All Forum Posts by: Cody L.

Originally posted by :

I am also worried about  my income. My credit is great however I have been writing off so many expenses the past couple years it doesn't look like I make anything. :(

lol, if you're in real estate, and are a seasoned investor, you're going to get to the point where you have no IRS "income".  Might as well realize that now :)

I've given up trying to get a conventional loan.  I can get a $4m loan for an apartment building no problem (just did another a few weeks back).  But trying to refinance a $200k single family home?  Not going to happen.  Tax returns are $0 or worse (and that's with my adding $5m in equity last year).  All a SFH lender cares about is credit score and "how much income on your taxes?".  It doesn't matter what I take as a draw, or what I pay myself.  My companies are in LLCs and those LLCs = me when it comes to tax returns.

Once you have a large portfolio of properties, there are simply too many deductions (even if it's just depreciation, which becomes an enormous number).   The IRS is not setup to understand how "income" works for anyone that isn't a typical 9-5 W2 worker. 

Originally posted by @Benjamin Blackburn:

Hello @Fred Heller

I have a quick question about the houses developers are tearing down for new construction.  In regards to the specific ones that are on bricks, do you think that they would ever sell them to investors?  Or is that not an option?  I've been thinking about trying to purchase one before it get torn down and have it transferred to a lot that I own on the North side of Houston.  I'm pretty sure there are a lot of variables that would come into play... especially permitting I'm sure.  Just curious if you've ever seen anything like this happen.  Thanks 

If anyone else knows anything about this as well, i wiould highly appreciate any info.

I have some land inside the loop (various lots in 3rd ward) and I've thought about plopping down some homes on them.   Just never got around to it.  Mostly, the cost of getting the grading done, slab, plumbing/electrical to the city, cost to move, etc.  It's cheaper for me to buy another rental property that's up and running.    When you're buying stuff at ~$20k/door, it makes the hassle of moving a house seem not quite worth it.

But if you're sold on the idea, just check the list of demo permits that you can get from the city.  Google map and view them, then contact the company doing the work.

I really like that area and own a lot in that zipcode.  A 56 unit, a 20 unit, an 8 unit.

As an investor, I don't think I like paying $300k for a duplex.   Heck, I had my 8 unit for sale for a while at ~$400k (decided to keep it).   That property brings in ~$750/unit (2 bed, central air units).  So if you lived in one, the others would WAY more than pay for your mortgage.

So if you can swing it, try to look for a larger property.  You'll pay less per door and you'll actually have the renters paying ALL of your note and then some.

Finding buyers is EASY.  Finding sellers is hard.

I get calls every day from brokers wanting to know if I'd sell one of my buildings.  I say "No, but do you know anyone that's looking to sell?"

Everyone is a buyer now.   

Find a deal.  Make some $.  Brokers that bring me deal are normally paid by the seller (or I'll bake it into the price and pay them 3%).   Non brokers (birddoggers mostly) that bring me deals I give them 3%.

So yeah.  Concentrate on finding deals.

Way to go man!  Whenever someone asks me how to get started, I say "get started".  Even if you broke even you learned so much just by doing.

The fact you made some $ and learned a lot is awesome. 

$500 per deal for birddogs.  You're getting a good deal.  I give them 3% of the purchase.  One just pointed me to a $1.8m property I closed.   He made over $50k on that deal.

I'm surprised we don't get more deals from birddogs given what we'll pay and given how many deals are out there if you're willing to smile and dial.

Originally posted by @Gino Barbaro:

I have posed this question to help me serve my students better.  I know most answers will focus around lack of money, but I think the answer is more complex.  My three biggest reasons for taking action: FEAR, family members dissuading me, and failing at first.

I want to know what is stopping you from jumping into Multifamily Properties!

Thanks everyone!

Gino

 I've been buying and selling for about 8 years now.  When I list a property (say, on loopnet) I get a ton of replies.  Most from people who have never bought (and quite frankly, most likely never will).  Almost all deals in my submarket of Houston are done by 4-5 parties.  I've got a pretty good idea of what's stopping people

1. Fear - They'll never pull the trigger because they want the 'perfect' property.  The perfect property doesn't exist.  And if it does, it's priced accordingly (making it not perfect anymore).  Some of the properties I've sold and would have LOVED to get back were passed on by some buyers for the strangest reasons.
2. No cash - While you can get started in this business by hustling, that's done to get cash to finally start getting some deals.  Though when I started I got into some properties with *almost* nothing down (wrap around the existing mortgage, seller financed some of the equity, scrapped and borrowed the rest of the down payment)
3. No lending - Unless you want to buy ALL CASH, you're going to need a loan. Getting a loan as a n00b isn't easy.

Dude, don't let something like that kill the deal for you.  If it's a good deal, it's a good deal - get it.

If they don't work out as tenants, get new ones.  You'll be getting plenty of new tenants on the life of the property anyway...

Originally posted by @Joe Fairless:

@alex j. the address is 17601 Wayforest Drive. And we're putting in about $5,000 a unit to increase rents $75 per unit. Going in with bridge loan during renovations then will do a refi after year 2. At that point we'll get a new valuation and put long-term debt on it. Anticipated exit is Year 5. 

 Joe, mind telling me who the selling broker was?  This deal never hit my radar.  Granted most brokers know I'm looking inside the loop only but it's rare a deal that's 100+ units sneaks by  :)

 Cody, I responded to your premise that a $30,000 property was going to see more upside than a $300,000 in SJ.  I asked you to compare your market to SJ over the last 40 years.  Can you respond to the values over time of that $30,000 property. 

NOpe.  I can't.  But if you want me to concede that over the last 40 years, SJ properties gone up more I'll 100% do that.  If I were to be transported back in time 40 years, I'd buy up a ton of SJ RE.

But going back 40 years I might also buy stock in a ton of different companies that have shot up since then. 

I'm looking from this point in history to the future.  If you want to argue what's done better in the past that's silly -- of course it's been SJ.   But I can look at my global equity position when I bought my first 8 unit in Houston about 8 years ago vs. what it is today.  I went to 1000 units w/o investing any more funds after my first buy.  I don't think I'd have done better with that same capital in SJ.   

Hey, this is a pointless conversation though.  You feel there is more appreciation opportunity in SJ.  Enough to make up for short term cash flow differences.   Okay, no problem.  So you buy there.  I'll buy in Houston.  I'll still wish you the best no matter what you do.  I don't see where the issue is?   You act like I'm calling your wife ugly.