All Forum Posts by: Robert Williams

Hi Tal,

Its always nice to meet another DC investor.  I think the easiest way to answer your questions is to first differentiate between a "bird dog" and a wholesaler.  To me, a wholesaler is someone who finds a ready, willing, and able seller and brings you the deal.  The sales price has typically already been negotiated, and the wholesaler may even have the property under contract and is looking to assign it to an investor.  I pay wholesalers based on the strength of the deal.  I recently paid a wholesaler $11,000 for bringing me a deal in NW DC, as an example.  The wholesaler negotiated the sales price and then got the sellers to sign my contract.  

When I think of a "bird dog", I think of someone that you're hiring to go out and do prospecting for you.  A bird dog will bring you leads (names and addresses of someone who's "thinking" about selling) and not so much done deals.  Bird dogs typically get paid some type of hourly rate and then a bonus for any deal that actually closes.  I've worked with bird dogs who made 25 cents an hour following up on warm leads over the phone for me.  They earned a $2,000 bonus for every deal that closed.  I think it's important that you incentivize a bird dog to get you deals, not just a bunch of names/phone numbers/addresses that never amount to anything.

-Rob

You should put your investment properties into an LLC as soon as possible. However, sometimes this is not practical, as other folks have pointed out. Transferring to the name of an LLC may not be allowed by your lender, or it may be prohibitively expensive.

In Washington, DC, for example, you have to pay transfer tax to move a property from your own name to the name of an LLC. This tax amounts to 1.45% of the sales price. So far it hasn't been worth it to me to pay $6,000-$10,000 per property to move them into an LLC.

The primary reason you want to hold a property in the name of an LLC is for the legal protections it affords you. If moving to an LLC is not an option, another way to protect yourself is to identify the risks you're most concerned about and to address those. For example, if you own a rental property and you're worried about tenants potentially suing you because of an issue with the property, increase the amount of your liability coverage on your rental property insurance coverage.

Lots of lenders are starting to offer loan products that do not require a property to meet Fannie/Freddie guidelines. The mortgage industry is starting to offer more creative products because competition for new lenders is so intense. Though your building sounds like it won't qualify for the most vanilla conventional loans, I suspect that you're not just limited to cash investor buyers.

Since I'm an agent I'm biased, but I suggest talking to a local real estate agent who has good lender contacts to gain a better understanding of the market. Don't sell yourself short. Talking to an agent doesn't cost you anything and could provide you invaluable information.

Hi Ashref...it's not difficult to find good "fix and flip" deals on the MLS, the challenge is getting them under contract because the competition for these limited listings is very intense. I see at least two to three good DC flip deals on the MLS every week.

You can be successful getting a good deal under contract by knowing the market and knowing your own investment criteria so well that you can instantly recognize an opportunity and act on it. One of my first flips came on the market at noon one day. I saw it by 2 PM and submitted an all cash offer for it by 4 PM. I offered above asking with no contingencies and had my agent push for a ratification that evening. I basically beat the competition to the punch and made it hard for the sellers to say "no".

Another good deal came about because I stalked a property that had been on the MLS for a long time and put in a lowball offer when I thought the sellers were motivated enough to accept my offer.

All that being said, your best source for consistent, good "fix and flip" deals is to implement some off-market acquisition strategies (yellow letters, bandit signs, door knocking, door hangers, bird dogs, etc).

Hi Eric,

Lots of investors are working in Deanwood because the housing stock is relatively cheap there and it has good public transportation access with the metro station. Of course, ARVs are lower for properties, but there is definitely a buyer market and you can make good money on projects as long as your acquisition cost is right.

I haven't done any deals in Deanwood yet, but I've made offers on several houses there and am actively looking in the neighborhood.

-Rob

Hi Kelsen,

Welcome to BP!

The numbers you presented certainly look good on the surface, but you really have to be careful about where you're pulling your data. First, when you say you ran the comps to establish the ARV, what do you mean? Did you check what other similar houses have sold for within the past three months in the surrounding blocks? Estimates of a home's value on Refin, Zillow, Trulia, Realtor.com, etc, are just estimates, are notoriously inaccurate, and do not factor in the home's physical condition.

I suspect the estimated repairs amount you have is off. The DC Tax Assessor's evaluation of a property is meaningless. They never physically look at the inside of a property so they have no idea what shape it's in. As a wholesaler/investor, you need to visit the house yourself to see what work it needs.

Finally, while finding a deal on Redfin is not impossible, the first question I would ask myself is this: "If this is such a good deal, then why hasn't someone else bought it yet?"

Hope this is helpful....keep on learning!

-Rob

Hey Brandon...I really like your motivation and there's no reason not to pursue your business interest. But, there is a significant risk to an investor in hiring someone completely inexperienced to rent their property. The risk to an investor is having the place sit vacant if the person/company they hire fails to rent it out in a timely fashion. If I have multi-unit with four apartments that need to be rented at $1000 each, I'm losing out on $4,000 per month in potential income for every month that a leasing company fails to find me tenants.

I don't know what all the legal requirements are to set up a property management company (I'm already a licensed agent so I didn't need to worry about that angle). The rest is just setting up your business entity (an LLC in my case), etc. If you go to DC.gov, they have a complete small business section that you can research for the exact requirements.

Hi Brandon,

I have a property management company in DC which provides leasing services (finding tenants for properties). All of our leasing services business is through referrals from my real estate company. To find renters, we advertise on Craigslist. We basically charge one-month's rent for our leasing service (we have a tiered price structure, so pricing changes slightly based on the rental amount of the property).

The services we provide in exchange for our leasing fee include helping the homeowner prepare the property for market (suggesting neede repairs, painting, etc), marketing the property (taking photographs or hiring a professional photographer, putting together a compelling Craigslist ad), holding property tours, screening applicants, putting together the lease agreement, and moving in the new tenants.

For additional fees, we will help homeowners register their rental units with the DC government.

Rents in DC are really high so providing leasing services can be pretty profitable assuming you can generate enough business.

Hope this helps,

Rob

Hi Matt,

Yes, there are not a ton of true duplexes that come on the market in Washington DC. First, it's not a very prevalent building style in the city and second, many homes that were built as true duplexes have separate owners for the two units.

What is a lot more common, as you pointed out, is the SFH with an accessory apartment. These are very common in DC and would be your best bet in my opinion. There is no "rule" that prevents you from buying such a property as an owner-occupant for one of the units and then, after living in the home for a period of time, moving out and renting both units.

The more common challenge that you will encounter with accessory apartments is that many of them are not legal rental units so make sure you do your due dilligence with that upfront. To legally rent a basement apartment, it will need a certificate of occupancy from DC. You should ask for this up front.

If an apartment does not have a C of O, the next question should be does it meet the criteria to get a C of O.

With all that said, the reality is that many basement rentals are not legal rental units. Of course, that opens up the owners/landlords to a host of potential problems, but many folks do it nonetheless.

-Rob

Hi Karen,

Here in DC you can pretty easily find out who owns a particular property by doing an address search in the DC government's property tax database. The link to the database search tool is here: https://www.taxpayerservicecenter.com/RP_Search.jsp?search_type=Assessment

I'm not aware of any publicly available tool here in DC that lets you search by an individual's name to find all of the properties they own (but that certainly doesn't mean that it doesn't exist).

-Rob