All Forum Posts by: Gerald Demers

If you have the cash, it's just an expense.  If you don't have the cash, it's a problem!  

In analyzing a potential deal, if the cashflow is only $100, there has to be some other amazing terms that would make me say yes to that deal; otherwise, it's too thin a deal and almost anything can wipe out your cashflow and cost you more.  

Our buying model we go by is I want rent to be 1.5% of the all in price (purchase and rehab).  If it rents for 900 a month, I can't pay more than 60K for the property.  It will create about $350 in cashflow and I know that if the rental market softens, I can lower rents and still pay my private lenders and cashflow.  

Our one property we have generated 4,950 in repairs in one year and it still cashflowed...a massive $150 for the year.   :O)

All those about that emphasize the importance of escrowing repairs, I applaud you.  It is an intelligent financial management practice both professionally and personally.  

That $8,000 roof that has about 10 years of life left, estimate it conservatively and call it 8 years.  $8,000 divided by 96 months is 83.33 you need to escrow a month for the next 8 years.  

If I am going to spend 3,000 on a vacation and 800 at Christmas, that's 316.66 a month for 12 months.  

Gerald Demers

Hello @Pratik P., In the case of an assignment, you are selling a contract which could be construed as personal property.  You are selling a right to purchase real property; you are not selling real property.  I am not sure what the rules are around assigning and selling a contract.  

I am curious, whether you are broadcasting it on Craigslist or a private email blast to your group, does the wording in your advertising stating you have a property for sale or an assignable contract on a property for sale?  

That being said and asked, most wholesalers I have experience with is they are trying to sell a property they have under contract, but have not closed on yet.  Their intent is to do a same day double closing.  They are trying to sell real property they have no equitable interest in and, at least in Florida, a real estate license is required to do this legally.  

I don't agree with it at all.  There is so many restrictions around selling property.  If you are not a licensed agent, if you send me a lead on a $25,000 house, I can't legally compensate you in any way.  But if I am a car salesman and you send me a buyer for my 60,000 car, I can compensate you without any issue.  Go figure.  

Yes I understand the desire to protect people and I certainly don't want to debate this in this thread.  

Gerald Demers

Hmm, there are several different ways here but one we use wasn't mentioned so I will add it.  

I see some additional ways to automate payment, erentpayments and Qucken for starters.  

Whatever we choose, I definitely agree with @Kimberly H., I want a location independent way to collect rent and I would like a location independent way for my tenants to pay rent (remove the "I am still on vacation so I will have to pay rent when I return" rubbish).  

We provide our tenants with DEPOSIT ONLY atm cards.  The can go to any Wells Fargo anywhere in the US and deposit their rent (cash or check).  Looking at our account on line, each deposit has a transaction ID.  If they use the card to make an ATM deposit, the last 4 digits of the transaction card are the last 4 digits of the deposit card so we know what property to credit the deposit to.  

We have a Rental Payment Options addendum in our lease that states how they can pay their rent.   ACH and the deposit only atm card are our preferences.  They can also pay be check, money order, etc.  But all of our tenants use either ACH or the Deposit Only Cards.  

Finally, I want to address @Matt Slakey comment "I have them go into a local branch to pay. The flip-side of this question: How do you stop them from paying? If you want them out and they pay, they can stay (at least in Oregon)."  

Matt, check your landlord tenant law for changes on this.  Previously, if you accepted any payment then your eviction process had to stop.  But with the advent of electronic payments, they definitely changed this in Florida.  If I am evicting you and you deposit $100 in my rent account, I simply send a check to the courts for that amount attached to the eviction.  The eviction proceeds.

If I am successful, what was being held by the courts will be released to me.   

Gerald Demers

@Pratik P., I AM NOT AN ATTORNEY.  Pratik, you state above that you don't need a license to wholesale if you do it correctly.  How does one do it correctly, specifically?  I ask because the rest of your post describes creating a buyers list and it seems to imply that if you approach them individually instead of mass marketing, you are not acting like an agent.  Where did you get this information?  How is marketing to 20 and marketing to an individual different where one way is illegal and the other not?  

Shawn Breyer, I would love to know what your attorney states.  I would think a disclaimer would not allow you to bypass any laws.  

In Florida, I see many people wholesaling properties they have under contract (ONLY a purchase and sale agreement).  Though many do it (and I have done it myself), doing this without a real estate license in Florida is illegal.  For real property, if you are trying to sell property you have no equitable interest in, you need a real estate license to sell that property AND be compensated for it.  I do not know what the laws are if you are doing it without compensation (for example, helping my friend sell their house and they won't be paying me for the help I provide).  I do not know what the laws are in CA. 

Having a Purchase and Sale agreement is not equitable interest.  There are two ways that I know you can have equitable interest in a property:  You can own all or part of it or two, you can have an option to purchase.  An option to purchase with first right of refusal is considered equitable interest, at least in FL.  Again, I do not know about CA or any other state.  

Is it illegal to wholesale REAL property without a license in Florida? Absolutely. Are there many that do anyway? Yes, of course. Do I know if anyone was ever caught or fined? Not a one. But I do know at the local REIA, there were lots of concerns about wholesalers not being licensed and a few years back, a whole bunch of them all got licensed and then set up a wholesale consortium: they market their properties and those of other wholesalers in the group. The idea that if they bring the buyer, they will get a cut of the wholesaler's proceeds.

Gerald Demers

@Shawn Breyer, you need to check with your own state laws on this. I believe you do, especially for access to the MLS AND be able to see viewing information. I also believe that if you want to own a supra key, you need to be working under a broker.

That being said, look in your market for an investor friendly broker.  Typically, they give you all or almost all of your commissions.  They basically create a resting place for investors to run free.  

Talk to an experienced broker in Michigan; actually, talk to more than one and confirm their answers are the same.  

Gerald Demers

Welcome @Account Closed.  Congratulations on your first purchase.  How did you buy it?  What cash did you use.  Was it all yours, some of it yours or none of it yours?  

What is next for you to grow your business?

Gerald Demers

Hello @Chris Davis, this question keeps showing up.  It shows everyone how important it is. 

I don't understand your first question about purchasing discount for both.  

Secondly, you state you want to buy under your LLC (commercial loan). Is your intent to purchase these properties directly into your LLC using conventional financing?

There are some that state you can refy your properties owed in an LLC. I am looking into it but the loan is for several properties, all of them performing and the loan amount will be about 380K. I bought all my properties with private lenders and fixed them up and renting them so they are all performing properties.

There are some who think you can refy the properties individually for small amounts.  You can speak to @Nathan Click about a solution that might fit your needs.  

Gerald Demers

@David Rutledge, cashflow is created by buying right.  Both property types can cashflow big time and both can suck your savings dry.  

Many see multi-family as easier to manage - one roof instead of 20, etc. In either case, I am always trying to improve my property to generate the most cash flow while still maintaining an awesome ROI.

I don't worry about appreciation too much. My plan is to hold onto the properties for a very long time and then sell them with owner financing.  And when I sell, I will create the value through the financing, independent of a property's appreciation.  

For your "I need an exit strategy if I need funds" requirement.  We are currently looking at getting a commercial loan for our properties.  While the amortization period changes from 30 years to 20, the lower interest rates support the higher payments and we still increase our cash flow.  

It also frees up all that underlying private lender financing we currently have allowing us to use that to buy more off line distressed properties.  None of our lenders have indicated that want their funds back; they enjoy the returns and the consistent payments.  Again, this solution is not dependent upon market appreciation.  We forced appreciation by buying them at a steep discount and then completely rehabbing them.  

These strategies work for multi-family and SFRs.  

The one thing I don't like about multi-family is the extreme difficulty managing pests.  That won't stop me from buying them but I really hate that aspect.  

Many site the advantages of multi-family is that if my 20 unit has two vacancies, I still get 90% of my rental income. If my house is vacant, I get 0% of my rental income.  I really don't like this analogy as I think it's apples and oranges.  If I have 20 properties and two are vacant, I still receive 90% of my total rental income.  

Gerald Demers

Know how or learn or get some help doing title searches.  Know what you are bidding on.  Make sure you are not bidding on a property foreclosed on by a second mortgage.  You may win the auction, but you also win the right to continue paying the first.  Senior anything does not get wiped out in an auction.  

Gerald Demers

@Stoney Lowstetter, first off, have that conversation with the seller in people speak, not investor speak.  

"What if I have a way that you can sell your house quickly today, get a great price, not have to change your schedule to show to other possible buyers that may or may not be able to close, and close on the exact day that works best for you and never have to worry about selling before you fly?  More cash and the perfect schedule.  Is that something we should talk about?"

Then capture your agreement on any piece of paper and it's a legal contract.  It does not have to be formal.  Tell the seller your real estate attorney will write it up formally and get started on the closing work.  I have seen a purchase and sale on the back of a business card.  

Alternatively, each state's real estate board has an approved P&S agreement. Just get a copy of it and capture your agreement there. Or, before you sit down with the seller, call your RE attorney and ask for a contract knowing he will be managing the closing.

Gerald Demers