All Forum Posts by: Don Alder-LaRue

@Joe Mazur  If this is going to be your first property, I would not recommend moving walls or opening floorplans.

For the first flip or BRRRR look for undervalued cosmetic fixers. Maybe something that needs roof, but I wouldn't recommend much beyond that for the first time.

Always run your own numbers, and run them again and again as you go through the process.  Every time you have a new number, run your numbers again.  It NEVER hurts to be cautious.  If the numbers start to fall apart because of repair/rehab bids, get a couple more bids.  If they're all in the same price range, get out of the deal before you own it (preferably you're doing all of this while in an inspection/due diligence period so you can get your earnest money back).  If you're outside of the due diligence period, it's better to lose an earnest money deposit than go through with it and be stuck with a lemon that sucks all your cash and energy.

@Ryan Anthony Locally, I get lists like this directly from the title company and it costs me nothing.  In some states the title companies have to charge for all their services, but the fees are usually nominal.

You should have an RE agent on your team.  Ask him/her to get the list from a title company.  Then you're off and running.  The title company can usually break out the absentee owners quickly.  They will also usually email the results as a CSV file you can open in Excel, then do your own narrowing.

For other lists, think of reasons why people sell or feel they must sell quickly and for less than full market value:  Death, disease, divorce, disaster, dissolution of partnership.  The public records at the courthouse can be a gold mine if you're willing to spend the time, or pay someone to do it for you. 

@Account Closed  Don't substitute a hard money lender for a traditional lender.  Only use hard money for the initial purchase and rehab, and until the home is rented.

Before you get into a hard money loan, you should be pre-approved with a conventional lender.  You will want to be certain you can refinance the home into long term conventional financing when  you're ready.  Hard money loans are high interest, short term loans.  

Using a traditional lender for the initial purchase and rehab should not make it harder to refinance, but your out of pocket will be higher.  Traditional financing of 20% down of the PURCHASE price, and add rehab and carrying costs out of pocket is often a big chunk of cash.  The hard money lenders lend on the AFTER REPAIR value of the home, allowing you to finance the home and the repairs.  This cuts your out of pocket and raises your percentage returns.

Connect with me and send me your email privately.  I'll show you an example of a conventional loan v a hard money loan evaluation for the same property (using hypothetical numbers) so you can see the difference the out of pocket expenses are, and the percentage returns.  You will see if you buy right, you'll make a lot more money.

@Tchaka Owen  GOOD FOR YOU!!!  You're one of the rare and lucky ones.  Are you going to fill us in on what you did?  I'm certain that many here would love to hear it, including me!!

@Jay Hinrichs  Yep.  Texas is one of the states I have been licensed in  Texas, Florida, and California. 

It is unlikely the bank will sell to you directly without placing the property on the open market first.   I've seen investors try this, but have yet to meet one that has been successful.   

If you see a property that you are interested in, take note of the address. Contact the real estate agent on your team and give her/him the addresses. He/she should be able to set the MLS to give him/her and you a notification that it is now on the market so you'll be the first, if not one of the first, to go see the property and set your offer.

It all depends on how your contract is written.   In some states the buyer pays for an option period and it is during that period they have the right to inspect the property, check financials (if there are any), enter the property for repair/improvement estimates...anything they need in order to be satisfied with their due diligence.  In other states, you may be waiving only the general inspection.  

I would never recommend waiving the inspection period, even on a flip when the buyer will be doing extensive remodeling.  There are times that the inspector discovers items that you overlooked or the seller did not disclose.  That general inspection can save your earnest money deposit should you need to back out.

I completely disagree with @Geordy Rostad.  Paying cash for a property is not a good idea.  

The reason one buys with hard money is to keep your out of pocket expenses to a minimum and maximize your return on capital gain. Most hard money lenders will lend up to 70% of the ARV on the property. The buyer only keeps the hard money loan for a very short period of time (until the rehab is done and a tenant is in place) then refinance into a long term conventional loan. Your out of pocket expenses are cut dramatically, even if you are paying high interest rates during the hard money carrying period.

Keep more money in your pocket. Use the hard money lenders correctly, run your numbers before you purchase, and every time new numbers are available (desktop appraisal for ARV which the hard money lender will require, written quote from contractor for repairs, etc) ensuring you have at least a 100% return on capital gain, and will get at least a 10% cash on cash return after tenant in place and refinance. Then you'll have more money to do another BRRRR using the same method. More properties equals more unrealized capital gain and more cash flow which is the reason for investing in real estate in the first place. Pay cash and wait 6 months before doing another, and you'll be missing out on a lot of properties, and your percentage returns will be terrible.

Since you're just starting out, I assume you're either a fix and flip, or SFR buy and hold investor. I would ask the following:

1.  Do you work with investors?

2.  What kind of investors do you work with (flip or buy and hold)?

3.  How do you determine if a property is a good investment?

4.  "Can I see one of your evaluations?  You don't have to give me the address, but I'd like to see how you run the numbers."

5.  Would any of your past investor clients be willing to give you a recommendation?  Would you ask a couple of them to call me so I can talk to them?

6.  Do you work regularly with any hard money lenders?

7.  How do you calculate the return on capital gain?  What kind of cash-on-cash return can I expect in (enter a neighborhood name here).

You will be surprised at how many agents will say they work with investors, but cannot answer these questions.  Most won't even know what a return on capital gain or cash-on-cash return is.  These are not terms they learn to get a real estate license.  If they say they'll have to get back to you on that, they're going to look up the terms and then they'll give you a ******** answer.  If you find one that can answer these questions, hang on to that person for dear life!  

Be prepared to run your own numbers.  Better yet, always run your own numbers.  Double check everything any agent tells you.  Many of these people will do anything to sell a home and collect that commission check and they wont' give a damn if you lose money or not.  I say this as a real estate agent myself.  I've seen it many times, and I've seen new investors get burned badly.

Jatin,

That all depends.  A lot of the events are "gurus" who put on an event for free and give you just a hint of information without giving any real "meat" to the discussion and then they pitch their low cost membership which gives you entrance to some class where they pitch a high price "Special group", and on and on and on.   Others will be actual investors just having a meet-up, where some will be wholesalers pitching their contracts, and some will be other types of investors you can talk with and learn from.  The VAST majority however will be the gurus, so watch your wallet!

Since your'e her on BP, why not post your own meet up.  If you're new to investing, state that and that  you're looking to meet up with those more experienced.  I've met some wonderful people by doing just that.  We met in coffee shops at a slow time of the day.  Not many people showed up, but it only takes one or two people with experience to help you a great deal.