All Forum Posts by: Don Konipol

I visit fairly often with investors looking at a certain vacation rental property to make an offer on.  I am not a realtor, so I cannot give advice as though I am one, but there are some guidelines that I have used personally over the years, with great success. Maybe these will help you, too!

You’ve found the property you like, and the numbers seem to work, but it’s more than you can afford or want to pay. Here is the Collin Hays method of buying the property at what you want to pay:

1. Don’t ask the seller what their best offer is. They’ve already priced the property. This puts both you and them in an uncomfortable situation, as you are inferring that they didn’t already price it fairly.
2. Don’t make a list of the flaws of the property and use that to try to talk the seller down. They know they ins and outs of their property, and you bad-mouthing the property isn’t going to going to endear you to the seller. If you want the seller to accept a lower offer, you can’t offend them.  
3. Consider the possibility that the property is already priced quite fairly. I have given asking price several times with no quibble, particularly if I really liked the property and the numbers worked well.  
4. If you really like the place but you feel that it is priced too high for your budget, instead of saying “it’s priced too high” and insulting the seller, simply say “I absolutely love your place; it is exactly what I want, and I’d really like to buy it. It’s just more than I can afford, and I don’t want to offend you with a low offer.” If the seller says, “Oh no, feel free to give us an offer”, then there is your invitation.  
5. Find out what the seller has invested in the property if you can. In many states, this is public information. You can find the most recent sales price for the property on the local tax records website or by doing a quick search on Zillow. If you are trying to buy a $ 1 million home, and they bought it 20 years ago for $250,000, it’s likely they have a whole lot more wiggle room – and less price sensitivity – than someone who paid $1.2 million for it last year. Of course, what they paid isn’t going to take into account the money they have spent on renovations or remodeling, which can be substantial.  
6. Finally, even with a substantial discount, the house may not be worth it. Do your due diligence and make sure the numbers work for you. It may be that it works quite well at the asking price.  It may be that the price needs to be substantially less for the numbers to work.  You do not owe the seller any explanation on this.  They already made their investment using their own reasoning; now it's your turn.

Happy Hunting!

Money isn't easy to save and $10,000( my debts) is a ton of money I want to save for a downpayment, I'm just starting so I don't have any money I would like to save $60,000 to buy a rental property, I think I could do it in  5-6 years, my brother filed bankruptcy and they relieved him of $6000 in debt from cash money.

a list of my debt

Gst Hst Tax 4500 income tax from working with my dad I owe
Scotiabank credit card 1400
Canadian Tire credit card 500
cash money loan 2400
Belair 600
echelon 600

should I pay the 10k back in the next while or should I file bankruptcy like my brother as It won't be for years until I am able to get a downpayment for a rental house anyway.

When running numbers on an investment property, I focus more on equity growth than monthly cash flow.

Here’s why:

If I can acquire a property at a low basis and add significant value, I can:

1) Sell and reinvest elsewhere

2) Cash-out refinance to recapture my investment. Id be happy to break-even with the rental income if I get all of my invested capital back.

At this stage in my life, these equity plays are more impactful than holding onto a property for a couple hundred dollars of monthly cash flow.

What’s your take? Do you prioritize equity growth or cash flow in your investments?

A property doesnt increase in value just because an STR is run successfully on it. its value on paper is based on the comparables in the area. The perceived value may be more, because you know an STR was run there and making money, but a lender wont value it more.

I have a friend with a property in a very desirable location in Texas that I believe would be great for STR. It sits on about 1000 acres 30 minutes from Fredericksburg. He does not want to deal with the headache of tenants cleaning or any thing to do with STR. The property is unused most of the year.

How much harder is it to run an STR on a subleased property? Also any tips for automating this as much as possible and how to protect the property financially and property management would be appreciated.

Wholesaling as it is today will be a thing of the past.

It’ll truly be strange to even hear people and gurus trying to make big money off it.

The more people try wholesaling but then end up not having an end buyer or cancelling contracts or trying weird things like novations, the more all of real estate will be regulated and cause requirements like licensing to be able to transact more than just your personal resident purchase.

Which I don't know why hasn't happened sooner.

Here's all the states (in red or yellow) requiring a license to wholesale or at least have started the process:

Credit: REITipster

I think licensing and regulation is a beautiful thing that should happen if you plan to be an wholesaler and do more than one deal... which is going to be the case for anyone taking this business seriously.

Or even it being regulated to need a real estate agent to do more than one deal outside of buying a personal residence.

I've had plenty of failed attempts with agents in pursuit of wholesale deals and I know exactly why, it's not because the agent couldn't find me deals, it's just not practical to think there's opportunity for the numbers a wholesaler needs to make a profit on top of everyone else needing to these days.

Because the only sellers who truly can sell at a deep enough discount are usually those who ran out of time and just didn't do something sooner with their situation.

I know many coaches and gurus will disagree with me but there’s no regulations on youtube gurus and what they teach either.

If we look at the current state of the market in hot cities, the availability of online resources to the average homeowner, how many deals can you possibly believe are available at 70% of ARV?

This isn't 2011-2013 days but many people are stuck in that time period STILL.

As I finish my licensing study, I'm very grateful I chose this route as opposed to being a one trick pony.

....But I set the goal of acquiring 50 doors in the next 3 years using the BRRRR method and will then be financially free...isn't that a scalable business :)

The “moderate size” question is pure opinion. In investing, I’d consider a moderate size being $2 - 10 million in real estate with 50-60% leverage.   In a business, I’d say owner “net profits” (exclusive of any owner salary) of $200,000- $1 million.  But the answer for everyone may differ.

Here are the personal attributes I see in those able to achieve a higher than market ROI, enough higher to be able to "scale".

1- Knowledge of real estate principles, real estate law and real estate finance
2- Minimum 3 -5 years full time, or near full time experience directly related to real estate investing
3- Ability to utilize technology for increased efficiency, capacity, and accuracy
4- Excellent hired legal counsel and excellent hired marketing help
5- Established method(s) of obtaining consistently high QUALITY deal flow
6- Ability to manage and choose people who are NOT employees: Attorneys, Appraisers, Mortgage Brokers, Real Estate Brokers, Title Companies, Surveyors, Marketing Specialists, Accountants, Contractors, Consultants, Property Managers
7- A VERIFIABLE track record of success
8- Ability to identify, analyze, and negotiate a deal that can be “worked” for “enhanced” ROI
9- Some type of competitive advantage; for example for me it’s my ability to analyze and identify mortgage loans that are actually less risky than all other lenders believe (on the investing in debt side), and on the real property side it’s my ability to analyze”pull the trigger” with LESS information than other investors need,  combined with the ability to pay cash, or raise significant capital almost instantly as well as being able to obtain loans at the lowest prime customer bank rate with no recourse or personal liability.  Others investors drive extra ROI by thing like ability to reposition property for greater profitability and or less risk; ability to rehab property at less cost, ability to identify areas where gentrification is likely to occur, etc. 

Most of the failures I've seen when investors attempt to "scale" a non scalable business result in only moderate losses and temporary setbacks. However, I've witnessed cases where the investor went "all in", spending and losing many millions. A classic example is Vestin Mortgage back about 15 - 20 years ago. They were a hard money / private mortgage lender out of Las Vegas doing about $30 million annually. They then decided to scale, hired Joe Namath as a spokesperson (I know, right there that's the sign this was headed for disaster) and went around the country drumming up interest in investing in their newly formed REITs. They raised over $300 million in two mortgage REITs, however they didn't have the deal flow to invest 10% of it. Because the number of qualifying risk/return deals is just not large enough to handle that amount of money at one time. So they started doing the loans that everyone else turned down, ultra high risk development deals, second mortgages, land loans at ridiculously high LTV, loans where the borrower has none of his own capital invested, 85% of AFTER stabilized value loans. Their REITs were initially sold to the investing public at $10.00 per share. After one year the REITs were being traded at $.01 per share!. According to their SEC filing of the $300 million in loan they made, $299,300,000 was NON PERFORMING.

Just checked on Vestin Mortgage. Interestingly I saw they're still in existence with a stock price of $3,105 per share. However, this is smoke and mirrors. They've had 4 reverse stock splits, including the absorption of the first REIT into the second REIT. The reverse stock splits resulted in the holder of 24,000 shares purchased at the original offering now being the owner of 1 share. So for every 24,000 shares purchased at $10 per share or $240,000, the investor, 20 years later owns 1 share worth $3,105. Or each original $10 share is now worth $.0004, or four one hundreds of 1 cent.