All Forum Posts by: Ke Nan Wang

I think it's very feasible and lot's of benefit from the education and expose to inner circle of the people in the industry. When I started out, I trusted and used a realtor for my investment properties. I had no reason to trust her except on two factors: One she's very nice, enthusiastic, communicative, and secondly, she's willing to offer a 4.5% commission to sell my houses. I didn't know what's going on behind a deal after we entered a contract, she didn't educate me or maybe she didn't know better. I felt like I was very reactive and lost my leverages in negotiations when I'm working in escrow. 

After I got my license and worked in the industry, I couldn't believe how much is going on behind the curtains. The knowledge and experience helped my real estate negotiation tremendously. I know what the agents on the other side want and what the seller want. This is one of the perks from having a real estate license. 

Other perks are: Have access to houses that are on the market. This perk got old quickly. When I first got my license, I was so excited and decided to "preview" many houses on the market. Now I don't remember the last time I "preview" a house. 

If you are with a brokerage that has bi-weekly meetings and you attend these meetings and some other trainings, you can get spoon fed with more relevant market and industry data as opposed to if not, you will have to be self-motivated to find the data on the internet. 

Biggest one is earning a buyer's commission when purchasing a property, and earn your own seller's agent's commission when selling a property. I would say there is a difference between a season and good realtor vs. an amateur realtor when it comes to selling houses. I have seen in the same neighborhood, similar house condition and similar price point, one listed with a reputable realtor, who was on point with marketing and open houses and sold within a month, another one listed with a not so well known realtor and who just posted on the MLS, sat on the market for half year and later withdrawn. So I'm not too sure about the "savings" in selling a property.

So all these perks as a self represented agent come with a cost of about $600 to $2000 a year depend on which broker you hang your license with. The rule of thumb is if you do one deal a year, you will get your cost paid for. So I think it's always good to have a real estate license as long as you are active in real estate. 

Now let's talk about actually providing real estate agent services to other people and become a successful real estate agent. This is a completely different ball game and require a complete different mentality than what I stated above. It's a tough industry to do well in. There's almost no way for one person to hold a W-2 job and be a diligent and successful agent. The time is not there. You either be a really ****** employee to your company, or a really ****** agent to your customer, or both. On top of serving your clients' real estate needs, you need to study the market, know the market, get good at dealing with people, negotiate deals, be diligent and have the attention to details with your contract and all the procedural paperwork involved with doing a deal. If you aren't good at your job as an agent, you WILL cost your client thousands of dollars. If you suck at marketing and sales, nobody wants to use you and your business will fail. So you need to be good at being an agent and being a marketer and salesperson. I think if anyone can learn and sustain this career and maintain a good W-2 job, that would be <1% of the population. 

So to summarize, it's very feasible to get your license and do most of your own deals and maybe some of your family and friends' deals. But it's almost impossible to be a career realtor who still holds a successful W-2 job. Mostly you will do your customer and your employer a disservice. 

First of all, at the end of the day, your realtor works for you. So if your realtor can't make a reasonable lowball offer with tact, then you might need a more competent realtor. Not everyone with a real estate license is the same. The good ones can save you tens of thousands of dollars. 

With that being said, there are definitely way to go about this without burning bridges and piss off the owner, and your realtor needs to feel comfortable to present this tactfully and confidently. 

The key is, you need to understand why does the owner wants that price and justify what the offer makes sense to you. Most people would not take a loss on an investment, it's embarrassing. If $275,000 is the owner's breaking even number, and it's not a short sell, then it's not likely you will bring that number down. But if that's just a number made up in the owner's mind, then your chance of success is much higher. 

The numbers below are made up numbers for me to demonstrate my case for you:

First, ask your realtor to ask the owner, why $275,000? Looks like he purchase the property X years ago at $100,000. And he spent $50,000 to fix it up. So he invested $150,000 to it. After commission and closing cost, without taking into consideration of rent income, his cost is $170,000. Are there any improvement to the property that's not shown in public record?  If there are improvement made, you need to account that into the owner's cost. If there aren't and you know this is a number just in the owner's head, then you can position yourself as such: I'm gonna pay the owner $230,000 cash to let him exit this investment with decent amount of profit. 

You can tell your realtor to say like this:

"After all the analysis, I'm looking at cashflow $200 a month at $250,000. For me to purchase this property, I need the cashflow to be at XXX amount, hence my offer needs to be $230,000 otherwise it wont' make sense to me at this point. So here is my offer and it's cash and I can close it in XX days with a 5 day due diligence. This is the number that works for me and if it doesn't work for you (the seller), I totally understand. "

(If this property is in great shape and you know you don't need due diligence or if the property is in bad shape that you need to completely rehab anyway, I would go as far as no due diligence so only contingent on a clean and transferable title.) 

Side note: you need to do your due diligence upfront so you can close the deal after the seller accepts your low ball offer. That's the fastest way to destroy your creditability and it's first make a low ball offer and then don't follow through. Unless misrepresentation was made that you could've not possibly find out. 

Here is an unpopular opinion, if cashflow is important to you, I would recommend you get a property in your local market and try to do things yourself. If LTR does not cashflow in your market, I would first try other creative ways: rent by room, MTR, etc before handing off my investment to other people that I have no idea what they are doing with it and how to hold them accountable. 

It's not a rocket science to manage a long-term property. Even most professional property manager would tell you why it's important to hire a professional like them, I am a professional PM myself and I know so many people around me (family and friends) manage property themselves and do it profitably with very little hassle. Once awhile someone will have a bad experience, but the chance is low.

Do this yourself you can cut cost on PM, which is a significant expense to your cashflow. Also you can learn the game, learn what the PM is doing, so later on when you decide to outsource PM, you know what questions to ask and how to hold them accountable. 

That's very high. Most mortgage brokers charge 2% to make a living but there are banks only charge a fixed rate origination fee. 

That's why it's important to shop around. I would use bank on a FHA loan if the bank can match interest rate and loan amount. I have done a deal recently it's exactly that. The bank saved the buyer $6000 in closing cost.

If this is a great location and you feel a good vibe for this neighborhood, good school, shops, restaurants and people are moving into the area. The condition of the house is pretty new and being maintained properly, I'm okay with that cashflow. 

If this is a class B/C neighborhood, 20-30 year house and barely maintained or upgraded, I wouldn't buy. Anything breaks would easily wipe out your entire year or two profit. 

That's a great question @Ran Iarovich. I can only speak from my own experience, and that is: I don't have a method to calculate the risk to tell me either yes or no on an investment. It's learn as you go, and keep up with podcast, forums and network groups, and read books. Learned from others, and implement ideas, keep what's working and get rid of what's not working. It's the best way to learn. If you only have limited capital, start with lower risk project first (house hacking or buy real estate in the market you know, mostly in your local market). Once you have more capital, depend on your personal goal, maybe you are willing to take on higher risk investment project to make more money: use more leverage, long distance investing, investing into assets you haven't done before, etc. 

Quick example:

You know T-bill is yielding 5% interest right now. So that's your baseline. Understand RE provides other benefits (tax shield, depreciation, etc.), and you do your analysis and see if the ROI is worth your time, effort and stress. Also keep this in mind, we use to pay 100k tuition to get a college education. So if you are young, even breaking even on a project but you learned valuable life lessons is a win. These real life lessons you can't learned in school. And the only sacrifice you have to make is your time. So getting start early is more important than getting a ROI in my opinion. After you do a couple of deals, then you look at the real numbers, and decide for yourself. "man last year I only made $100, or lost $2000 on these deals, but I learned valuable lessons and I think I will make more money in the next deal" or "real estate investment is just not my thing and I'd rather put my money to go buy stock or bonds."

I like RE investment because in my opinion, it's the more secured investment that provide tons of benefits where currently there are no other investment class can compete. Also you have the flexibility to make it as active or passive as you can be. 

In our state, accepting partial rent only reset the eviction process (LL has to post another 3 day notice with the remaining balance, not forfeit the right to evict). So first check your state law. 

My reaction to these scenarios are all different. 

I tend to be very strict in the beginning. There are different rent paying behavior from all sorts of tenants. Some tenants will do everything to pay early or on time. If they are one day late because work schedule they will feel embarrass and apologetic. For these tenants, if things happen to them I tend to work with them more.   

I've also inherited a number of tenants where they always paid before the grace period ends. So they pay on the 5th day of the month. Since I didn't train them right in the beginning and they always pay before the 5th, I'm okay with letting these tenants slide. 

For every new tenant I put in, I set the expectation straight upfront with them when signing the lease. I told them rent is due on the first and late on the second. If I don't see rent on the first, I'll post three day notice on the second day of the month. I don't let emotions getting involved. They can tell me sobbing story all they want, I told them I feel sorry for them but still post3 day notice on the second day if I don't see rent. I charge late fee per the lease agreement and file for eviction when the 3 days up. I don't have any problems with any of my new tenants. Even I do, I carry out my procedures. The earlier you start the process, the less loss you take. 

I have three long term rental rented out as an arbitrage. I sent my normal residential lease agreement to my attorney and he modified it to implement the following:

1. This is a commercial lease and it's governed by the non-residential landlord and tenant laws. Subletting is allowed for STR guest only.

2. 3 year lease with a built-in 3.5% increase on rent each year. They would want this anyway to get their furniture expenses back and guarantee a profitable period. 

3. Lessee is responsible for any maintenance less than $500 per occurrence. Lessee is responsible for all STR taxes. Need to obtain appropriate licenses to run the business and obtain the appropriate insurance with $2M liability. I would recommend have the lessee supply their own washer/dryer because STR will take a huge toll on this appliance if they wash sheets onsite.

4. If Lessee default on the lease, they have 24 hour to remove their personal belongings inside the premise or the Lessor will take procession of their belongings (furniture and decors) 

Then the rest is pretty much the same as my residential lease. 

Hi BP,

Hope everyone is having a great Tuesday!

Just wanna see what are your thoughts on this situation:

We have a nice and cute 900 sq ft, 3 bed 2 bath 1 car garage house in one of the most sought after community in St. Augustine Beach. No HOA, less than 10 min straight walk to a nice public beach on A1A Beach Blvd. Comparable nice condition houses are selling for $500k in this neighborhood. Our house has been rented out LTR for about 10 years. We have had stable tenants in it. The current tenant is paying $1850 a month but I'm confident market rent for this place, if upgraded, would be around $2800 a month. So we are not renewing out lease at the end of June and looking at fixing the place up and then we would either sell it or rent it out again.

The unfortunate part about this property is that it's under STR control by the City of St. Augustine Beach. It's located in a medium-low population density area where only 30+ day short term rental or LTR is allowed. Less than 30 day transient rental is not allowed (technically it's by licensed by it's being long gone and the waitlist is 10 year long).

We are looking at probably selling it as-is around $430,000. Or fix it up cosmetically and selling it for a premium around $500,000. We have a portfolio LOC balance that's costing us 8.75% right now, so if there are no deals on the market, we can at least pay down the 8.75% balance. At 8.75% interest rate, the $430,000 is costing us $3135 a month, adding property tax ($5000 last year) and insurance ($1200 last year), a total of $3651 a month to hold the property where it's not generating maximum of $3000 a month in LTR. We have cashflow from our real estate portfolio to pay down the LOC balance so we are not in a position that we need to sell this property. In other words, we can weather out the high interest rate and wait for more appreciation down the road.

My other option is to fix it up, furnish it and make it a MTR. We are looking at $4000 a month fair market rent but need to take into consideration of occupancy and added operating expenses with the MTR. 

Or we can do what some other people are doing in the neighborhood, doing a transient rental under the table and hope to not get caught. I don't think this option is appealing to me. The risk vs reward is not there for me at this point. 

The best part about this property is that it's located in the most sought after neighborhood near a very popular public beach. The area is growing. There aren't that much land left in the area so the property will have the highest chance of appreciation further down the road. 

So with the limitation of STR control and not allow this property to cashflow compared to the equity in it. Would you sell it and use the money somewhere else? That's what we are leaning towards doing. But often other people says location location location is the number 1 priority in real estate, and this property has a great location.

Looking forward for some insight from the community. Thank you in advance. 

Putting money into your primary residence that's not generating additional income for your own enjoyment is not an investment. Unless you are talking about making improvements to reduce your living expenses, which in most cases, hard to justify. Nobody here could give you much advise without knowing much about your current house condition. 

If your house can use that $100k and add an extra space so you can rent it out as a separate unit and get some income, that would be a good move.