All Forum Posts by: Joe Sanada

1) I want to learn all I can about REI because I want to make a career out of it without losing my shirt.
2) I won't have much cash to actually invest until I have sold my property in CA and I need to finish the reno before I can list it.
3) I used to be an attorney and I saw plenty of clients get burned for trusting the wrong person/people. I don't want to be an OOS investor praying that I have the right team in place and none of them are lying to me. I want to be an active part of the boots on the ground team until I know that I am working with the right people. So I am working on visiting the area in which I want to invest so I can interview people and move there once I get my property sold.
4) Being slow to get away from my computer (see #1) to actually get things done on my current property (see #2) is dragging out the process of selling/moving (see #3).

I totally get what you are saying and I think there is WAY too much "just get out there and start" advice going on in every industry, not just REI. My wife and I are wedding photographers and you would be shocked to hear how many leaders in our industry are basically telling people "The most important thing is to start booking clients. You can worry about learning photography when you are at paid shoots."

That is terrible advice and, obviously, the people who take that advice fail catastrophically because, as it turns out, brides don't really want you to be learning how to use your camera on their wedding day. Who woulda thought?

On the flip side of that coin: "You miss 100% of the shots you don't take." - Wayne Gretzky

It is SO easy to succumb to paralysis by analysis in REI and it is something I personally struggle with. I have enough cash to do 2-3 deals at a time, so I want those 2-3 deals to make me the most money possible.

But, there is a limitless amount of information out there about REI and there are almost 20,000 cities in the United States alone. If I try to find the absolute best properties in the absolute best cities for my perfect investment strategy, I will never take action. If I don't take action, then my money isn't making the most money possible. It isn't doing anything!  

There are plenty of people who are trying for the best of the best. Those people (myself included) need to hear and embrace that perfection is not required. Getting good/great deals with a good/great strategy is good enough to start taking action.

**This is not legal advice. I am not your attorney and me posting in here does not establish an attorney client relationship with anyone in this forum. If anyone has any legal questions, you should contact an attorney who is licensed in your jurisdiction and is familiar with the law surrounding your particular legal issues.**

I can't speak to the laws of your state nor can I technically give you any legal advice. That being said, back in my attorney days I had a few clients who had damage done to their properties as a result of negligence by government entities.

I don't know whether you have a case or not, but if you are considering lawyering up, you should do it sooner than later. In many jurisdictions there are specific statutes that require you to file claims with the government in a very short time frame after an accident. These requirements are different than the typical statutes of limitations for civil lawsuits between non-government individuals. For most civil lawsuits the statute of limitations is upward of a year for you to file your case with the court. For claims against some government entities, you have to file special claims directly with that government entity within just a few weeks in order to be allowed to file a civil lawsuit later if the government denies your claim. Stated differently: if you don't file the right paperwork now, you might be giving up your right to sue the government for damages and the timeframe for doing that is usually ridiculously short.

You will want your attorney to do that paperwork for you because if you screw up that paperwork, it can potentially result in your attorney having to spend a LOT of time dealing with that in a civil suit and may even result in you losing your ability to file a civil suit against the government in its entirety.

Again, this isn't legal advice. I'm not your attorney. Just wanted to give you a heads up that you might have to act unusually fast if you are considering litigation against the government.

At this very second, I am trying not to look at ANY areas because my wife and I haven't decided which city we want to move to/invest in, so we aren't ready to start actually purchasing properties. I was looking at properties on MLS everyday for several weeks, but I was starting to get a little upset when I would find what looked like a great deal and then it sold. The FOMO was flaring up, so I am just telling myself "there will always be a next deal" and I'm concentrating on getting our CA property ready to sell. If I can control my curiosity, I won't be seriously looking at properties out there again until just before we visit in early April.

That being said, when I WAS actively looking, I was looking at properties in areas that had rent comps upward of $750/mo for BRRRR opportunities and the usual hot up and coming areas for potential flips.

Mike, are you referring to turnkeys that are $40k-$50k or properties in general? I'm strongly considering moving to the midwest to find BRRRR opportunities. I feel like I've seen a few properties in the $30k-$50k range that are in areas of Indy that I have heard are pretty good, but they need a good amount of rehab. But, obviously, I'm not as familiar with the area as you.

I guess what I am asking: Am I one of the chumps that is getting lured by the idea of cheap BRRRR investment opportunities in Midwest markets like Indy and Columbus? Lol.

@Alex Kamunyo I'm a total newbie investor, but I'm trying to practice running the numbers on this site in hopes that the seasoned pros can tell me what I am missing. :) So, take my comment with that in mind. 

But, to springboard off what Jonatan said, unless you are including carrying and sale costs in the reno budget, there doesn't appear to be enough meat on these bones for a flip unless you can pick them up for WELL below the asking price.

Property 1:

Acquisition and Carrying Costs:

$95k Purchase
$1.5k? Closing costs on purchase for title transfer, recording, etc
$20k Rehab
$2.3k 14 months of property taxes
$5.7k? Utilities, insurance and other carrying costs for 14 months

Total: $124.5k

Cost of Money:

$14.5k = 14 months of interest on $124.5k @ 10%

Sale Costs:

$9.6k Agent commissions on sale of property for $160k
$1.5k? Closing costs on sale of property for title transfer, recording, etc

Net: $9.9k

Potential for $10k profit with no contingency fund would be an absolute "no" for me. It wouldn't take many unexpected problems and expenses to end up in the negative. Even if everything goes perfectly, is it worth all that work for $9k?

House 2:

Acquisition and Carrying Costs:

$150k Purchase
$1.5k? Closing costs on purchase for title transfer, recording, etc
$25k Rehab
$3.7k 14 months of property taxes
$5.7k? Utilities, insurance and other carrying costs for 14 months

Total: $185.9k

Cost of Money:

$21.7k = 14 months of interest on $185.9k @ 10%

Sale Costs:

$12k Agent commissions on sale of property for $200k
$1.5k? Closing costs on sale of property for title transfer, recording, etc

Net: -$21,100

Obviously, this is a "no."

I wouldn't plan on flipping as a contingency if you can't BRRRR them and I don't think you are going to get all of your cash out on a BRRRR anyway at 70% LTV.

I read a good article on here that a good quick and dirty metric for BRRRR is 70% ARV - All Rehab Costs = MAX offer. For property 1, that would be (.7x160k) - 43k = $70,500. For property 2 that would be (.7x200k) - 57.6k = $82,400

Seasoned Pros: What did I miss/do wrong?

@Amanda M Laird, I'm kind of in the same boat as you: I have a bunch of equity in my condo in CA and I'm looking to take that and invest it somewhere else.

I've spent the last month or so basically just doing research to try and figure out where the "best" market is. I have found that there are a million different websites that have a million different answers to the question "what is the best city for investors." 

The problem is that there is no website that knows your exact investment strategy, goals, risk tolerance, and priorities. They are all looking at some key metric (or a variety of metrics) that is important to them, but that doesn't necessarily mean that their conclusions are going to be the right fit for you. For example, I have seen several articles that say that San Francisco is one of the "best cities for investors" because all they are looking at is property appreciation rates over the last few years. But, for someone wanting to get into the rental business, I can't think of many places worse than San Francisco to start looking.

It is kind of the same in here. In addition to everyone having different priorities and opinions, odds are that if someone is saying "XYZ is the absolute best market for investors!" you can check out their profile and find out that they are wholesalers (or property managers, etc) in that market. I.e., they are trying to sell you something.

Decide what your key metrics/priorities are and what your strategy is going to be. Then check out the midwest (Cleveland, Columbus, and Indianapolis are common options), Texas (San Antonio and Dallas/Fort Worth are common options), Florida, North Carolina, Missouri, and Alabama. I think those are the most common areas that people are talking about right now.

If you do happen to find the indisputably best market for investors, message me. :)

I've been looking in the San Antonio area too! Maybe we'll be neighbors soon. :)

I'm a newbie too, but I think that the math looks like this:

20% initial down: -$20K
Rehab Cost: -$10K
Cash out refi at $120k: +$16k

You are still in the house for $14k + closing costs, points, etc. That's if you can even get a loan that will let you only do 20% (my understanding is that usually the lowest lenders go on investment property is 25%).

From what I've read around here, the rule of thumb is that if you want to get all of your cash out (or more), your max initial offer should be: 70% (or less) of the after rehab value minus the cost of the rehab. In this case, that would be: (.7 x 120,000) - 10,000 = $74,000

@Josh Sohar My wife and I are planning a visit to Indianapolis some time in the next couple of months. I'll reach out when we are a little closer to the trip. 

@Lane Kawaoka You mentioned that the resources are there for out of state investors. By any chance would you mind sending me contact information for who you are working with?

@Jay Hinrichs Thank you for the tips and for the heads up about Morris/Oceanpointe. I don't think that I've been looking at anything related to Morris/Oceanpointe. But, I saw a brief negative comment about Morris/Oceanpointe in another thread and I meant to circle back to see what was going on. I'll be sure to look into it more thoroughly. 

Thank you @James Wise and @Grant Rothenburger!