All Forum Posts by: Brian Bellanca

@Luke Saseen Hi Luke, are you sending out offers yourself or working with an agent? Inspection contingencies are typical. Basically the offer is good pending inspection. You get your inspection done, if anything pops up you can negotiate from there for the seller to complete the requested repairs, credit at closing to buyer, etc. If you can’t work out a deal after inspection, you can walk away.

Hi @Neha Shah, you could always take out a home equity line of credit against those properties instead of doing a cash out refi. The rates are very favorable and you don't have to pay for it unless you are using it (beyond the minimum draw). That way you have access to your current equity and can strike on a deal as soon as you find it but you aren't paying down a new mortgage in a traditional sense. 

Hi Michael,

There are a lot of routes you can go and its different for everybody...A lot of people look use their own marketing campaigns, go to local REI meetups, you can also network with realtors in the areas you are looking to invest and set up a automatic relay on properties that meet your criteria. You can look for active wholesalers in the area you are looking to invest, you can be active in social media sites like FB marketplace, craigslist, etc., you can look at forclosures, there is a marketplace on this website with off market listings, the list goes on and on.

@Jay Lipshez no, they lend on a deal by deal basis and actually take a good look at the numbers to make sure it's not a crapshoot with their money. If you get to know some local private lenders and bring them into a few deals that turn out well you might be able to arrange something like that. Other than that there's the possibility of taking out a home equity line of credit to help fund the deals - since it's you and a partner maybe you could both do that to start out if you are not comfortable with HML to start.

It might be worth talking to a few local credit unions to see if they have any offerings. If your business has been around for a while they might extend a line of credit but being in the construction industry my experience has been banks are very wary of lending to contractors after the last downturn.

Hi James, I've worked at an A&E firm for over 10 years - all I can say is it is very local as far as time frames and costs go. It would also be hard to give an answer without understanding what type of build you are going for... Are you planning to buy a lot off an existing tract or are you planning to build somewhere where you would need to bring in main utilities. On the low end in California I see custom houses get built for $250/SF + land acquisition costs - on the higher end I've seen easily over $1,000/SF.

Easiest way to build would be to find a partially developed piece of land off an existing tract where roads, utilities, and zoning wont be an issue and you wont have to go through lengthy entitlement processes. Once you have the land you can find a General Contractor that specializes in ground up single family in your area and get an all inclusive price from them - alternatively you can hire an architect and engineers to develop drawings then bid it out to GCs. 

Best advice I can give is to find someone who has done it in the area you are looking to build. Get costs, timelimes, etc. from them based on your local market.

Hi Jay,

Congrats on your current business. For financing there is a list of hard money lenders on this site you can reference. If you have a deal and you want to finance you can go that route. See link below:

https://www.biggerpockets.com/companies/hard-money

In addition, you can start going to REI meetups in your area - there are some posted on this site you can look for NETWORK > Events tab. Besides meeting potential private investors that may be able to handle the funding side of things, its likely a good opportunity to network and get further exposure for your construction business.

@Jacob R. Typically I make it a practice to analyze deals whether or not I'm in the market to buy. I'll start off by looking at current statistics on which states are experiencing population growth, then target in the the primary and secondary markets in that state, I'll run a couple quick deal analysis and move onto the next town/county/state - If I find a town that I think the numbers work in, I note it down and take a closer look when I go to buy to see if the numbers still work. 

Another thing I do is I follow the big builders around - I.E. Lennar, KB Homes, Etc. and see where they are building. They are huge so I figure they have had a ton of money that they've dumped into market analysis and if they are about to build a couple thousand units, there is probably a good demand for homes there. Don't mind me while I hop in and see if I can make it work there too!

Hey Zach,

Also to chime in again on #3 - The type of analysis that you would be looking for that takes everything into account as a whole is Internal Rate of Return (IRR) - Here's a link to a pretty easy read on how it is used in RE Investing.

https://www.crowdstreet.com/what-internal-rate-return-irr/

Hi Vinh,

I know the area well - Definitely a hard market to cash flow in. If you're in this investment strictly for cash flow there is only a couple things you are going to be able to change: Increase Revenue, Reduce Costs. Try switching from a property management co to self manage to get rid of the fees. You can use a free site like Cozy.co to manage the rental payments and make them automatic. Increase rents after the lease term is up. 

Also, depending on how long you've had the property selling might not be the best bet. You are going to pay the real estate agents 6% on the sale, get hit with depreciation recapture on your taxes, and if there is any profits left at the end of the day you will pay capital gains on that (unless you qualified the property as a primary residence and haven't taken the exemption within the past 5 years). I just got out of a property in LA for the same reason - made sense when it was my primary residence but after moving out the numbers didn't make sense compared to letting that money work elsewhere.

Hi Zach,

1. Banks are not like your everyday investor - Banks are businesses, and where you might use a bank's money as leverage - the banks use your money, my money, and every other person/business that banks with them's money. As such there are regulations in place to ensure the banks are not taking too much risk with everyone's money and throwing them into high yield, high risk investments. The banks diversify as many way's as they can to limit the risks and maximize their returns within the regulatory limits.

2. By front loading interest payments it maximizes the amount of money the bank receives in the shortest amount of time. If you buy a house with a 30 year term and sell it in 5 years the bank will have gotten a higher annualized rate of return.

3. They are different analysis that tell you different things - Cash on Cash is an analysis of cash flow against capital investment - this type of ROI analysis can be easily compared against something like investing in the stock market. As a real estate investor you would still look at the Return on Equity as well which would shows you the cash return you are getting vs. equity. These are both helpful because as an investor I can see how much I am returning (on a cash flow basis) against my initial investment and allows me to compare determine if my current equity position is allowing me to maximize my returns or if the equity would be better off used elsewhere. These can both be analyzed on the front end with projected number when looking at a deal and give insight as to how long you want to hold the investment then assessed on an ongoing basis to compare against your original analysis and current market conditions.

Hope this helped!