All Forum Posts by: Will Barnard

Robin,
So what did you use, a land trust?
When did you accomplish this?
Would you kindly share with us how you were successfull?

Jeff,
It has been stated that these gurus do not "share" in any losses and therfore have nothing to lose and everything to gain.
That was my entire point. Now if I was to mentor and ask for 50%, I would take my 50% part in any losses and to protect myself, I would also include that the investor must follow my direction to avoid "rookie" mistakes.

Ned,
While you make some valid points, comparing giving up 50% off profits + large upfront fee + no risk to mentor with a plumber's common knowledge of fixing a pipe is not a viable comparison. Yes, experts in any field should be paid accordingly for their efforts, knowledge, and skill.
My point is that the above mentioned payment to mentor is not only excessively high, but a rip-off for lack of a better term.
While I can respect the fact that you feel that a newbie could not have done a deal without you, I disagree that the mentor should have no skin in the game and reap the majority of the financial benefit. Besides, a newbie should not be starting off with large and complicated deals which require such advanced advice to merit such a fee.
Looking at this from the newbie's perspective, you would not have got the deal if the newbie had not found it and brought it to you either.

Seller financing for the buyer means no bank qualifying and easy availability to purchase. On the negative side, it means probably paying a higher interest rate. The positives outweigh the negatives in my opinion.

David, well said!

Shari,
I am not confusing fear of buying with fear of debt. First off, they are the same. Fear is fear regardless of the intent. You also need to re-read Mr Buffet's book as you are taking things out of context. WB holds a mortgage on his own personal residence and when asked why was quoted as saying that where else could he find money for that price. He does not fear debt, in the context of leverage. What he does not like is a company that has too much debt compared to income/assets. THere is a large difference!

Brian,
Mike uses the 50% rule in his calculations and his business model. What he is saying is that he includes all expenses, both fixed monthly, and future capital expenses. I do not do my cash flow calculations that way. This is not to say that I pretend that they do not exist, simply to state that the funds used for those capital expenses come from a reserve account and not the cash flow.
From a tax keeping standpoint, it is easier and more straightforward (for me & others) to do it that way.
You may not ever have to put on a new roof or ac unit, and on another property you may have to. You may not have a vacancy on a property for as long as you own it, and on another, you may have 6 months worth.
The important thing is to either, save for them via the cash flow as in Mike's example, or have a set account for them as I do.
Bottom line is that you will find that some types of properties will have lower average expenses than others, and some higher than others.

Getting back to CA, next year may in fact be an even better time to purchase, however, as many have pointed out, getting cash flow from these proerties will remain difficult as rents are much lower than values, even when purchased at 60% of market value. The same 500k home that rents for 2k a month and you can buy that home at 50% or at 250k still will not cash flow. That is why CA is more of a spec investment rather than a long term buy and hold for cash flow. If you want to enter the landlording business, you will need cash flow, so go out of state. If you can afford negative or no cash flow, but want large chunks of ":flip" profit (which still will require a longer term hold at this point), then pick markets that have proven to have high appreciation rates such as CA, Vegas, FL, etc.

True, and never trying is failing in my book.
All the fear factors you mentioned above are the same common ones which stop many potential RE investors.

Just one more of my favorites:
The greatest mistake in life you can make is to continuously be afraid you will make one.

While I often disagree with MikeOh, his advice/analysis on this deal is close.
When it comes to commercial multi-family units, it is very difficult to operate below the 50% OE.
One thing that jumps out at me aside from the obvious "proforma" gross rents is the very low insurance rate. Insurance usually averages around 8% of the rental income, so the figure presented is wayyyy to low. In addition, since this unit has owner payed utilities, the expenses could very well be above 50% of gross rents.

When I analize these deals (quick analysis), i take the max. gross rent, subtract out the "current vacancy" arriving at the adkusted gross income. I then plug in the expenses and arrive at the NOI.

Brian,
Let me save you tens of, if not hundreds of hours of time by telling you that CA is not currently a "cash flow" state. (Not unless you put down 50%)
Therefore, you have two options for your long term strategy:
1. Buy and hold out of state in a market that is stable with future upside potential (I like TX)
2. Buy at an extreme discount off the true dollar in a market proven to be able to rebound/appreciate rapidly. (CA, Las Vegas are two choices) Keep in mind that this is a speculative investment that will most likely not produce positive cash flow, but in 5-7 years, will produce a large equity position (assuming you bought correctly).

Thank you Aly. I just get frustrated when people spit out the common fear factor phrases.
Here is my favorite saying rgarding fear:
"The rich act in spite of fear, while others allow fear to stop them".
This is not just a statement of words, but something to live by.