All Forum Posts by: JR T.

Good advice: Never buy something based on what you think you will turn it into. You acquire assets based on what they're worth today, period. Not what you think it will do, not "once it's fully leased," (because it may never be). Take a long cold hard look at that asset and say - if I didn't have any ideas in my head what is this worth? If you pay your your ideas when you buy something they're not working in yet you lose the opportunity to GET PAID for them when you're ready to sell.

Comments about your deal: By the time you leave the closing table you will be into this for AT LEAST $285-290k assuming you are getting some proceeds to complete the renovation. Are the ground-level units 2 stories tall? Why can you only get one unit in the basement if there are two upstairs? I'm thinking to make two legal units your costs are off too - probably closer to $40k WITH the right contractor.

The problem with basement apartments is while they do rent and show OK tenants very rarely renew their leases once they learn what it's like to live with zero backyard, patio or other place to enjoy their summers. People who haven't dealt with them before overlook this but most people are gonna upgrade to a place with some sort of little patio at the end of their initial lease term. For a variety of reasons if I were proceeding with this I'd try very hard to fit two two bedroom one bath units in there over the configuration you proposed.

There's nothing wrong with your deal. It's an 8% deal. Better than you'd get in the bank, a nice little return, but nothing really sexy about it either. This is assuming the two existing units are so rent ready that you'll be able to show them while the place is in escrow and will go straight from the closing table to meet your two new tenants there with their leases and keys... if there's any work at all to get the upstairs units rent ready forget it.

@Marquis W., which is surprising I did not expect to be writing that line based on recent experience.

Do you receive any matching in your 401k with the pension? Make sure your contributions to the plan do not exceed the matching. If there is no matching do not put anything in there at all. The real estate will be your retirement. You might want to pay yourself down to a healthier 50% LTV and try to purchase future prorperties between 50-75% LTV paying down to the 50% range. Some leverage works as a tool, too much and the slightest hiccup can bring the whole thing crashing down.

That's a horrible product to put someone in my position in Joe. I'm glad I know better. For all your experience a quick glance at your company shows that you're marketing all sorts of gambler type insurance products such as 200% of replacement value policies. Bets where the house always wins. Did you get into insurance to help people and deliver useful products or just to write everyone into the most insurance possible? 

I have to say I'm not much a fan of this style of doing business in industries where you have a duty to provide advice in the course of your sales effort. These products aren't equal victimizers - they always wind up disproportionally sold to the oldest and poorest of a firm's customer base - the people who don't know any better and really depended on that "advice" component being there for them. I'd be interested to learn what demographics are shared between customers you put into these 200% policies. I suppose you call it ThinkTwice coverage because the customer should've thought twice before buying coverages they don't need and will likely never collect on.

I thank you for your feedback. I'm not going to keep responding to you, it seems like you simply don't get it. If you want to grow beyond a handful of people you have to build value through service. Clients know when they're receiving the best of something and when they're receiving the most of something not quite as right. Insurance is still a word of mouth business. Food for thought...

DocuSign has a plan specifically built for your needs. I recommend it over others because if you wind up in litigation somebody will have heard of Docusign before, the others --- well not yet and I'm sure they're comparable. DocuSign has a reputation behind it, which is nice if you can get it in a fairly new technology.

eSignatures are just as good under the Electronic Signature Act as a regular signature.

@John Reardon Again I must try to clarify - are you a licensed Real Estate Broker? Did you work as a REALTOR sales agent for several years and then obtain your brokerage license?

Your profile says something about having 3-5 "brokerage deals" the terminology I don't think means in this industry exactly what you may think it means? You also mentioned not finding wholesale deals on MLS, which makes perfect sense since by their nature they're off market deals and wouldn't be on MLS. This is nothing to be worried about at all - there are people of all experience levels here and this is a great place to come and learn all this stuff.

If you haven't obtained your real estate license I highly recommend you do that first. It's a whopping 60 hours of classroom instruction. You'll come out with some industry terminology, know several other Realtors starting out in their careers and the whole this is paid for many times over when you buy that first house. Additionally, I think when you get equipped with knowledge, even in a brief structured way, it builds a foundation onto which you construct your future learning. 

I suspect if you aren't licensed and get one you won't be interested in wholesaling anymore. Do you picture yourself running around in the middle of the night 10 years from now replacing any bandit signs that got picked up at various intersections around Southern California, going to meet with people when they are at a weak moment in their lives and working them out of the equity in their homes so you can line your bank account? 

Incidentally I am not a licensed realtor. I got into real estate investing after having success in another industry, but it's a path I recommend to people who are trying to find their way. 

@Joe Bertolino So I come into your shop with $650k real estate $450k free cash and your recommendation to me is to pay the $12k a year for a comprehensive policy? You couldn't rebuild these properties if you wanted to. Most are really ornate old buildings that were converted to apartments between 1960-1990. I'm looking to get the liability off my plate and protect my principal within reason. Insurance is a financial risk in and of itself. Do you think Jason's estimate of $30-100 per unit for stand alone liability is reasonable?

What's the SOLUTION Joe? Are you this obstinate in your mini Cal Expo out there in El Dorado Hills? This is 3 or 4 times I've asked for advice and received commentary. If you didn't have a business website I would have thought you were just trolling and ignored you. Just saying.. 

@Charles Worth I'm heavily concentrated in two counties in Maryland. All of the brokerages I tried just tried to sell me a one-size-fits-all package, with a five figure price tag. It's obvious it would be prudent to move the liability issues off of my books and am hoping the advice I've received to purchase stand alone liability and perhaps stand alone fire insurance would be a good move. One of my buildings has had a fire within the past decade; it's not as though I think "nothing's gonna happen." I just think I can pay for my lifetimes of serious casualty by setting the premium payments aside and come out ahead.

The liability issues are what really have me coming to Internet forums hoping to be convinced. It is scary and I would be more comfortable with the investment if I could solve that puzzle.

@Ben Leybovich With these subprime assets you're really supposed to be in the market for cash flow and not principal appreciation. If you're buying them right you should run around 15% net of taxes and routine expenses. You should generate $4500 a year in net rents and if you do have a repair like that you should be amortizing its cost out over the life of the item - not booking the entire expense into the year you bought the property. 

The assets are cheap but they require both money and human capital to service correctly and achieve the correct returns. There are no passive investments that do 15%+++ you have got to earn the spread.

@Joe Bertolino Thank you for again confirming your position that the approach I came here to ask for help with is wrong.

Do you have any alternative suggestions? Or do you think paying out 2% of value each year in premiums is reasonable?

A good place to start that is often overlooked here is to complete the 60 hours of coursework to get your Realtor license. Either pay a monthly fee or go actually work for a real estate brokerage. You will learn enough to have some general knowledge so you know what things (if any) about this might actually really interest you, paying the monthly fees will get you off your butt to do something with that license and worst case you'll make all the money back you spend on this endeavor when you get to take the 3% buyer's commission home on your next RE purchase.