All Forum Posts by: Ke Nan Wang

Yeah, you are not their seller. A seasoned wholesaler should picked that up from the first 10 seconds of conversation and should have immediately ended the call on good terms and move on to the next one. The one you've encountered and many of us do are the inexperienced ones who think they can talk a property owner into a low ball offer because there is no commission and closing cost. 

Once you understand their model, you wouldn't be as irritated as you were. 

Most things make sense to me. 

The 50% rule for net profit is a conservative estimate but it's pretty good one. This pretty much cover all the maintenances. If you do a good job in the renovation and the renovation cost covers the replace any appliances/roof/plumbing/HVAC, then your maintenance expense should be less and your profit should be more than 50% of your gross income. 

In this high interest rate environment, if you want to take all the money out and continue BRRRR, then it's very likely you will have negative cashflow. You can mitigate that by reduce your finance amount, leave some equity in the property and lower your monthly payment, or see if you can get better interest rate.

At the end of the day, most of your real estate wins come from appreciation, cashflow is a tool to help you maintain the property in your portfolio until it's the right time to sell. 

In reality, you will potentially getting $1500 a month and pay about $1000 in debt service so you should have $500 net operating income until you have to pay any maintenance and your property tax/insurance. 

If everything works out how you projected to be, this is a good deal. 
 

Finding a free mentor is rare. A better mindset is to work as an intern for someone who’s already successful locally. I occasionally have young people reach out to me, asking what value they can offer in exchange for the opportunity to shadow me on a project. That kind of approach stands out. Even if they can’t help much, you feel inclined to help them—because they showed initiative and respect.

On the other hand, when someone just asks, “Can you teach me?” without offering anything in return, it can come across as entitled.

Ask yourself: what value can you bring to the mentor? Sure, some people may genuinely enjoy teaching and won’t ask for anything in return—that’s just who they are. But from your perspective, you should always approach the situation with gratitude and a willingness to give back. And ideally, you rather bring value from the start than making promises you may not keep.

Since I'm one of those investor you mentioned, I can speak for it with my own experience and insight from both the perspective of an investor and the perspective of a property manager. 

Property Management fee is more like an insurance premium, PM hope nothing goes wrong from the correct tenant placement and relationship management. Trust me, if things go south, assuming a responsible PM, that little PM fee you paid won't cover the resources the PM has to invest to solve the problem. So the PM business is a volume business. If you want to hire one, you want to hire a professional and reputable PM business who has well trained professional staff to manage your property. If you are gonna go with a real estate agent who does PM on the side, or a family member or a friend, you might as well just manage it yourself and keep the 10%. If you do a good job in tenant placement, yeah you don't do anything else but collect the monthly rent, assuming you have a quality conditioned property. You should have a team of trusted vendors where anything breaks, you should be able to call the those people to fix the problem for you and pay the cost. That's what PM will do any way. I don't recommend investors to actually go hands on to respond to maintenance calls unless it's stupidly simple. You should be able to ask your tenants to send you video and photos for any maintenance issues and 90% of the time, you can diagnose based on that and either direct your tenant to fix it (reset a breaker) or call the right vendor to fix it. I'm currently managing 30+ units and I have no problem handling all of these. 

One thing I will say it's both an art and a skill to handle tenant relationship correctly, you don't want to be a bend over nor you don't want to be a slumlord. You need to know the Landlord Tenant law and your leases cold so you know where your bottom line is. My strategy that worked well for me is first, to have a iron clad and fair lease, done by an attorney where it's protecting the landlord but also fair for both sides. Then initially, if there's any problems, I give the tenant the benefit of the doubt and I accommodate more leniently. I would say 70% of the tenants I placed, I simply collect rent and don't hear from them again until lease renewal. The other 30%, I might hear something here and there after they moved in, which is very understandable because I might miss something during tenant turnover, I have encountered some high demanding tenants, and usually be genuinely nice to them and be accommodating 99% of those tenants. I might have had 1 or 2 super high demanding tenants throughout my landlord career so far where it didn't matter what I did, they weren't happy. And here is my way out, I have a clause in the lease that I allow the tenants to terminate the lease within 2 weeks of moving in, they have to pay for the remainder of the month rent and we can square away their security deposit after they move out and turn the property over. I can present to them that option saying since nothing I do can make you happy and it seems like you might have made a mistake to rent this property, we don't like unhappy tenants so you can exercise this clause and be out of the lease, give the property back to me with minimum penalties. All of the incidents I mentioned that, the tenants immediately started to back off and say they would love to stay and then I don't hear from them again. 

Personally I've been getting so good at property management that it doesn't take much of my time to handle the tenants no matter what situations are. I don't see a late night text as a headache. If I get one, and I think it's an emergency, I'll immediately send my vendor out who's on 24/7 schedule. If it's not an emergency, then I'll respond the next day. This is something you got to train your mind for it. I remember when I started, every time I just feel dreaded when I see a maintenance request from the tenants. I don't anymore. And I've resolved lots of problems and maintained a very good relationship with all of my tenants with what I see as minimum effort. If I have to hire a PM, the PM fee would be well over $60k a year that I don't see it's justified based on how easy is it to me. I can see myself to handle double the volume I currently have. 

Here are the criteria for me to hire a PM:

1. out of area. If I own an out of area property that's not feasible for me to manage remotely. I haven't owned one yet and I even have a friend who manage 10+ units remotely by herself without a PM simply have a team of trusted vendor in the area. 

2. My personal earning power has exceeded the PM fees I'm saving. Say if I'm making $1M a month, then my time would probably better spent to focus on doing the work that's making me $1M a month than property management

3. I continue to grow my portfolio outside of my capacity. Personally I think I can handle 60 units no problem. So far it's just not the case for us. We have been more or less maintaining the number of units we have, but making each unit more profitable than focusing on growing the quantity. 

Lastly, you should know that property management is not a profitable business unless you do it at scale. So if you hire someone who's PM for you but PM is not that person's business and that person is not doing it at scale, then it's to that person's best interest to do as little as possible. Only the PM companies who do it at scale can afford to hire the right staff and give them proper training to handle all the issues and be responsible for your property. There are PM companies who are just a marketing company they do nothing but advertising and onboard property owners. Then there are truly good PM companies where the owner is a good PM and have a team that can best serve the property owners. Only the ladder is worth to hire a PM for. All other cases you might be better off save the money and manage it yourself. 

There are few factors here, yes I was recently denied on a loan as well even everything looks great 800+ credit score and high cashflow, our DTI is definitely below the threshold by a margin if the underwriter understand our operations.

These are my speculations of what might be going on: 

1. Factor 1, many underwriters worked for a lender don't know better. I personally don't know what's the qualification to be an underwriter for a bank but we have experienced where my accountant needed to hold hand with the loan officer, who plays a telephone game with the underwriter, and help them to interpret our financials. In one incident, we felt like the underwriter had made up their mind about denying us from the getgo and were just come up with reasons or excuses to deny us. 

2. Current economic state, definitely feel like this year lenders have tightened up their lending practices. 

Possible Solution for you:

One lender denies you absolutely doesn't mean others won't be glad to lend to you. You need to talk to other lenders, banks, especially smaller local ones who you have a close business relationship with. I know the local bank that we bank with they are very lenient with their requirement with us. Their loan officer is an actual CPA, and he absolutely understands our financials my accountant loves dealing with him. They only need to speak at high level and he understood exactly how we operate and our DTI.

Not legal or professional advices, just what I would do in your case:

That's why eviction is always our last resort. We try with the following but our history with the tenants matter a lot. Therefore an experienced PM knows how to deescalate and inexperienced landlord usually failed and blow things out of proportion. It's a very fine line to walk on. The agent must be firmed but reasonable. However, in the end, if the tenant is not dealing in good faith, then eviction is the only way forward. 

Other alternatives before the eviction would be:

1. let them break the lease and out at the end of the month. If they told me that's the option they would like to proceed, I would put that in a written agreement and have all parties signed. 

2. Let them break the lease and when they vacate the property, give their full/partial deposit back (cash for keys lite version)

3. Let them break the lease, when they vacate the property, give their deposit back plus some additional cash that makes sense to me (cash for keys heavy version)

If they agreed to those, signed the paperwork and then when the day approaches, they still show no signs of moving, then it's time to go to the court. Most damages to properties are cosmetic (drywall, paint and flooring) and doesn't cost much to fix them with a few exception if they clogged the drain, break any drain pumps and damage your major appliances (be financially prepared to repair/replace them if broken)

I'm a licensed agent in Florida, but if I were using a Realtor to make an offer in your situation, here’s how I would think about it.

First, I assess the worst-case scenario. If I make an offer with contingencies that protect me, and I lose the opportunity to buy—am I okay with that? It depends on how competitive the property is. If it's getting a lot of activity and looks like it might receive multiple offers, then trying to negotiate contingencies that favor me may be pointless because I have no leverage. In that case, I’d probably wait and see if it actually goes under contract. If it does, I probably wasn’t going to win it anyway. But if it doesn’t, I might have a better chance after 30 to 60 days when the seller could be more motivated. Unless I absolutely love the property and can't afford to miss out, I wouldn’t lead with my strongest offer. But if I really want it, then I would put in the best offer I can comfortably afford.

Second, if I’m in a position where I might be the only serious buyer, then I’d take a give-and-take approach. I’d try to give the seller something they value and take something I value. In most cases, price is what matters most to the seller. If I’m financing, price might not be as critical to me, so I’d be more flexible on price in exchange for contingencies that protect me. In your case, that might be a tenant vacancy contingency.

Third, I try to convert every unknown or risk into a dollar amount. I’d talk to an attorney or experienced property manager in the Seattle area about the true cost and timeline of evicting a tenant. Then I’d double those numbers just to be safe. If I still want the property and feel like the seller just doesn’t want to deal with the tenant, I’d deduct that cost from my offer. For example, if I estimate it’ll cost $50,000 to evict, and the property is listed at $1.8M but we had been discussing $1.7M, I might shift gears and offer $1.6M (or even $1.5M) with no contingencies and a quick close once the title clears.

Just some negotiation strategies I usually use.

My best advice right now would be focus on doing what you love, which is flying. Build a successful career in that and just put your excess money in an index fund if you don't have a passion to truly study and grind in real estate. 

I started doing real estate full time back in 2019. Considering I have invested a total of about $3.5 mil over the last 6 years, if I had just put those money in the index funds since 2019, I would probably ended up very similar to the net worth I had today. Yeah it's a little bit less but if you think about S&P is 100% passive and I'm spending all my time in real estate, this is what I would advice someone today. 

Of course I would still practice real estate because I feel I'm good at it, when I complete projects I feel like I've been productive and improved the community, I employed many subs and gave them jobs, and I've build a relationship with many people throughout the years, these are all benefits of working in this field. But if you are doing this simply because people are saying it's the only way to grow wealth, I could argue there are other alternatives. 

It looks like to me that flying is your true passion, and it's generating great income for you, I would suggest you to focus on doing what you love, what you good at and continue to excel in that field. Unless you have tons of free time outside of flying and just want to deep dive into another field, then you may consider going into real estate. 

And I'm one of them. We got into a deal with the pro forma looked great on the sale exit. After about 10 months finishing up the project, right now the property just does not sell after multiple price cuts. So any further price cut will render this project simply breaking even and our investors do not like that. 

So our second exit is to convert the listing into an airbnb and getting the revenue to float the property and sell when the time is right. 

Why is your credit bad?

If you don’t have experience, credit, or a track record of a number of successful deals from inception to exit, and no skin in the game (no cash down), why would anyone trust their hard earned money in your hands? 

Finding those deals is one thing but people with that kind of net worth to invest in general are much smarter than you think. Hence most people turned you down. 

If you are so good at finding deals, consider give the deal to someone else who can work the deals
for a finders fee or assignment fee. After some deals done, maybe you have earned your part and negotiate a higher stake at the table.