in your area. Here is the Chicago area. We have a lot of them. Sorry not here a lot so late reply. Will try to be on more. 

Sorry I should have added this to the top. 

Then once you have done all the steps. Do a partnership deal. Not go into partnership with someone else but do a flip with someone that has the money. As long as you have a great deal there should be very little risk. They can own it and you can do the work. You can even say that incase of something going wrong you will share the downside to some degree with them. 

Personally for the first 3.5 years of doing flips I did that because I was paranoid of losing someone elses money when they trusted me. I don't have to do that but still that is my business practice today. I don't do partnership flips at all any more but I was great way to start and make sure that if someone trusted me I safe guarded their money. 

Mr. Pete: This is my 2 cents.

If you new have no money, experience, built I up credit and credibility. I would suggest the following steps in the following order. This is not going to be easy but this approach works. It's step by step.

1. Get to know your market. One suburb or one particular area. Every single sale and every property transfer.

Break down the properties in your area by Single Family or 2 to 4 units or what ever. 

You want to get to know the following. Highs in your market the Lows in your market the sweet spot in your market. 

Flipping is about very accurate market data. Not general data. People fail with flips for 2 reason: Over paying on purchase and rehab.

Look in the following places. If you don't have MLS access look at Sold on redfin in the last 30 Then 60 Then 90 and 6 months.

Then I would look at your public record data to establish sales price points in the following

MLS

Auctions

Individual Property Transfer that did not go though the MLS or Auctions.

If you really break down an area you will see that what you think is a good deal is probably an average deal at best. 

Then I would look at a 14 Month data of properties that were sold twice. You will find some name of companies or agent that do a lot of this. Then I would look up their history. Not just a year but the depth to their business. If they have depth and have done for a while I would study their numbers very closely. Go visit there rehabs. Don't say anything just observe and learn. You will see some thing they do well others you can improve on. This is with any business. 

Then one you have done this talk to other investors and present all your research in detail. If they are investors with money they will automatically get excited. A bunch of people will get fired up but very few people will follow through. That is life. Easy way to meet a lot of these people is to go your local real estate meetings or may be here on the BP community. 

I know when you are new the first thing is that I need money for deals. If you first do the due diligence needed and you know what you are talking about you will attract a lot of people. Even amount the experienced folks there are very very rare exceptions that know the real estate in an area like the back of their hands. 

If you do a little research you will find the following will apply off every 100 People. 

95% Do nothing

3% A few may do something have some home run hits and then crash. A few may hold some decent rentals

1.9% will hold rentals with decent results over time. 

Less than 0.1 may be I am being way to generous will have a legitimate real estate business that is worth something. 

I am not trying to be negative. It's just reality. Personally with out a lot of research long term success is impossible. 

Wish you the best. 

I have often wondered why we do what we do? 

I have pondered these questions and I though it would be interesting to get thoughts from other investors. I would love to get your input specially if have a large portfolio of single family rentals. 

Seems like there are two schools of though when accumulating property portfolio on a larger scale. I mean 50 + up to 200 single family type of properties. Some people will Invest in what I will call challenging areas and build up quickly because it's easier to find inexpensive properties on the other hand the second school of though is to stay in good B areas and accumulate at a little slower pace. 

Personally I stick to the later approach of buying in B areas. Having said that we still manage to buy a decent amount of home a year in good solid areas. 

My style of investing is buy with minimum of 25 to 30% equity after rehab with a minimum cash flow of $ 400 per property. Then take cash flow and pay off all the properties. I don't really worry about appreciation because I can't control it. I don't believe in touching the cash flow for personal expenses. 

If there the property does not have a minimum of 25% equity after rehab I pass. I know my way of buying properties is a bit unorthodox but it work because in the Chicagoland area. I can find tons of deals. 

I guess my question to people that have managed to buy 50+ unit and held them for long period of time. Looking back at your investment period what is your perspective today?

What is your investment style?

Would you have invested any differently knowing what you know now?

What is the intended goal?

Do you invest for cashflow?

Or Get Properties paid off and then collect cash flow?

What is the long term exit strategy?

What is the plus or minus in your particular investment strategy?

Just looking to get some comment from people who have long term experience on the subject. 

Hey John & Jd.

To answer your guys question. 

The cost basis is the most critical thing when Ed is picking up these properties. If you only have one or 2 you can't pay them off in 7 years flat. 

When setting these up the right way to set them up is pair 3 single families with 

2 - 2-3 flats in B area. 

Combined cash flow pay the 3 single families off pretty fast. Now you have enough paid off properties that you can pay the 2-3 flats off in a total of 7 years. 

The most difficult thing to do is to buy properties in good solid B area with the numbers we need to pay them off. 

We buy a lot of stuff from Sheriffs sales, Online Auctions and Off market probate and short sales. I wish I could say it is easy. It's easy to to find 4 or 5 deal a year that are home run deals but to find 3-4 home run deals it's is very tough.

On top of that we will not buy suburbs where the investor ratio is over a certain percentage plus the economics growth has to be good. Adding all the overlays it makes it hard but we have managed so far. Obviously we are buying very heavy over winter and it get a bit tougher in Spring and summer when people start paying crazy prices. 

The hunting season is about to begin for us. So holidays is the most exciting time of the year hence we love really bad winters. Like we have had the last 3 years here in Chicago. Investors go to sleep makes it easier on us. There are lot of very solid B pockets around the suburbs that we buy like crazy. 

To answer the other question about X down. We don't buy with X down. As much as possible we are refinancing everything out. What most people try to do is cash out refi. If you set it up as a rate and term refinance you can get all your money out. 

Town Home are good but we in the process of getting rid of all our townhomes. Personally I want a portfolio of 2-3 flats in the suburbs and 95% single families. 

Andrew.