All Forum Posts by: Bill Devola

Partially agreed. "Guaranteed" is a strong word for the cap rate. If you screen your tenants, have a well maintained ability, you certainly have control over the cap and can/should have strong expectations on your NOI. Unexpected happens, but if you have bought a solid investment it shouldn't take long to right your ship.

Under what circumstances will collect your NOI as expected and not turn a profit? Also, the comps/market cap don't tie into your cap rate. Well, OK, if we're being technical the market cap ties into cap rate, but not IRR (what you paid/laid out for the asset versus what it brings in). But I think to your point if the cap rate is 1% or 20%, no one is looking to pay more than market. That's a truism.

I've never seen a site that just stays on top of the US as a whole and posts these varied, loosely tied together economic factors.  I've poked around on google and seen multiple "best city to invest/be a landlord/own property".   They are everywhere.  Start there.   Someone will write about a Charleston SC that has positive trends, or a Kokomo IN that has a reviving mfg base.  

After that, my advice is once something sparks your interest, dive in hard.  Pick 4 or 5 cities/metro areas and ditch the rest of the map.  You'll have dozens of cities you could make work, but comparing them all will be a huge task, and you'll never end up with a definitive right vs wrong by crunching numbers and population trends etc.  

The one way thats really been our only path way to good info is to work the phones.  Call prop mngmt cos and shoot the breeze.  They will all tell you their area is great (to be fair though, they don't work nationwide so can't compare Minneapolis to Augusta).  But you'll know from one city to the next which area has more going on based on what the locals in the area tell you about jobs and housing trends.  After you've made dozens and dozens of calls you'll stumble on someone good in a city you like.  I think people who haven't done out of state investing before underestimate this aspect: having someone or some company that you really like and is professional is the difference between you turning a profit on your investment and having a break even headache on your hands.  

Lastly your 7 cap is doable, but turnkey options are of course going to limit your choices.  Mismanaged or distressed comes with the territory by nature when youre trying to push up the cap rate.  But I'm sure you thought about that already. 

@Bill Richard

Nice post.  It'd be nice to get a lawyer to actually check that out, ie how the law actually reads.  I'm not a wholesaler in GA whatsoever, but I think this is pretty stupid and is over reach.  

@Michael Daniel -- I've used Neel and Robinson to close a few of our deals.  I can vouch, they are good!

I read the article. Never heard of this happening (fined for wholesaling) but I'm not surprised it could. One thing it doesn't mention is that if you wholesale with a license and it "legally", your going to have to do full disclosure to people that youre licensed (which could raise antennae), and even bigger still you'll have to give your broker his/her split from wholesaling. Figure cutting your profit in half. Plus the MLS/Realtor fees every year.

But to your question directly, having access to the MLS can help you find deals to wholesale (though probably difficult in NYC) but will also help you find buyers. Being able to provide comps to potential purchasers can help sell the deal and add a level of certitude and confidence.

LOL.  I think the number of CA investors who invest out of state dwarfs the number of people from the rest of the country who invest out of state combined.  Seriously.  I don't doubt that at $1MM you might not even make to to break even cash flow in West LA. 

As to your actual question, there are a lot, and I mean LOT, or places you can find for a 7 cap.  It will be harder in A locations (NYC, Miami, DC), but someone couldn't name them all for you.  I agree with @John Van Uytven that 3% appreciation can't be equated with a cap rate.  Cap rate you know.  Appreciation isn't guaranteed.  The closest you'll get to a guarantee is in those markets above (+LA & SanFran).  But forget your 7 cap there. 

The best way to narrow down your area is other factors: whats happening to a city's demographics? Is some big employer like Merc Pharma, or a Toyota Mfg facility on its way?  Is it gentrifying with an increase in avg annual income, or is it withering away and bleeding population year after year?  Even bigger still, how easy is it for you to get there?  Is there anyone you know in your potential city?

I know you're looking for a name or geo region or two, but I wouldn't throw any out because the criteria you've listed above don't tell enough to make a judgement on fit. 

Tough one.  I've dealt with issues that are somewhat similar in terms of chain of title having a kink.  Technically, you don't have a kink in the chain.  But its similar.  Hopefully someone is going to give you name/number of a title company.  But your best bet is to start working the phones.  Explain the situation openly.  Don't talk to the 1st person that answers the phone b/c chances are they won't get what you're saying.  Not sure about NY, but in NJ each title company has a lawyer as counsel.  Try to speak with them (or the owner).   You'll find someone who'll do it.  Worst comes to worse I would think a letter from the lender saying they are OK with it may alleviate some concerns.  But guaranteed a title company out there has deal with a subject to short sale before.  Just have to work the phones.  

Sorry.  Good pick-up. I meant w-9.   

Lump sum or hourly, you'll need to 1099 them over $600 or $650.  

I'd like to hear some creative answers on this to.  I don't have anything concrete.  As an intermediary broker your best security is a contract with the owner for the underlying asset, or lien on the real estate being transferred.  Failing that, a written agreement with the owner of the asset.  But daisy chaining wholesalers will make protecting yourself might be hard.  

One thought I have is before introductions are made ask the potential purchasers to put money in escrow with a 3rd party.  You will end up paying a couple hundred for the service, and have to call multiple people to find someone to do it, but this is the safest way for everyone.  And its still not air tight for you. 

Forget zillow. If you have a realtor, have him give you some comps on the ARV. Based off of a calculation on this you set your offer level.

I'm also with @Regina Abay.  Do you have no money down financing in place?

I'm not being negative, but if the list price is $156K and you're at $90K, you're going to have a hard time connecting with the seller.   OK, negativity aside, on your calculations I don't follow what "fixed costs" are.  And they are a good chunk of the budget.  If you were all in at $120K with purchase and repairs, I'm guessing that leaves that taxes at about $500/mo?  

Your numbers look good to me at first glance.  They also look right from the perspective that in this area renting out a SF property will leave you somewhere around break even to +$150/mo.  

I agree with most of what @Rich Baer said but have a few things to add in. 

If you're not in an attorney state, be careful.  Auction.com will try to make your deposit "hard" immediately after the auction.  Most of the time, no home inspections, no contingencies, period.  Just shut up, give us your money, and close on the house.   They are so inflexible they forced us (with threat of cancellation) to initial and agree on the contract in writing to use their closing/title company even when the bank agreed in writing on an email to allow us to use our own title/closing company because, "there are NO changes to the contract".  And they mean none.   I mean, really.  Is this a Fascist State, or real estate?

I'm in an attorney state, so we have invoked that clause to be able to back out without losing the deposit, but I don't know how hard it will be if your in a non-attorney state. 

With regard to finding deals, I'm not going to say there are no deals on the site. I've heard of people getting them. Actually know of them. But its not a treasure trove of below market bargains. What I'm seeing now is banks will hold an REO at a set price while the market rejects it month after month on the local MLS. Instead of lowering the price, they throw it in auction and count on a bidder or two lose their minds during heat of the moment deal chasing.