All Forum Posts by: Account Closed

@Colin C leamy I can't convince my parents to do anything, let alone give me their money for something as "risky" as investing in property. LOL.

To give you their funds someone has to be a believer. Best way to make anyone a believer is to gather enough knowledge and ability to be able to put together a compelling story. If you could do this, you could probably get money from a lot of people, not just your parents. In fact, getting money from others who are already believers in REI might be easier if you could establish credibility with them.

Good luck!

@John Colin Rogers start thinking as big as possible today! Big big big big. And don't tie yourself to the idea that you have to be small for a while before you can grow. Ask yourself WHY a lot, and ask yourself HOW a lot. 

It doesn't matter which investing style you take on, many work in different ways with the right execution. There are 101 ways to exit the rat race and it doesn't have to take 10 years :)

@Thomas Bryan with those high payments I would make sure you're being as conservative as possible on your pro-forma operating expenses.

-Definitely include a management budget, and it's going to be 8-10% because this is going to be a residential property manager.

-Get rehab scope of works on these buildings, find the age of all of the major cap ex items. I would also use a higher maintenance cap/ex reserve based one 1) the condition of the collective portfolio 2) the fact that these are not a single conforming building, but a bunch of singles with a lot of surface area.  Have some sort of reserve fund. If you have as much equity in the portfolio as you say you do, then maybe get the seller to sell at a slightly higher price but transfer you cash for operating reserves at closing (not sure how the lender will like this, you may have to place the funds in an escrow account of sorts to demonstrate they are really just for operating reserves not just cash at closing that the seller is giving you out of the lenders pocket).  If you have 5 roof replacements, 15 furnaces, 50 windows, etc... all go in year 2 you're going to be in trouble with your low cash flow. 

-Better start talking to banks now! A lot of traditional banks aren't going to like the fact that you have no skin in the game. They don't care if the seller signs a subordination clause or if the cash flow numbers meet their debt coverage ratio- a lot of them are accounting for cap rate expansion now too. They're also going to want to see a certain amount of liquidity on your end. Try a mixture of traditional and local banks!

It sounds like there's some promise in this deal for you, although the whole 17 properties thing for 4 units isn't ideal. Good luck and keep us posted!

@Chamara Edirisinghe @Bob Green makes a good point- local banks that offer portfolio loan products will often refi without seasoning at all. Here are a few things to consider with them though.

-Even if they offer an immediate cash-out refi, a lot of them will not do so based on the market value of the property, but rather the purchase price. That means if you bought your property for 70k and it's really worth 100k... even if it appraises for 100k they will only give you their standard LTV percentage of the 70k purchase price. You may have to do a little more digging to find one that will allow you to take out debt so quickly after with non of your own skin left in the game.

-When you do find one that will refi based on property value, take a close look at terms. Often times, these banks that lend their own dollar to give you flexible terms will do so as a commercial loan. This may often mean lower LTV (70% instead of 75%), shorter amortization schedule (20 or 25 years instead of 30), slightly higher rates, and they will almost always require recourse even on an SFR. Take these into consideration- if you property's pro forma is strong and cash flow checks out these shouldn't sink you.

***As far as finding a bank goes, this is a simple process (especially in a huge city like Atlanta) but takes a bit of elbow grease and sales effort. I would suggest putting a very nice clean pro-forma report of your current property together, as well as for the property you want to purchase. Maybe even create a very simple "business plan" illustrating what you plan to do in order to continue financing through them with loans that you will easily perform on. Also, local banks care about relationships so offering to transfer your deposits through them (plus other services you may use from your current bank) will incentivize them to work with you more. Lastly, be salesmanlike in your approach. Go online and make a list of local banks in the area. Get 10 or 20 to start with. Then put together a nice clean email template and send it to a bunch of their business bankers. Follow that up with a phone call to each branch until you find one or more that are willing to work with you, and decide which you think will be best.

Good luck!

@Shella Sanders I agree with what you're saying- a buyer should do their own due diligence...

But imagine a wholesaling business where your buyers trust you? How much easier would that make it for you to get deals sold? 

These are some things I've noticed have improved my business when I became a more literate wholesaler:

1. When I can accurately estimate ARV: My buyers who have watched me do it accurately time and time again trust me. They can buy a wholesale rental property from me and forego an appraisal. Some who have seen their cash-out-refi's come through at or above my ARV number don't even ask for comps any more. How easy does this make my job?

2. When I can accurately estimate and scope out rehab for them: My buyers don't send in a bunch of different contractors. Hell, sometimes they don't even send in any of their own representatives aside from my property manager, who I have look at the property before I even present it to a buyer. They know what I tell them is going to be the rehab cost, and their costs often come out below my estimates.

3. When I can estimate market rents correctly, create a project plan for them, and offer investing strategy: They come back time and time again. They entrust me with their money because I treat it with greater care than I treat my own. When I hand pick a property and bring it to a buyer they don't pass on it, because I took the time to know what they want from their investments. I don't even have to email blast my whole list. 

Imagine a wholesaling business where everything is sold before it's even bought. This is something you have to deliberately design. And although it is truly your buyer's obligation to make the purchase decisions that are best for them... you will throw rocket fuel on your business and set yourself apart from all other wholesalers when you do what they wont- make it your obligation to be an expert in your area so that your buyers can not only come to you for product, but for your knowledge of real estate investing.

ALWAYS BE BETTER!

This thread inspired me to start blogging on BP :) 

This might not be the right place for here, but here ya go! It's probably terrible, and it's a complete stream-of-consciousness type post. I hope some of you guys enjoy.

https://www.biggerpockets.com/blogs/10891/73653-invest-like-an-investor-not-like-a-landlord?created=1

Thanks for hanging out at our [failed] open house experiments when we last visited! We're realizing auction style is definitely not the way to sell properties. The investor-relationship approach is far better for both the seller and the buyer! 

p.s... you better not have deleted me off snapchat!

 Greg, you're too kind lol. I just look like a fool if my analysis doesn't match yours- and trust me, I've had to look like a fool many times to learn to better collect information and valuate these properties from all the way over in CA without seeing them first. 

You'll make up for the deferred trigger pulling by buying, like, 8 units at once- I can feel it!

 Hey Marcin!

Two SFR's were in Hammond, both pretty good parts of it. The duplex was in Laporte on W 18th. The four unit is in EC!

 There are a lot of factors that go into investing in working class property- the factors I find most important are:

-state laws being highly favorable for the landlord.

-strong property management that understands this asset class and tenant class.

-high level of demand for rental properties

-a quality building

-A clearly defined minimum property value you're willing to invest in so that repairs aren't disproportionately high relative to the value of the asset.

That being said, one of these properties I would call a C-, the other three C+. Properties in these markets work for a lot of experienced investors and I've personally encountered many in these markets that have managed and maintained small to mid-sized portfolios well for 20+ years into retirement. The proof of concept is there, it just takes a deliberate and well planned set of strategies to succeed. 

Nonetheless, I appreciate your skepticism. Every investor has a different risk profile & I'm sure as an investor, you make far fewer mistakes than most.