All Forum Posts by: Joshua Martin

@Rick H. @Sharon Vornholt

Thanks ;)

Hey gang,

  So I've shifted my marketing materials to probate leads over the last two months, and am now coming at it from the realtor/investor angle. That is, I can either help them sell for top dollar or quickly for cash.

  I've got the copy planned out well enough to get the ball rolling and some initial pamphlet material that will hopefully look legit from the realtor angle, but for those of you who mail lots of probates, how the heck do you do it?

  More specifically, from mining this data the last several month I can expect from two counties (for now) about 75 leads per month. Sure, I can stuff envelopes for the first month or two or three, but if I'm planning on mailing them for several consecutive months (7-12? - I guess), very quickly that becomes not only a difficult system to keep track of (which mailing for which month of leads), but also remarkably tedious if I try the DIY method. Still, I plan to for the first few months as I fine tune things, but very quickly it needs to be outsourced.

  So, do you hire someone to just stuff envelopes and you take care of printing, etc. (because I've found difficulty finding someone that offers the quality of mail piece I'm looking for), and what is your database look like for keeping track of the probate leads? (Not to mention keeping track of the attys who I also plan on mailing - not planning as many touches - I was thinking one letter per probate, then call, then e-mail if it's available, then if it looks like an approachable office I'll stop by).

  Just looking for ideas an guidance on the nitty gritty.

Thanks in advance. 

Best,

  JTM

@Sasha Josephs Time and scale. While a driving for dollars list might provide more targeted leads and distressed properties, it isn't at all feasible for an established investor who is mailing out 5,000 pieces of mail per month. 

Hey gang,

  I thought you'd be the folks to ask a traditional finance question. I just saw there's a 4 family in my marketplace that looks pretty solid but is beyond what I would qualify for if I were to carry the whole thing personally. Do you consider rental income when qualifying an applicant? 75% of the rental income on the other 3 units of property would probably probably qualify me.

  Thanks.

Best,

  JTM

Hey gang,

  This isn't a first wholesale deal for 20k, or a knock out flip, or even really an investment at all. It's much more modest, but I did want to share for two reasons: 1. I just became a biggerpockets pro, and I told myself I wouldn't do that until I did my first deal (and it's only kind of a deal ;) And 2. I've officially gone red to black in terms of start up costs.

I only discovered REI and BP about 11 months ago, started saving money, paying off bad debt, and getting things in order. I got my license about 8 months ago, and dinked around with that for another two before signing on to a brokerage. So, realistically, I'm only sharing that in less than six months at the brokerage and actually taking action, I've built up a solid network of investors in my marketplace, know who to call when the deal comes in, I've sold 2 houses, one under contract for a buyer, a listing went up yesterday, and a few more in the works. With the closing coming up in early to mid-March, I'll officially have made a few thousand dollars beyond my expenses incurred. I also have a two family rehab project under contract that should cash flow very well if I can manage C properties.

  Point being, get in the f-ing game. I'm hardly accomplished, but I've learned so, so much more in the last six months of sending mailers, door knocking, cold calling, and whatever else I do to stay busy than I did reading investment books (though both are required, I suppose). And the other point being the progress doesn't feel rapid but looking back six months it's so obvious. I met a guy who has become a friend off of here about 9 months ago, and neither of us was really doing much beside planning to get into real estate, and we were just talking a few days ago about how for we've both come. (He's now up and running as a commercial broker and just closed his first deal with more in the works).

  It doesn't matter that I haven't started with the 20k deal. I bet the reality is that very few do, and the guests we hear on the podcast (and all want to be like, c'mon now) are the exception rather than the rule. I bet for most investors it starts and builds slowly with one decision and move at a time, hitting singles and doubles rather than the home run we all want.

  I'm in the game, it feels good, the money will come, and my success is inevitable. Or as a friend here on BP likes to say, "Persist and you will win!"

  Thanks BP. 

Best,

   JTM

Hey gang,

  So this is a general question that I thought I'd get some interesting feedback on (or maybe none), and it's one that some will interpret as procrastination or over-analysis, and I'll preemptively say it's not, it's a question about strategy (and I can't afford A markets currently anyways...)

This is something of a weird time to enter the marketplace, knowing enough investors who weathered the storm, lost a great deal, or acquired their whole portfolio after the crash, I hear about these deals and the ease of finding them, but there's obviously nothing like it on the open market (read MLS) today. And, in fact, after closer analysis, many of the higher end areas look like horrible investments. I mean piss poor with cap rates at 2%, negative cash flow, and properties that will inevitably deteriorate because owners have never heard of CapEx or even property maintenance.

  This question is more with respect to buy and hold (my play), because flippers obviously look to capitalize on strong markets and low inventory, giving a quick sale and maximum profits. But for the 'high end' investors I see time to time on BP who trash 'cash flow' C area investing, when I'm currently looking at the market it genuinely seems to make more sense. 

I was doing on MLS search on one of the A markets near me and analyzing sales between 2010 and 2012 - some properties were selling for 1/3 of what they're currently trading at, and there was a short sale or foreclosure every other listing. If you guys were buying cash at the time you're probably retired now, on a yacht somewhere...

  I've been working as an agent and closed a few transactions with some better ones in the works, but where to put my cash is the question (I don't have tons). I have a C property under contract that needs rehab, I plan to occupy, has a ridiculous cap rate on paper, and should be fine if negotiations come together. But I've talked to some 'higher end' investors recently who said they would've skipped the junkers all together and moved to the bigger stuff, but isn't that a terrible play right now?!

  Are cash strategies, wholesaling, whole-tailing, flipping, slanging real estate (working as agent), or buy and hold C areas the best play in the given market? My 1-2 year plan was buy cheap properties. Recent conversation had me rethinking it. Analysis of better areas has me rethinking their advice. 

  It seems the best advice in the given market could simply be: save your cash.

BUT, who knows when it corrects? Who knows what kind of fall out we see, if any?

I guess one general takeaway could be don't shop on the MLS...

  What are your thoughts?

Best,

  JTM

Thanks gang!

@John Leavelle Good insights. So just to be clear you like to hold at least 3 months of vacancy and repairs (ideally 6 ;) - so is that 3 months at 100% occupancy or three months at 25% occupancy? I'm trying to learn the safest way to analyze these things, and most of what I've been doing for the last 6 months is SFRs and DUPs. So, for example, in vacancy you'd hold $780, and in maintenance $390 (sticking with my numbers and ratios)? $780 would cover a tenant leaving in the night and the time it might take to run it over the next month, and $390 would probably cover cleaning, not paint if it was required.

@Daniel O. & @Michael Henry They're all 1 bed units, in Glendale just south of Bayshore (you know Michael), and $650 one a one bed doesn't seem market low to me. I don't see any value add on this darn thing, I think it's just a terrible investment. Cap Rate I would imagine at 5-6%, and I see even worse on the eastside. I should run more numbers to get a better feel for it but I often wonder if my expenses are correct and then that can influence a cap rate.

Thanks everyone else! @Jeff Brower Those are basically my numbers, I just roll CapEx and Maintenance together at 15%. I agree with conservative numbers, but when you run them you see how much junk is out there.

@Kyle Nelson No worries.

Surprisingly, the 4 family right next door to this one sold for within 10k of this property. Who buys this junk?!?!

Best,

  JTM

That is not helpful feedback. The question is whether the cash analysis is accurate for future reference and application. Thanks for your input.

Hey @Jordan L.,

  First I would ask, where is the property? And do you see any building happening there? Buildable lot is okay, but there is not that much new home construction happening within Milwaukee itself, and as I was just talking to a in house realtor with a builder yesterday, profit margins are only impressive with new builds on higher priced homes, and that's with them having everything in house. (Though, admittedly, I know nothing about spec building or building on contract, I was just picking this guys brain but drew the conclusion that it wasn't necessarily as lucrative as I might have thought).

  What are vacant lots selling for in the area you're looking? And are people buying them? I live in Riverwest (say what you will), and I can buy a lot down the street for 10k, but do what with it?...

  Also, if you're talking about a B- to C+ area I'm not sure where you're charging 1500 for a 3 bed and 1000 for a 2 bed. And even 1100 for office space sounds potentially high. My broker is listing the lower office space on 113th and Bluemound for $650 if I'm not mistaken (a bit smaller).

  What is your pro forma cap rate with that purchase price and considering that 100k invested?

  Don't know anything about expenses on the property but you'll have to know all of that to the best of your knowledge to start estimating these values. The vacant lot is tricky, however, because I'm sure the seller thinks it's worth a ton.

  And I'm no expert, by any stretch, but just some questions that occurred to me as I was reading this.

Best of luck, and keep us posted,

Best,

   JTM

Hey gang,

  So I'm looking to run more numbers on larger units, and just starting with a 4 family here and wanted a little feedback. It's a B area in Milwaukee (if you guys want to weigh in ;) and it's definitely not a deal but for a buyer with a long term play desiring modest cash flow I wonder how accurate my numbers depict the property (when I run my numbers most of the time properties in good areas look like terrible investments...)

  In any case, here we go (on a monthly basis, I find it easier):

Asking price: $295,000

GSI: $2,600 p/m (4 units @ $650 per)

Vac @8.3%: $215.80 p/m

Tax: 512.33 p/m

Utility: 202.58 p/m (per seller for electric, gas, and water - shared areas I imagine? In any case, due diligence required).

Maintenance @15%: 390 p/m This one is really the question. Seller has 120 p/m for property maintenance, grass cutting, etc., and cleaning of general areas. Don't know what type of budget to factor in for CapEx and repairs.

Management @ 10%: 260 p/m

Insurance: 100.19 p/m per seller.

Total Expenses: $1,680.90

NOI: $919.10 p/m

Debt Service w/ 30 yr @ 5% w/ 80% LTV, or 236,000 = $1,267 p/m

Cash Flow: - $347.90

Am I over-budgeting on certain items or is this just that bad of an investment? I won't bother with Cap or COC - can you run them negative? Lol.

Thanks in advance. And to property owners, this might seem simple, but after you've built up a certain dollar amount in the CapEx and vacancy budget I imagine you just pocket the remainder correct? What is your threshold? 1 month at 100% vacant?

You're the bomb gang.

Best,

  JTM