All Forum Posts by: Ke Nan Wang

I mostly build to hold. In my early career I was building mostly in class C neighborhoods. Nowadays I use what I've learned and help investors building their rental portfolios in class C neighborhood while personally I either build Padsplit in class C or build high end vacation rental in class A area and hold them. 

For me, it's definitely cheaper to build than buy from retail because I save on a GC cost. For my investors, even with my GC markup, they still spend about 80% ARV from doing things normally so even they won't make much money if they sell it right away, but there's some equity in it for them and the cost is lower than buying. At the end of it, they get a brand new house with lowest insurance premium and lowest maintenance cost so to them it's no brainer. My new construction rentals rent out instantly at a premium rent. So my investors are happy and I get lots of repeat businesses from them.

For flipping, I don't do it a lot, I flip one at a time in class B neighborhood (HOA neighborhood) where I build semi luxury houses. Usually there is enough margin to make good money and keep my fashion taste current and my subs happy. Even real estate takes a huge down turn that would probably just wipe out my profit but not hurting my operation.

Hi Tj, when starting something new, start with a pilot program with some funds that's not gonna sink the ship even if you took a major lost and test out the water. Even as an experienced investor, when we go into a new market or a new opportunity, we use the same strategy as well. Every time we do something new, we start small and slow. 

You should do the same. Long term rental is the easiest investment strategy and just start there. Buy something in class B neighborhood or emerging class C neighborhood with higher cash upfront low leverage to ensure you have enough cashflow in worst case scenario and see how it performs. Looking at it as depositing into a long term savings account. The real estate will hold the value of your deposit, and the rent revenue is your dividend. In this case, you got to do a little more work of either find a good property manager or manage the unit yourself. But the upside is also much bigger than saving money in the savings account and lose it through time due to inflation and no tax benefits. Don't worry about LLC, just get a good insurance policy if you are worry about losing your asset. Hope this helps.

If I say yes, will you go for it?

Personally I wouldn't give up that easy I'd keep going and try my best to turn it a profit. 

I believe how a person treat one deal is how they will treat every deal. If I made a mistake, besides learning from the mistake, I'll work extra hard to make the deal as best as possible. 

The minimum I would do is to finish this property and list it on the market with the right realtor for sale so I'm not wasting the money I invested in the property. I may take a small loss but it wouldn't be over 100k. 

But if the property will breakeven or cashflow, and there is a chance for appreciation, I would rent it out and sell it at the right time. 

I don't know your personal situation, goals and motivation. 

Personally, if I were single with no kids just by myself and my dogs, I would rent out the rooms and live in this house since you said it's too much space for you and it's a two story house. 

You are in a great financial situation now so you can be very picky. Figure out your boundaries and look for the best candidates who can be your roommates. You aren't subject to fair housing if you are house hacking. 

I would use the rental income to hire a maid service to do weekly cleaning for me.

Seems like you've already made up your mind and no one is gonna change your mind. Anytime someone brings up a reason you will counter it with your own logic and actually push yourself further and further away from where it seems like the place you want to go. Just accept the fact that real estate could not be for you and your wife, and that's okay. 

Everyone has their our ways of building wealth. Not saying one method is the best one for everyone. Usually the one asset you know the best, is the best asset for you. I have a plumber who made $700k net last year between him and his father, they put all that money either in a high yield savings account or put it back to their business. Compare my plumber to another "hot shot" developer I know who ended up over extending himself and filed bankruptcy, maybe the plumbers are doing better than that fast growing developer...  

Personally I invest in stocks, mutual funds, moneys in high yield savings account, dabbled in digital currency and but primarily real estate. I know real estate the best and I think it's the best way to build wealth so real estate is my top choice.  It's not passive but I enjoy working in it because it's something I'm good at. Find the investment asset you are good at and just invest in that one. If you aren't willing to learn that investment asset, then you can either:

1. find someone you trust to help you invest into that asset

2. put money in low/no risk investment assets and just accept the low return

3. blindly go into an investment asset and basically gamble. You can win or you can lose. The pitfall you want to avoid in this scenario is that, even if you have some success, ask yourself if the success was due to luck or your skill. This is what I did with my stocks portfolio. In the beginning I was buying the companies I believed in, everyone knows buy low sell high but nobody really know where is the low and high. Sometimes you get lucky and you thought you were genius at picking the right stocks and then later you get unlucky and lose it all. At the end of the day, in the long run, without studying the stock market and the knowledge like Warren Buffet, most people ended up not beating the market and might as well just put the money in SP500 index funds. If you don't know real estate, this would be the same for  you if you just want to invest, not wanting to do the work nor learn nor wanting to do option 1. 

I have never been a wholesaler but I work with many wholesalers and are friends with a few wholesaler who run a successful wholesaling team in town so I might fit in the category of "I don't have to have eaten pork to have seen a pig run." 

In my opinion, many traits that would make a successful real estate agent can translate to being a successful wholesaler. Real estate agent transacts mostly retail properties where wholesalers mostly transact distress properties or vacant land. Their target buyers are flippers and investors. 

Here is the process (keep in mind, you can be the one person whom does these all, or outsource or have in house employees to do these):

1. Lead Gen: most successful wholesaler I know outsource lead generation. There are companies who will offer lead gen services at a far more efficiency than a single person. For instance, direct mailing. It may take a person average $0.5 material cost (card or paper and envelope, ink and postage) and plus whatever cost they view their labor cost is to send one mail out. And there are companies out there to help you send one mail out for $0.4-$0.5 and all you have to do is give them the parameters (zip code, city, etc.). They usually start out at 500 minimum per batch. Other lead gen methods are cold calling, social media, SEO (direct people who google "sell my house fast" to your website), signs and bill boards, and whatever methods you can use to let people know, YOU ARE BUYING PROPERTIES AT A DISCOUNT BUT WILL CLOSE FAST WITH CASH. The successful wholesalers I know spend about $10k to $30k a month to generate leads for their sales team to work the leads. Typically they need to do one or two deals a month just to breakeven from their marketing expenses. The successful ones do somewhere between 6 to 12 deals a month. 

2. Offer, the pitch. So once you get the lead, make contact with the lead, be prepare the lead can suck. Qualify the seller quickly on the phone and schedule an appointment to see the property. I think for someone who's starting out, that person can expect 12 to 1 appointment to closing conversion ratio and someone who's expert at it maybe 6-8 to 1 lead to closing ratio. You basically go see the properties, use the formula: ARV x 0.7 - improvement cost - assignment fee would be your offer. Now here is the battle, usually that number comes out to be around 30-40% of ARV. To many sellers, that could be a sticker shock. There are many scenarios can played out from here but a good wholesaler would negotiate respectfully and still stand firm on their ground. If it's unrealistic and not a good fit, they would not be hesitant to end the conversation on a good note and move on to the next lead/appointment. You would think, who in the right mind would take a 30-40% of ARV offer? The answer is more than you think. Many people are in all kinds of situation where some quick cash is way more important than hold on to a destress property that's not doing anything for them but causing pain.

3. Closing the transaction and exit. Once you and the seller sign a contract, now you have the options to either keep the property yourself, do flip or long term hold, or assign it to someone else if you don't have the capital to flip the property. You need to have a person to dispose the property for you, someone who has a connection to cash buyers and flippers. 

That covers the wholesaling process, besides sales skills, the successful wholesalers in town always value their reputation and relationship over anything else. This is not a regulated industry, so anybody can be a wholesaler. If a wholesaler screws around town, the big players will learn that very quickly and will stop dealing with the person. A good wholesaler that never runs out of buyers are the one who always disclose everything and do what they say. 

From my perspective as a potential buyer or a real estate agent who represents a buyer, what I am looking for from my wholesaler partners is that they bring me deals that fit our buy box consistently, always disclose everything they know and can close deals on time. The wholesaler usually understand construction and development so they know what potential issues we might run into for a property and they make sure to check those out for themselves or they let us know that this could be an issue. I typically let my wholesalers make $15k-20k assignment fee per property. 

Out of all the deals I have done, maybe only 1% I would say was a slamdunk and I saw there was no way to lose no matter what (i.e. somebody just handed a piece of real estate to me and only wanted pennies on the dollar) 

99% of the deals, none of them looked like a slamdunk in the moment. Some of them maybe was just little breaking even. But years later down the road, after we stabilized the properties and operated them for a long time, all of them become a slamdunk deal after 5 or 10 years. Even for the ones that somehow we missed the mark and it was "bad" deal in year one, but we continued hold on to it and operate it and made it green. 

The key is: simply don't get killed in this game. The longer you play, the better you become. And the real estate game is very forgiving. If your renovation cost ended up being higher than you budgeted, then elbow to the grease and you better pick up a paint brush. If your operating cost is high for your LTR, spend some time in the evening to learn how to manage properties on your own and start manage your own properties (trust me, it's not rocket science, professional PMs here will criticize me on this comment).

This deal you mentioned does not seem like it's a deal that will get you killed (financially speaking). So I'd take it and run with it. You will have lots of experience and knowledge from owning this unit. Whether good or bad, at least in the future, you see a similar deal, now you know better what to do or what not to do. 

I've used many and I'm sure there are thousands more that I haven't used out there. But Turbotenant is by far the best platform I've used for self managing landlords. Their free version is already great (a lot of PM software have the free version limited to a number of units, or lock one of their main feature behind a paywall, which they don't). And if you pay a low subscription fee (also the cheapest out there I've seen), you have access to some more convenient features but they are not necessary. 

The only complaint I have for them is that they don't have a feature for property management business. So you can't collect rent from tenant, take out the PM's fee and distribute the remainder to the owner. For that, I just square away with my owners on a separate account, minor inconvenience. 

Other than that, everything is great for me in terms of tenant screening, lease signing and tenant onboarding, rent collection and maintenance management. 

I know Jeff Weller from Coast to Coast lends on Padsplit properties.