All Forum Posts by: Glenn Espinosa

I love to see other young investors out there. I, too am in your shoes. I started investing at 22 and now have 8 units, 4 of which are in rehab. My company has 2 flips under our belt and are midway through our third (soon to be closing on our 4th). Who knew crunching numbers and fixing old houses could bring so much excitement?

Naturally I think we are a group of investors who have a higher risk tolerance. This has worked to my favor, so far. As we get smarter (and maybe older), however, we learn to crank down the risk a little.

But I agree, diligence, diligence, diligence. Never go into something without multiple end games and never let your emotions mess up the hard numbers.

Best of luck in 2013! We should plan an east coast young investor gathering.

Glenn

Others might frown on this but it's what got me off the bench and helped me do my first deal.

My first deal was a small one but I was able to fund it with $10k+ of savings, multiple maxed out credit cards, a $15k construction loan, multiple loans from family friends, and probably $10k worth of sweat equity on my part.

Toughest and riskiest deal of my career so far, but the most rewarding and the most lucrative (not for long, though). Knowing the numbers work enables one to make those risks. Also, being young and "dumb".

Alex,

From my experience, that idea will NEVER work. Many GC's hire subcontractors who are living pay check to pay check. These guys will never do a job with the end payment somewhere in the far future.

The best contractors can "float" a job for a few months but nothing in the timeframe you are suggesting.

In theory, everything you have suggested is great and all. In reality, finding a competent and reliable GC is much harder than you are suggesting.

No there are many people doing flips this way. As you do more volume it is the only way to do flips.

The approach works - I was merely outlining the things that you have to look out for, especially when you first start.

That's a big if

Don't think flipping is that easy and the term turn-key when applied to flips is definitely a misnomer.

Expect to make decisions about what renovations should be done, expect to be on site making sure things are happening, expect to be the one controlling costs and not over renovating.

Be careful, some GC's can sense blood in the water and many times they don't have any motivation to control your project costs. Why would they? The more work they do the more money they get paid.

Justin Morris - It seems like you are between a rock and a hard place - I don't have a team because no one wants to work with someone who has no experience, but I can't build a team until I have experience...

My question is - How comfortable are you right now? Have you been told flat out "NO" yet? The reason I ask is that by your post you don't seem to have stepped out your door and put yourself out there yet.

Until you engage in unfamiliar and uncomfortable situations regarding real estate, you won't be able to grow.

You will be told "NO" numerous times before you get a yes. Each time try to figure out what the other person really wanted from you and take action into providing that for the next person. Many Realtors won't give you the time of day - thankfully for us there are many Realtors.

You have to figure out the value you bring to the table when building relationships and leverage those points. I paraded myself out like the next best thing to sliced bread when I first started my career. Did I lie to people and tell them I had numerous deals under my belt? No. But I didn't focus on that, instead I focused on what my plans where, how that person could be a part of my future success, and most importantly, what they stood to gain from helping me out.

As for the business plan - check out this BP article http://www.biggerpockets.com/renewsblog/2010/01/26/outline-real-estate-business-plan-step-success/

The business plan is exactly that - A plan that you will implement. You don't have to have a deal already done to write one. My advice is not to focus too much on it, rather focus on finding a great deal. Your plans will change and I think most lenders know that.

When you have zero credit, zero experience, zero money the main thing that will matter to a lenders will be the deal itself. When you find one, lock it up. Put together an investment prospectus that outlines the numbers and make sure you highlight what the lender will stand to make from funding you. During all this you also need to be working on networking with mentors, other lenders, Realtors, contractors, attorneys, title companies, accountants, designers, etc. etc. etc.

Eventually you have to get out of your front door. That's the hardest part. Get uncomfortable and put yourself out there.

I'm putting together a BP blog about this very issue so it's fresh in my mind.

Sorry if this is all pretty vague advice but I promise you it's true. Maybe someone can word it in a more step-by-step fashion.

Till then,

Glenn

*Note: And my brother beat me to it*

I've done a lot of research on this lately as I am doing a green project, so maybe I can chime in a little..

A lot of your decisions depend on where the house is located and what r-value is typically recommended for that region.

Once you've figured that out your options will decrease and you can start to hone in on what method might best suit you.

For the most part, batt insulation is your best bet and it generally costs less that other methods. Some contractors I've talked to recommend a hybrid system for older houses that are generally draftier than most. This includes a foam system to "seal" the house coupled with batts to do most of the insulation leg work (cheaper overall)

By using foam to seal the house you eliminate air infiltration and allow the cheaper batts to work at their maximum r-value.

As for moisture issues, you typically don't have to worry about that with spray foam methods as you should have effectively eliminated air leakage. In high moisture areas (kitchen, bathroom) that are properly vented (range hood, exhaust fans) and tightly sealed, you can pretty much avoid moisture problems. 98% of moisture is caused by air leakage, get rid of it and you're set. Don't believe me, check this out from energy.gov http://energy.gov/energysaver/articles/moisture-control

A poly vapor barrier can help in these areas as well, again as long as you tightly seal the area - around doors, windows, outlets, etc. If you are using typical batts in this area, just make sure the vapor barrier faces inward.

Have you thought about consulting with an energy auditor? A lot of times they charge by the hour and they can lay out the best options for you pretty quickly - as well as give you good recommendations for insulation contractors in your area. There are also federal and state programs that offer rebates and incentives for energy audits, if you dig deep enough.

Hope this helps!

Glenn

Not a lot of people have $400k in cash. A lot of people can find ways to put $20k cash together, however. Thats why these properties are so popular.

Entry point and overall risk is lower when you're dabbling with the lower end homes.

Talk about sweat equity! Awesome story Brandon Turner!

For me, $500k seems like way to much of an entry price especially for your first deal (I assume it's your first since you're posting in the starting out forum). If you have access to that kind of capital, why don't you start with something much smaller?

I would tend to agree with the above, especially in today's market with the influx of new investors. I would venture to say that many new guys are tying up properties with higher offers but failing to produce once their financing falls through. I would definitely want to be the next one in line with a strong back up offer in that case.

Jim M. posted a success story today about this exact scenario.