All Forum Posts by: Laird Wynn

Jesse,

As a wholesaler you are likely to run into a lot of properties that are marketable but do not have enough margin to make wholesaling them profitable.  The best way to take advantage of these is to get your real estate license and list the properties for sale.  Collect the commission income on the properties you can't wholesale and make more money with the same effort.

I invested for a long time before I got my real estate license and now realize that was a mistake.  Give it some thought.

Here in Cleveland, Ohio the supply of good investment properties is tight in the middle to high priced areas with abundant opportunity for those with more tolerance for the inner city.  

In a tight market you have to get creative and find ways to get to the properties before they come on the market.    It's also worth remembering that even in a market with more supply than demand the good deals always go fast so you always have to go fast!

Congratulations on getting started!   Keep learning and growing!

Instead of"Buy and hold or flip" why not "Buy and hold and flip."

I agree with the comments that flipping is a way to earn income and holding is a way to earn wealth.  The problem for holders is that the wealth creation curve of their buy and hold properties is not linear.    For example:  A new roof on a home has a life span of 30 years in most areas.  However the depreciation of that roof is not actually a straight line.  A home needs a roof and a home with a good looking roof that is five years old is not worth any less than a home with a brand new roof.   After 20 years, you really start to see some aging to the roof and buyers begin to calculate the cost of replacing the roof.  Thus, the actual depreciation of the roof is relatively flat for the first 20 years and then gets really gets steep after 20 years.   If you buy and hold that property long enough to pay off your 30 year mortgage you will put a roof on it and that cost will eat up a big part of the equity you gain as your tenants pay off the mortgage.  Multiply that by paint, garage, driveway furnaces etc and your actual depreciation and maintenance in a property held for a long time is very high. Without significant price appreciation it is very hard to make money over time in this scenario.

My solution:

1. If you are local and have the interest and capacity:

Buy properties that need total rehab to get the best prices. Fully renovate to create maintenance free rental properties. Rent them out to the best tenants for the best rents for 3-5 years, then sell to other investors looking for turnkey properties. Do all this using a 1031 exchange or operate in a self funded IRA to avoid taxes.

2.  If you are out of state or international:

Buy the above property either newly rehabbed or after 5 years with a great tenant in place. Enjoy the cash flow for another 5 years then sell using a 1031 or hold the property in an IRA to avoid taxes.

I believe in buy and hold.  I also know that very few investors factor in the cost of the actual depreciation of their properties and this leads to some nasty surprises down the road.  I believe my approach solves that problem for buy and hold investors.

When I took my first real estate investing class in 1992 my teacher said that I should never get my license because it would make it harder to buy off-market properties due to disclosure issues.    I listened to him until 2004 when I got licensed.   At that point I realized how wrong he was.    Get the license!  As other have mentioned, it makes everything easier as an investor.  It is also worth noting that real estate sales is almost risk free, requires relatively little effort and is VERY lucrative!    My advice is to find a local Keller Williams office, talk to the Team Leader there and get going!  

John,

If you are in Ohio, you should only need a 3 day notice to evict if your tenant is late.  Depending on the rules of the city in which your units are located it should take 45-60 total to remove the tenant. Often, when faced with eviction, a problem tenant will move on their own in a few weeks.   I recommend contacting a local real estate attorney who specializes in evictions to get this process started.  If you have a hard time finding one, go to the local court on eviction hearing day and you"ll likely find several effective and affordable attorneys.

Give the three day and let the tenant know that you mean business.  If he complies with paying on time, by check through the mail, then let him stay.  If not, follow through with the eviction process.   Your real estate assets should be investment.  If you have to go collect rent every month then you have a job.  Remember that in business and in life we get what we tolerate so hold the line on your standards and fins a tenant who will comply.

Good Luck!

Glen,

I agree with all the comments about pre-screening.  Two other issue that can affect the quality of potential tenants are rental condition and pricing.   

If your condition is not at the top of the market then the better quality tenants may be selecting other units to apply for.  That leaves only the less desirable applicants for you.

With pricing, I have found that if a unit is priced too high then you really reduce the number of qualified applicants.  This seems ironic, I know.  I have learned through experience that with over priced units, the only applicants are people who don't have a history of being overly concerned with paying their rent.  Since they aren't going to pay, they don't care as much about the price.    Seems weird but I have seen many instances over 20 years of investing when I lowered the rent and immediately got several well qualified applicants after several weeks of no qualified applicants.

Good Luck

Great Job.  Congratulations!

Antonio,

There are 2 keys to investing in an area far from where you live.

1  A GREAT property manager!  Ask for references from other out of town clients of theirs and then call the references.  Find out about average maintenance charges, time to lease a unit and fees from the clients.

2. While you don;t have to live in an area to successfully invest in it, you do have to be an expert.  I live in Cleveland, Ohio and I see too many investors come from out of town and buy before they do their research.    The risk you take in real estate is limited to the difference between what you think a house is worth and what it will actually sell for.   If you are an expert in a local market, then you really reduce the risk and can invest with confidence.

Good Luck!

A bad investment property is one that does not move you closer to your life's purpose.

First step,  know your purpose.  Not your goal, your purpose!

Second step measure every activity or transaction based on whether or not it enhances your purpose.  If it does, its a good investment.  If not, walk away!

(Appreciation and cash flow help too!)