All Forum Posts by: Joshua Martin

Hey Gang,

  So with this one I'm basically wondering what you'd do as I'd like to have an exit strategy plotted out before moving on it, and I see several options all with early implications. I plan to send an offer off tomorrow for my girlfriend (she'll be the O/O for a year) at asking price, so we have a good shot and according to listing agent I'm the only one that's seen the property yet.

  Details:

SFR

Asking price: 34,9k

ARV: Conservatively 110k, but depending on type of rehab I think you could push 120k or even list at 125k. (I want my numbers to work at 110k, but there's plenty of margin).

B to B- neighborhood. A mixture of O/O and young adult rentals.

I think it could rent for at least 1,000, but I plan to follow up with some other owners tomorrow to see how well their properties rent at 12 or 13. (I saw old posts on craigslist at these prices).

So, the rehab. If I wanted to make a decent rental property of it I'm looking at 12,5-17,5k. A higher end flip probably around 30k - 35k. These are somewhat ball park, but I'm not normally way off. Going through with a contractor buddy tomorrow to get a better idea.

With respect to possible exits, here's a rental breakdown by month:

GSI: 1,000

Tax: 341

Utility: 75

Vac (@ 8.3%): 83

Maint: 100

Manage: 100

Insurance: 50

NOI: $251 p/m

Debt: 35k @ 4.5% @ 30 yr = 177

Cash Flow p/m = $74 p/m

Needless to say, this is fairly unimpressive. And my research tomorrow with respect to possible rent of $1200 p/m could make a massive difference here.

These numbers don't even mention the rehab cash will also be borrowed at 3%... 

On the other hand, the flip looks quite impressive. All in, w/ holding costs, at let's say for the moment 85k and a sale price of 115k. I guess I'll have to run numbers on cap. gains and additional closing costs, but still.

So, apologies, this is a bit rambling, and I know it's a deal if I get it under contract, but I've been brainstorming all day about what the heck to do with it. My general plan is buy and hold, but an impressive margin on a flip looks appealing.

Other takeaway is that taxes in Milwaukee can kill your cash flow...

Also, BRRRR looks doubtful given unimpressive W2 income and unverifiable income elsewhere. So for the moment, that'll have to hold off, though I love the strategy.

A big part of the question though is about the rehab. Obviously if I want to push the higher comps I'd do something like refinish the bath and put in hard wood floors on the main level. If it's going to be a rental, clean up the bath and maybe floating floors. Several thousands difference between the two...

I guess any input is helpful. Hopefully by tomorrow night I can review some comments and also update with what I learn about SFRs in this neighborhood tomorrow.

Thanks in advance,

Best,

  JTM

Hey @Elliott Ridley, welcome to BP! I would say this from recent experience - while everyone thinks of wholesaling as an entry level strategy, I think it is actually more of an advanced strategy. It can't be done without cash (for marketing), and you need to know a heck of a lot about evaluating deals, and specifically scopes of work if you're going to put forward a wise investment for cash buyers. I see lots of people tie properties up under hardly below market value, or not knowing enough about particular blocks to know which properties do and don't compare, and then shop them around where the cash buyers are and not realizing that they don't have a contract on a deal...

Assuming you have a 3-4k marketing budget to get the ball rolling, I actually think buying a first property is an easier strategy than learning all the pieces to wholesaling.

That said, if it's the strategy you're taking and you're going to give it hell until it works, it can work too. 

Just a thought, but best of luck either way, and make sure to check out the Milwaukee REIA meeting and especially the Brew City Meetup Group to meet other investors.

Hope to see you around.

Best,

  JTM

@Brianni Johnson I think ROI is all that matters when evaluating investments...

What kind of return you expect depends on your local market. A areas might be happy with a 5-7% cap rate, in C- to D areas investors might expect something more like 15-20%...

There's several metrics to use, but look up the Definitive Guide to Cap Rate vs. COCR here on BP. That's a great source and explanation of the values and limitations of those metrics.

As for more complicated metrics, Internal Rate of Return, for example, those are used more in commercial and multi-family deals and I'm yet to meet anyone talking about the IRR with a single family.

How you know what's good for you area is by calling property managers, networking, talking to other investors, and studying the cap rates on recently sold properties (you don't need to know the actual cash invested for this one, so rents relative to purchase price is enough). 

Another quickie is the 2% rule, which often works here in Milwaukee, but as I understand is rarely achieved in larger markets, out east, for example.

Best,

  JTM

@Account Closed Look up motivated seller interview questions, and you'll find a basic list of required information to go off. 

About an actual script, they're not that valuable, because you'll never stay on it. I found the toughest part was just getting over the fear, and after ten or so, you'll qualify quickly to the best of your ability, and no longer stumble and fumble along. 

Sounds like you're doing well, and the best practice is just send the mail and take the calls!

Best of luck,

JTM

@Marty Anderson Welcome to BP! And you said it, imperfect action is better than perfect planning. Just keep reaching out on here, go to the Brew City meet up to meet some legit investors, and keep talking about real estate. When you love it you talk about it with everyone you meet.

As for your house hack plan, you can make that work. But maybe consider Riverwest as well. You might find a bit higher return if you don't scare ;)

Feel free to PM if you need anything or want to hear from someone just several months ahead of you.

Best of luck,

  JTM

@Rick H. I'm glad you weighed in. 

With respect to probates, do you find a level of oversaturation? After mailing for 3 months now, every lead that's come through has received 8-10 essentially identical letters from other investors, some that mail every two weeks.

I know there's a market there, but I've thought about changing strategy and coming at it from a realtor angle, who can get them the most money for the property or make a cash offer.

My original intent was to wholesale these leads, but when so many cash buyers are already mailing them I've been priced out of a few because of the wholesale fee.

Do you solely offer the cash option?

Best, and thanks in advance,

  JTM

@Ranny BBloch

They're probate leads, so all you have to begin with is a name and address. They would also be very awkward to call.

If you had the email that'd be a good strategy, but those can be difficult to find.

Thanks for weighing in though.

Best,

  JTM

@Daniel Hyman We also have the Milwaukee REIA group that meets at a few different times throughout the month, but that's a REIA...

  Brew City is much better, but has only been about once a month.

Best of luck, and I'll see you there,

  JTM

@Jun Ku Welcome to BP! If you want to know more about Milwaukee, or the variation in our market, feel free to PM me. I'm also on a team that's a one stop shop for local or out of state investors, so if you need a referral for any of those services, I could help you with that too.

Best of luck,

JTM

@Sean Stockman Welcome to BP! This ***** the bomb.

From someone just nine months ahead of you, who went the agent route, PM me if you want to know a bit about how my experience as been so far, or if I could provide any other insight.

Best of luck, and stay on board,

JTM