All Forum Posts by: Bruce Lynn

I think I would spend a year doing electrical jobs.  Should be plenty of work.  Meet all the crews, study the costs, learn the areas that have potential.  As you're working find and wholesale a few deals.  Meet the players.  Learn what cities are easier to work with than others.  Ask lots of questions of the trades and builders/investors.  

Then if you want to take one down yourself, you'll be much better prepared.  

Also a lot of the hard money lenders these days from 1st time flipper want to see that you have about $50,000 liquid to weather any storms, like supply chain issues from Long Shoremen's strike.  So build those reserves over the next year.

Good luck and best wishes.

Welcome to Texas.
Sounds like a great plan.

Remember you can 1031 the current investment property into the next deal to save on your capital gains taxes potentially.  You need to plan for this ahead of time.

Also we have very few 3plex here.  Some duplex and 4plex, but not as many as other places i think.  We also sell some of the duplex as 1/2...so sometimes it is listed as duplex, the pictures make it look like duplex, but really it is 1/2.

Another strategy might be to buy 1 with 5% down, live in it a year, then move to the next one as a primary and use 5% down and repeat as long as you can...and of course if the numbers work.  Most properties here will not cash flow with 5% down if that matters to you.  Typically what I see is more like 30-40% down to break even.  Not really one to consider, but an example I see not unfrequently was $1.2 purchase price with $7000/month rent.  Not sure who buys those, but you can plug in the numbers in loan calculator to see what down payment would break even.  That stuff does sell.  So as you move down in price point, competition increases or if the deal gets closer to cash flow with lower down payments.

@Colton Kotylo  

#1.  No reason not to continue using her services.  Normally does not cost you more.  Normally most builders don't discount the price if you don't have an agent.  So use her fully as a resource and let the builder pay her.

#2.  The builders rep while nice and friendly is working against you.  They're working for the builder.  YOU want representation, whether it is this agent or another.  Frequently I see builder's reps try to pass stuff off on buyers that is 100% not acceptable, but most buyers don't know the difference.  Frequently I am calling out issues to the buyer and builder that get fixed.  Buyer never knew to even ask or often what the issue was.

#3.  A great agent will be a great resource for you...all thru the building process, when you are picking option, inspection process, and after the sale.  There are just so many benefits to using an agent and letting the builder pay their fees.  Just an example is property taxes.  Rare is it the builder's rep will accurately explain to buyers how the property taxes work.  So when your payment goes up $1000/month next year you want to be prepared for that.  Many agents will walk you thru that so you don't have huge financial surprises a year from now.

#4. Agents often recommend 3rd party inspectors and phase inspections and will help you walk thru that process and negotiations for fixes with the builder.  Don't think city inspectors are the same or save you or get you a better house.  Don't expect any builder to recommend or even suggest an inspection.  Almost every new house I've sold when it comes inspection time still has plenty of issues to remedy.

#5 Most buyers have never bought a new home, never negotiated with a builder, don't have an idea of even what to look for.  Not an intelligence issue, just an experience issue.  One great example is framing crew comes in....frames up the house, plumbing and electrical crew comes in and does their thing....leaves all their 1/2 finished cokes, Gatorade and beer cans and 1/2 eaten lunches sitting on the framing.   Sheetrock crew comes in next....think they clean up after all the other trades and throw away all the trash?  NOPE.  They just sheetrock over it.  Then wonder why you have an insect problem ...ants, roaches, mice and other critters after you move in?  With me as your agent you get to meet me at the house and I bring trash bags and we clean together all the stuff you don't want covered up in the walls. To me that is worth the price of admission, but you'll get a ton more ideas and value when you use a great agent that walks you thru the processes like this.

Pay for performance.  1st one is always at full price, if you want to discount a bit on future deals is your decision depending perhaps on the volume and the amount of work required.  I work with lots of investors and it's rare they get a discount.  I find investors are just as much work and sometimes more than a regular buyer and seller.  They want to suck my brain for lots and lots of information.  That has value.  If they don't value it that, then probably not a good fit.  Occasionally there are some that don't ask 1000 questions and are pretty self sufficient, just trying to maximize their time and network, so those may get some consideration.  They also get 1st crack at the pocket deals.

I would also say while I have seen very few exceptions, for the most part discounting just doesn't work long term.  The people that always discount just don't last.  So if you start dealing with people who are transactional focused, they won't value relationships and loyalty and always find someone cheaper and will bail on deals that are good, chasing one that is cheaper and cheaper.  Their rehabs will be cheaper, they'll go with the cheapest loan which will cause you more headaches and time.  It just becomes a downward spiral.

For the most part now you MUST sign an exclusive agreement.  Can't show a buyer a house without it, as I understand.

To me you either add value or you don't.  If you do, you have to prove it.  Maybe moreso today.  I do my best to keep my investor clients out of trouble.  I save them plenty of time and money with trusted vendors.  I work with the best in town.  Real Estate is a team sport.  Long term success means having a team of CPAs, Attorneys, Title Companies, GCs, trades, roofers, cleaners, lenders, and so many others on your team as an investor.

Good luck.  Stay Strong.

Congratulations on getting your license.

Picking a broker.

#1 Find one that is profitable and growing.  If they're public, look at their stock prices, look at their income.  Many of the shiny object brokers I expect every day to see they've decided to call it quits.  Even if that one branch is doing well, if the whole firm is upside down, that's not a good business model.  You never want to be a creditor of a broker.  Look for one that is growing and profitable.  I mean if they can make a nice profit in 2021 and 2022, 2025 is not going to be kind for them.

#2. Ask to see the training room.  No room, then I question how serious they are about training...and you need training....real estate school teaches you laws, contracts, and concepts.  Training in the brokerage teaches you how to be successful.

#3.  Ask to see the training calendar.  Again no calendar, probably no training.

#4.  Ask how much the training costs.

#5.  FORGET about broker sponsored leads.  Nobody is calling the brokerage asking to list their home...and if they do, they're not giving that lead to a new agent.  Sorry....just bust that myth right now.  GO to a broker that teaches you how to lead generate.  

#6.  Ask about investors in the brokerage, ask how you get connected to that.  Ask if there are other agents that work with investors.  Ask if you can meet them.   Ask if the brokerage has any books about investing, like FLIP, HOLD, or the Millionaire Real Estate investor.  Read those books.

Sell the Dallas condo. It can be a great option if you're living in it, but normally not great for investment in Dallas. As you have experienced, HOA dues going up and so much out of your control, especially if you don't live there. There are also a ton of apartments competing with you in the same area that can do so many things to get tenants that are impossible as an individual owner, like giving 1-2 months free rent. With the exception of just a handful of condos, most just have HOA dues that are way too high and kill your returns. There are also probably a few that at some point will be buyout candidates for multifamily investors, but that is not easy, and is probably now 5 years or more on the horizon.

There are also just so many things that can go sideways with tenant occupied condos. Lawsuits against HOA, HOA lawsuits again insurance companies, deferred maintenance that makes it not qualify for FHA loans, too many investors make it unwarrantable for loans, too many investors, force you to sell to another investor (investors never want to pay premium prices) and just so many other issues.

I would say when your lease is up, sell that bad boy and either 1031 into a different kind of property or just take the cash and run. No reason to pay off cheap money today. I'm guessing your loan is at 3-4%? You will have some transaction costs there, but over the long run I think your overall ROI will be much better.

In General suburban is where the growth is.

Things can change though.  Dallas just passed Housing Forward that could change density in some areas.  Austin did near the same thing a year ago I think.  Not sure it has changed Austin the way people thought it would, or will change Dallas, but it certainly could.

Also in Dallas we have GS and BofA building giant buildings downtown.  Big money investors doing projects between downtown and Northpark.  Big Money investors buying all kinds of property south of downtown and West of downtown in design district.  Billionaire who bought the Mavs bought something like 110 acres where the Cowboys stadium used to be.  Plenty of activity in Frisco, but plenty of other places too.  Princeton growing so fast they just put the breaks on for 4-5 months.  Huge developments announced and dirt moving all the way to Durant OK.  So all that is a combo of urban and suburban.

I looked at a few of their deals in Alabama early on in my syndication investments.  I never did invest with them.  See how those past deals went.   There are 1000s of syndicators, so don't feel like they're the only deal around.   Plenty of opportunities.

One thing that might be of concern to me today, as if I remember correctly they were out of Philly or Pittsburgh.   I just think it is vital to have some boots on the ground in the city where the investment property is, especially for smaller operators.  Not sure if they do or not.  Of course there have been plenty of deals that were successful without that requirement, but more and more I think it is really important to know the asset, know the area, know that deal.   They all look pretty in the presentation and everyone always says the projections are conservative, but then how many deals have gone bad?  From what I remember they seemed to be a fairly small outfit out of PA.  Many of the deals I've seen with problems are when the GP group was not local or wasn't really familiar with the local market.

Ask about capital calls and distributions on their current deals.

I have not always practiced this, but I think I will on future deals....no excuse you can't go visit the property before you buy in.  Go fly in for the day, or better yet spend a night.  Go sit in the parking lot to see when the PM shows up.  What kind of residents are there?   Is the property kept, or need a lot of work.  Is paint enough or is all the trim rotted?  People hanging outside?  Trash picked up?  Lawn mowed?  Pool blue or green? Go talk to the the current PM....ask them about property performance, asked about rent bumps on upgraded units, ask about the competition and go visit.  Check to see if there is new construction in the area that will hurt your rents during lease up.  Do your own due diligence and don't depend on a 20-30 minute Zoom pitch.

Good luck.  Let us know if you invest with them. Let us know in a year if you do and if the performance matches what is pitched.

Also let us know where you end up and why you picked that city?   What made the difference.

It's awesome you are considering where you want to be and flexible with that.

I'd look at your high growth markets, where there is a diversified economy, job growth, income growth, population growth, business friendly environment.  Unless there is some other constraint, don't feel like you have to limit yourself to those two cities.  I'd say look at several.  Take a nice road trip.  Go visit Memphis, Nashville, Knoxville, Raleigh, Charleston, Savannah, five cities in Florida, Atlanta, Birmingham.   

Talk to 3 brokers in each of those cities and have them sell you on their city.  Talk to the economic development people in each city.  If you can and there on the right day/time go to a chamber luncheon or a Rotary breakfast or lunch. Connect with the real estate people there.  In the evening go to a real estate investor group meetup or some other kind of meetup.  Of course you can do that with just two cities, but why not do it in 10 or 15.  Meetup with some of the BP investors you've connected with on the forum.

I'm not sure I'm sold on this idea, but an old time broker told me this week is that what you do your first year, is what will set you up for the rest of your career.  So if you focus on one city or one niche or one price range, or one type of sale, that is where your career will end up.   More of something to think about, and like I said, I'm not sure I believe that, but as we discussed the careers of several agents that we have watched over the years, it was pretty much true in these examples.

Another idea is to visit new home builders in those cities.  If you're new to a city, that might be a way to generate some good income year 1 and 2, while you build your network.  Go to a new home community, sell it out, then turn around and become a realtor and pick up all the resales since you would know everyone in the community and hopefully they all know love and trust you.

As you consider brokerages to actually join, look to see if they are public or not.  Look to see if they are growing and profitable.  Every day I wake up wondering which brokerage is going to call it quits today.  You don't want to be with one of those brokerages.

If you would like to have a business conversation in any of the cities you plan to visit either just the two, and would like to connect with a Keller Williams team leader in any of those cities, just let me know and we'll get you connected.