All Forum Posts by: Account Closed

@Kenneth Bell I've only been looking seriously at fix and flips for a week or so, but I'm confident there will be opportunities.  I live in an thriving MSA with 3.5 million people so I'm sure I'll find a good spot where they will work.  It is a little harder today than a year or two ago, but there are always opportunities, sometimes just have to dig a little harder to find them.

You want a list of the brokers in town?  Or you want to get on their distribution lists?

I wanted to thank everyone on this thread again for the great insight and input.

After further thought and discussions with my lender, partner and builder, I've decided to pass on this deal.  In the end, I decided taking on $750,000 of recourse to make $40,000 was not worth it.  Granted, the project may go well and everyone involved make good money, but it didn't feel like the right structure for me at the end of the day.

I have a lot of real estate development and acquisitions experience and while I've never specifically built a spec home, the education was not worth the risk in my opinion.  Without getting into too many personal details, it came down to the fact that I make a very good living in my day job (multifamily acquisitions for an investment fund), was offered an opportunity to be a partner on a large apartment complex deal I put together for my company in Nashville and allocated a good chunk of my equity towards that, and the fact that I've realized at this point in my career while I am still building up, I am not comfortable putting myself in a position where any one deal can wipe me out.  In the end, it didn't make sense to me to leverage everything I've built up over the past few years on one deal where I might make $40,000.

One of the main things from this thread that stuck in my head was @Kenneth Bell saying I could make similar profits by taking on a much smaller deal with less downside risk.  I've looked at some entry level housing in my city and run numbers and he was right.  I'm now looking at doing a flip project where I can cover my downside pretty easily.   Going upside down on the $750,000 on the spec deal that was intended to be a "side project" would have sunk me at this point in my career. Down the road, I will take on those larger deals, but not until I have greater means to protect my downside.  

Regardless, this is has been a fantastic learning experience on many fronts.  Thanks again to all!

@Lynn Currie @Douglas Dowell @J Scott @Account Closed 

@Karen Margrave  just saw this recently on a house I toured.  

@Scott Trench perhaps I missed it somewhere else in this thread, but do you also invest in real estate?  If so, disregard the rest of my post.

I agree with @Account Closed above that your post is a bit misleading.  I am extremely confused by your claim that investing in a 401k is the best way to grow your net worth.  In fact, it's one of the SLOWEST and in my opinion, riskiest.  Did you have a 401k in 2008 or 2009?  Have you recovered those gains yet?  

If you are investing in your 401k as a compliment to your real estate investing, that is one thing, but saying a 401k is the best way to increase your net worth is harming to newbies.

For one, you can only contribute $17,500 per year to a 401k.  You can do one small real estate deal in a year and make more than that.  Imagine if you did 2, 3, 4, etc deals per year and banked all that money?  Your net worth would be MUCH, MUCH higher than the $17,500 max you put in your 401k, even if it grew 20% that year.

@Michael Yin you are interpreting what @Steve Olafson said correctly.  In the larger multifamily space, sellers rely primarily on brokers to vet potential buyers.  In a competitive market like we are in today, brokers will ask to see proof of funds, transaction history, industry references, etc if they don't already know your firm.

Unless you have $10 million liquid in the bank and it's a deal that no one else is chasing, you are going to have to work pretty hard to convince a broker/seller that you can take down the deal.  If you don't have the reputation and track record, be assured at a bare minimum, you will need to show you already have the equity raised and have a lender willing to make a loan to you. 

Go visit as many of the nearby properties as you can and pretend you are looking for an apartment.  Find out while touring/talk to leasing people what the rents there are.  Have them show you a unit or two. Then ask yourself:

1. Is this more or less desirable than the property I am thinking of buying?  Why or why not?

2. If less desirable, does the property I am thinking of buying have higher rents?

3. If more desirable, why is that?  Better condition?  Bigger units?  Nicer amenities?  Better location?  Can you add/fix anything at the property you are looking at?

@Cheryl C. the question you asked about credibility is a very good one.  I respectfully disagree with John. If you ever get up into the land of larger multifamily deals, this reputation will follow you around.  Most big deals (200+ units) are listed by large national brokers and they often guide the deals to buyers with the best reputation.  I'm sure John is doing great work, but I just wanted to make this comment to make it clear to you that your instincts were correct.

Before you pay down your debts, look into financing.  You'll need to put at least some money down on a purchase (and have reserves), so make sure you aren't using your down payment money to pay down your debt.  Unless, of course, you cannot qualify for a loan with the debt.  But speak to a mortgage pro first.  

@Steve Olafson welcome to the site!  it's been a long time.  hope you are well.