All Forum Posts by: Erica Osborn

I realize how exciting it is to be on the brink of your first investment, but there are plenty of other fish in the sea here and like @Patti Robertson said if you have 200k to spend there are lots of other deals that meet and exceed minimum investing standards within that dollar range.

A few foods for thought:

• If your friend is will to sell it to you for 200k, and it's value after he finishes fixing it up is 245k, then why not sell it to an owner/occupant outright, gather your profit (potentially 25k-ish) and find another lease option deal that the numbers work better on? You could potentially wholesale the deal by signing a purchase and sale agreement with your friend for 200k purchase price, do the work and find an end owner/occupant buyer, and assign the contract to them for 245k. Collect your wholesale fee, and move on to your next investment.
• You would not cash flow monthly with the current numbers (can you afford to pay some each month for someone else to live in your asset?). Typically people in our market do not purchase investments properties for appreciation and assumed equity only, if you are caught and the market shifts your equity could be gone in an instant, but cash flow hangs in there through the good and bad as long as you bought it at the right price and in the right market. 
• You could negotiate a better purchase price that works with the rental rate and after repair value better. Your friend, as a successful RE investor, will know that you have to do this in order to make this deal work and should expect/respect it. As long as you have numbers to back up an offer price, there is nothing more to it! Numbers are everything in the REI game.
• You could offer him a chunk of the equity payout, if/when the tenant exercises the lease option, in return for a lower purchase price so that the property cash flows nicely during the lease period or partner with him through the whole deal and have him mentor you through this one (if he isn't willing, I would question why?)
• Could the property appraise at the 245k that you are lease optioning it for (your buyer will eventually be putting financing on the property and it will have to appraise so this number can not be pulled out of thin air - if your selling price is pulled out of thin air or incorrect your equity that you are basing this purchase on is gone in an instant). Get a licensed agent to do a proper market analysis and see what it's after repair value actually is before making any moves, and remember this value can change seasonally and as the market shifts.
• Please do your homework and protect yourself even when dealing with friends! This friend is essentially gifting you 45k in equity, make sure you have an honest answer for why they are doing this before moving forward. 

Good luck out there, be persistent, be smart, and go get 'em!

@Sean Rooks Way to go!!!!! What a great first experience. A wonderful mixture of learning and success!

Who: Anyone in the Hampton Roads area excited about expanding their mind about personal finances and wealth generation! I have 4 boards, so I can fit 24 people!

What: If you don't know what CASHFLOW is, it's the Rich Dad Poor Dad* board game to help you change your mindset about money and getting out of the rat race by compiling passive income generating assets and generating true wealth. All of this in a board game!!!!! *I am not affiliated with Rich Dad Poor Dad, just a fan of the game.

When: Thursday, May 23rd, 2019; 5:30-8:00

Where: In Aromas @ City Center in Newport News, get caffeinated, and get jazzed about getting out the rat race. I'll be supplying black coffee for participants to keep everyone energized.

There are many great pm professionals in the area. 

I would throw Christian Phillips with REMAX Alliance out there, he's a Soutside pm beast (in a good way!)! I am happy to give his contact info, just send me a message! It might be a good start, and congrats on your duplex!!!!

Erica

Hello @Kwambe Smith! Some food for thought when dealing with tax deed sales. It's my understanding that the tax deed (actual type of deed you receive, other examples general warranty, special warranty, etc.) is not marketable or insurable, meaning you can't get title insurance on it and neither will anyone else until the title is clear and someone will issue title insurance on it. 

If you are looking to wholesale these deals, just know that your buyers are going to have to put a quiet title process (quite a few thousand dollars depending on the deal complexity) into their calculations to get the property's title clear, marketable and insurable for their end retail buyers. If you are holding them for your own purposes (and do not plan on refi-inf them at any point) it's less of a worry or selling to cash buyers who are aware of the type of deed they are being sold and costs associated with it.....then to each their own. If any lending is going to be placed on the property though, the lender will require that title insurance and clear title. 

I know this from experience, having purchased a tax deed myself in Pensacola, FL! Good luck, those online auctions are fun (be careful :))

You are leaps and bounds ahead of the rest with having grown up here :) As long as you are up for the challenge, it's totally doable!

@Minnae Chabwera Every area is going to have it's pros and cons and @Amy H. is right, you can always find a deal, but as a long distance investor you unfortunately will have a more difficult time quickly reacting to new deals than people who are on the ground in that area. Personally, the only reason I would be investing in an area besides my own is that my money would translate better in that distant area, so if the 1% rule is really hard to come by in Richmond and they go fast to locals buying all cash...and you have no real reason why you are choosing Richmond (i.e. family there, friends there, contacts there, love the city, have history with the city), then why not go where there are deals that can still meet your criteria...and that goes for all over the country not just Hampton Roads. I am as biased as @Jason Sampson, Hampton Roads has a lot going for it and lots of deals that meet the 1% rule. Good luck in your venture, there are plenty of deals to be had, go get 'em!!

Hey Dave! I appreciate that you kept some of your money in the deal. I feel lots of people have unrealistic expectations about the BRRRR concept. They feel they have to pull out 100% of their funds and if they can't they walk away. Their money is still there, it's just equity! People forget that and go on unicorn hunts, when they could be stacking up BRRRR after BRRRR of solid investments!

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $175,000
Cash invested: $26,875
Sale price: $220,000

This was a vacation rental in the Crystal Beach area of Destin. We bought it. It needed just a few minor improvements and some updated decor. Our cash invested was 50% of the down payment (we had a 50% partner) and 5k for some improvements.

What made you interested in investing in this type of deal?

It was a sexy deal leaving us with a vacation rental in a highly sought after area and we got it for a good deal! The plan was to be able to use it ourselves and rent it out during peak times.

How did you find this deal and how did you negotiate it?

I found it online, through my mls portal from my agent.

How did you finance this deal?

Conventional financing.

How did you add value to the deal?

Improved decor, modernized the unit.

What was the outcome?

I kept my ear to the ground about appreciation in the area and values of real estate around us, in 2 years our property appreciated quite a bit and I decided to sell and take the profit and get out of the vacation rental business. We gladly took our profits from quick appreciation!

Lessons learned? Challenges?

Big lesson learned: Vacation rentals are a business, I love real estate, I don't love the business of vacation rentals. I thought it would be more passive (because I was using a management company).....but I learned quickly it was a business (I was always thinking how to increase income, decrease expenses, reposition, etc.). I couldn't turn it Additional bonus nugget: In my opinion, buy vacation rentals at the beginning of the low season, sell just before the high season (probably a no brainer).

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with a FL agent, I financed using a conventional lender.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $175,000
Cash invested: $26,875
Sale price: $220,000

This was a vacation rental in the Crystal Beach area of Destin. We bought it. It needed just a few minor improvements and some updated decor. Our cash invested was 50% of the down payment (we had a 50% partner) and 5k for some improvements. The plan was to be able to use it ourselves and rent it out during peak times. What I didn't realize was that I was buying a business and not necessarily a real estate investment. I was unaware of reality of this prior to purchasing the vr, I thought it would be more passive (because I was using a management company).....but I learned quickly it was a business (I was always thinking how to increase income, decrease expenses, reposition, etc.). I couldn't turn it off and I was paying over 25% gross rents to the management company and I felt like they were never doing enough. So, I kept my ear to the ground about appreciation in the area and values of real estate around us, in 2 years our property appreciated quite a bit and I decided to sell and take the profit and get out of the vacation rental business. Lesson learned, vacation rentals are not for me!

What made you interested in investing in this type of deal?

It was a sexy deal leaving us with a vacation rental in a highly sought after area and we got it for a good deal!

How did you find this deal and how did you negotiate it?

I found it online, through my mls portal from my agent.

How did you finance this deal?

Conventional financing.

How did you add value to the deal?

Improved decor, modernized the unit.

What was the outcome?

Sold, gladly took our profits from quick appreciation!

Lessons learned? Challenges?

See description above! Big lesson learned: Vacation rentals are a business, I love real estate, I don't love the business of vacation rentals. In my opinion, buy vacation rentals at the beginning of the low season, sell just before the high season.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with a FL agent, I financed using a conventional lender.