All Forum Posts by: Andrew Holmes

@Jerry : Would love to buy more properties. We are looking for deals in the suburbs. Will buy as is for cash. All in the suburbs. We are buying 2 per week. The pace always picks up to 3 or 4 in the winter as more and more stuff becomes available. 

@Dyanne: 

So the idea is not to any creative financing.

Here is how it work

Pay cash of the front end with private money or your own money. 

(Ed had to use private money because he did not have much of his own)

and then on the back end you use commercial small banks to refi out. 

For the first 4 properties back end financing can be down with residential refi without seasoning requirement but it's a bit of a technical process. 4-10 becomes more difficult but it can be done. It's way to technical to write it out here but it can be done.

Where most people make a mistake is that they try to do cash out refi. They right way to set it up is with a rate and term refi. Same result but no seasoning requirements plus getting 75% appraisals becomes a lot more simple. 

Andrew.

Personally turn key is not for me. We have a portfolio of over 150 rental and we are in process of buying another 125 before the market turns but for folk from states where numbers are just really crazy it may a good alternative. 

Here in Chicago we have turn key providers. The model is very different than the model we invest with. We want a huge amount of equity when we buy. We don't want any cash stuck after refi we also won't go into C or D areas at all. For rental I like solid B areas. 

When you go to the market you buy a packet of chicken you bring it home and cook any meal you want with it or if you go to a restaurant for the same chicken breast you will pay a lot more. It's the same chicken. The prep and cooking is done either by you or someone else. If some one else is going to serve you and manage the entire meal and the process then you have to expect to pay for it. 

There are a lot of turn key companies. I think they fill a great niche in the market not my cup of tea but I don't think I can say anything good or bad about them. I do question the investment from the individual investors perspective. 

I think from the model I have looked at they are investing for cash flow.

I invest for 

1. Equity

2. Cash Flow

3. To pay off the properties with in 7 years with Zero in

4. Appreciation. (It will happen already has in our market but I don't count on it because I can't control it)

The biggest issue here is time. If you are going to do it yourself it will eat up a lot of your time. As long as you are committed to that part of it and are willing to take on the headaches it can be pretty profitable. 

@John Byrne

Hey John: What you are saying about the inspection is very true. You don't want to spend the money unless you know you got the deal. On the other hand a good home inspection can be valuable specially for new and seasoned investors. For seasoned investors it not that they don't know what to look for but do they take the time. I know in a hurry and euphoria of finding a home run deal I have missed silly stuff that I should have never missed if I have paying just a bit of attention.

An easy way to fix this is use a simple checklist as a reminder. It help to follow a checklist even if you are experienced investor. 

As far as HUD is concerned. At the risk of coming across as a bit devious you have to be street smart. Here is what I mean. If you work with a good agent that really knows their way around HUD deals there are a few loop holes of getting out of the deal even after you tender earnest money.

Talk to a few people it not that difficult to figure them out. You earnest money will be 100% safe if you learn some of trick of the trade. 

Andrew. 

@Troy W. Yes I have been generous with the fail rate. If you look at the number of people that will go to real estate seminar or anything else and do something with it then the old 99% to 1 %. May be 1% will do anything. 

What I was talking about was that off that one percent 70% will fail. 

To address the issue you brought up about my statement that 

High Risk Does Not Equal High reward. 

Low Risk = High Reward

Life in it self has risk. So they I personally invest is the example between riding a motorcycle vs. Driving in a car. Both the bike rider and the person in the car will have an accident. It's not if they will get in to an accident. It's a manner of when. Those are just the statistics. The only question is statistically on a bike you will be hurt more than in a safe late model car. 

You are just playing the odds. Not to say that you could not get killed in the car. 

So when it come to real estate investing there are 3 type of areas

1. A - Affluent or Aspiration areas

2. B - Bread & Butter

3. C - Challenging

Challenging people like in challenging area and they do challenging this. I just choose not to deal with those challenges. In some of the challenging areas in Chicago you can acquire a property pretty cheap and get great rent but I choose not to. Getting shot, mugged and robbed is just not in my business plan. Not to say that other investors should think like me but in the long run I can beat the numbers of the people investing on the high end and the people investing on the low end with very low risk. 

Here is the math that I work with. Over the last 5 years i have accumulated about 153 single family and town home. (85% Single Family Homes and rest are townhome around Chicago Suburbs)

There are suburbs that if I left my car unlocked it a really nice expensive car. It would not get stolen in term of the statistics. There are rock solid, huge employment, very low crime infact lower than statistical average for the US as a whole. 

So 153 Houses X 420 Cash flow per month = $ 64,200/Per month.

I can pay off all my properties with in 7 years down to ZERO.

Now here is the kicker. Each property will have a minimum of 25% and I have 0 money of pocket in all these house. I am buying 125 more over the next 2 years. 

This is impossible to do in A area because the taxes and PITI will never work with the number I want. In C areas this will work but the cash out refi's will get stuck.

I studied how people invest since I was 20 to the age of 34 before I ever pulled the trigger.

There are lot of way to make money in real estate but I think it will be hard to beat this one. 

Just my opinion. 

Great discussion guys.

Andrew.

@ Nat Chan: The definition for success from what I understand is 

Success is the progressive realization of your goal. 

I cannot determine if you are successful or not. It up to us individually.

For me success is an ever moving target. 

When I was young my go was to be able to save $ 10,000 each month. Today if we don't buy a minimum of 5 properties a month with at least 25 to 30% in equity shame on me.

What seem like a nice car or a lot of money at one time today it's just okay so not sure if I really define success for someone else.

@Christopher: The house we live in is not an asset. We all need a place to live so just a place to live and it costs us money even if it is paid off. Yes if it is all paid off it will be an asset but only once you sell it.

Personally most investors mislabel assets and liability. Just my take.

This post will probably make a few if not a lot of folks mad but I figured why not mention realities of investing in real estate. 

My Opinion: Most investors over time will have marginal results at best when they invest. 

I have often pondered this question. Everyone wants to succeed. It is not that they lack desire, passion or are not smart. The fact is that real estate investing specially if you want to do well is tough. I wish I could say it was easy but it's not. My feel that most people will get bruised and bloodied . This is not just my opinion this is the fact. 

So let's start with the basics. 

70% will fail

25 % will have decent results

3 % will have success

2% will succeed at an extra ordinary level

A lot of investors invest for quick profits or appreciation. I think this is very fool hardy. Most people invest in real estate for the following reasons

Appreciation or quick profits then cash flow they never think about equity.

Personally I have a few very simple rules

1. If you take care of real estate for the first 5 years it will take care of you for the rest of your life.

2. Any property that does not put money in your pocket at the end of each month is a liability.

3.  Any body that said High Risk = High Return was a complete fool. 

Low Risk = High Returns

The entire point of investing is to keep reducing your risk so you can increase your returns. 

The three basics that need to kept in mind when investing

1. Equity - When you buy a property it needs to have equity. The greater the equity the better the grade of investment. The point of investing is to buy something that is worth a lot more for a lot less.

2. Cash Flow - Any property that you buy must have a debt coverage ratio of a minimum of 1.5% otherwise it's too risky. (I know folks will think I am too conservative)

3. Appreciation - Is not something you invest for. It's something that happen over time and you should be great full when it does come along. You cannot predict appreciation. Over time it will happen be great full when it does. 

Always Remeber: Pigs get fat, Hogs get slaughtered

Hey Ed. Good to see you on here. Hey we should do an updated interview with you. 

Andrew Holmes

Breaking Down the Numbers (Cashflow)

Chicago North Shore Meeting

Location: Glenview Public Library

1930 Glenview Road, Glenview, IL

How do you buy 5 properties within 1 year even if you don't use any of your own funds or credit.

Andrew Holmes will go over how he is purchased 153 properties in the Chicagoland area over the last 4 years just in his rental portfolio and they will be all paid off within 7 years. 

Now Chicago's #1 Flipping Team is diving deep into the cashflow numbers, also with a fully updated approach that takes all the recent market changes into account as well! Deals are definitely still available, we're finding more than ever now, but we're also looking harder than ever as well - we're on a mission to get 125 more in the next year or so! As a result, we're looking everywhere every day, and we're noticing a lot of changes.

• Where are the deals now?
• Can I still hit the same numbers?
• Do cashflow properties still make sense?
• What are the numbers I want to hit, and where?
• What has happened in the market that I should know about?

We'll cover all of this and more at the next Chicago REIA Northshore meeting, and we'll also include a complete cashflow market update, fully up to date!

Don't miss the fully updated Breaking Down the Numbers: Cashflow with Chicago's #1 Flipping Team!

We're also having a special presentation by Secure Pay One, one of the best management companies in the Chicagoland area!