All Forum Posts by: Lawrence Potts

Hi @Lance Gordon, you are in a very unique situation.

The easy route is to find a W2 job and forgo your disability so you are traditional financeable again. But if you are adamant about not working, you have some options. These are just a few ideas trying to look at in your shoes:

1. You have what most dentist do not have: time. So you can become the "real estate investing" dentist, or the bridge between dentist that have money and want to invest but do not have the time or energy to learn and find the right deal. Partner with them, leverage their income and you have the free time to manage the deal, run the numbers, etc., and grow a portfolio.

2. Maybe you can create a franchise model for new dentists coming out of school that they can buy into and you provide them with the equipment, facility, network, team, etc., but it's similar to a McDonald's franchise model where you own the real estate and collect the passive income of rent and royalties? (Check out the movie The Founder).

3. You can partner with Dentists to pull money together to buy large apartment complexes. Similar to the first idea but instead of lending based off of their income, you go the DSCR route and pull their money together to create the down payment and then find apartment complexes. Definitely find an attorney that would be familiar with this model and figure out how to structure this appropriately.

Just some ideas shooting from the hip, but you have time which is very valuable to most people that have money. Use the time to teach yourself and become the expert to a target audience that need an expert and have money and want to invest. Hope that helps!

Hey @Niecy Smith, good question. I think it depends...

I've been investing for a few years now. I got my license last year. It has helped me tremendously. I was working logistics for an Agricultural equipment company prior to working full time as an agent and I was always frustrated because a lot of my time was being allocated to work and my other responsibilities. I quit (I had a side business) and got my license and now I am working in real estate every day. Sure, I am spending time helping people find deals and new homes or selling their homes, but I have control of that in my schedule. I also have control of when I want to focus on investing. And I get to network and connect with a lot more people that are in the industry. That is something I could never get with my job.

The only downside I have been going through since being licensed is that I have to wait 2 years of tax returns to be lendable again through traditional financing. Have I bought since then? Yes, but through creative financing. I want to buy a new owner-occupied home. I've yet to close on a creative deal through owner financing. So I have to wait 1 more year to get conventional owner-occupied financing. 

If I were to go back, I would have:

1. Set up a HELOC on my current residence before quitting. Then I'd be able to access a lot more equity to make bigger moves.

2. Worked as an agent on the side before quitting my job. You will not get many deals done but there's a big learning curve when you start (understanding laws, contracts, building your network, etc.) that you can leverage while working and receiving consistent income and then moving full time when you build up a reserve and build up your network.

I don't think getting your license takes away from investing unless you see yourself as an agent. I see myself as an investor with a license and I am doing both. 

I hope that helps!

Hey @Matthew Elkin, I agree with @Nathan Gesner, house hacking is a great route to go for you, especially when first getting started.

2-4 unit owner occupied can only use FHA 3.5% down or you're using a large down payment. There are also opportunities to buy a single family residence home that has an ADU that you can buy with 0% down products (contact @Grant Schroeder). But here's something to note:

I would disagree that you can't cashflow on the west coast. But I will stress that it is very hard to find something that can cashflow. But a quick mindset shift can make a big difference:

If you are renting right now for $2,000 but if you are able to buy a duplex with 3.5% down with a mortgage payment of $4,000 you can do some quick math and find out that you won't cashflow. However, if you are house hacking it, you are paying net $2,000 per month ($4,000 mortgage - $2,000 rent from the other unit). However, you are getting principal paydown. It's minimal in the first few years, but exponentially increases throughout the note. Then you're able to depreciate 50% of your home (or whatever percentage you are renting and not living in). You still get to write off the interest you are paying too as being a homeowner. And you will be owning an appreciating asset. 

So no, you are not directly receiving cashflow, but you are growing your net worth significantly and gaining experience. Let's say you live there for 5 years and your property value goes from $400,000 to $500,000. And your mortgage balance is now $350,000. You now have $150,000 in equity that you can tap into through refinancing or a HELOC. All of this while you are still living exactly the same as you are right now.

If your mortgage payment is $3,500 and you collect rent for $2,000, now you're only paying $1,500. That's like a $500 per month raise. That's if you take that $500 savings and save it, reinvest it, etc.

So it's a matter of perspective. Cashflow is very important but it's not the only thing that matter when you are looking for your first deal that will most likely be a house hack because of the limited capital. You can find down payment assistant programs as well. Most cities and counties will receive grants from the state for down payment assistance based off of income requirements, geographical location, work industries, etc. But I highly encourage talking to a lender as they are always (or good ones are) looking for these programs. 

I hope that helps! I am currently house hacking and it's a tremendous wealth builder. Next year I will be able to access my equity and start buying another house hack again and I am living for free (sometimes, right now I have 2 vacant units so I am paying the mortgage for the last 2 months) because of me house hacking.

I agree with @Cory Carlson, there is an exception for you @Dmitriy Filippov that if you are moving into the unit (double check) or you are planning to do major renovations and can show that the units are inhabitable, you can execute a quicker eviction. But definitely work with an attorney on this one, you can't afford to be wrong executing this, no matter how good of a deal you are getting on this triplex. Let us know what you end up doing! Good luck!

Hey @Nessa Lyn,

Not too sure how far along you are in this journey as you posted 13 days ago, but I know that most counties in Oregon are allowing for ADU conversions. You can convert space at your home in to an ADU and be approved. There are rules that differ among counties and cities (square footage minimum and maximum requirements, parking, etc.) but it would be a good idea to contact your planning and building department for your local city and county to find out what it will take to accomplish this.

You may be better of converting to an ADU than trying to complete as a duplex. You're looking at separating meters for utilities, getting a new/different address, and more hoops to jump through. I would see what cards your dealt with and play with them. Which would be that you have a great opportunity to create units and the city is allowing for ADU's.

Now to answer your question regarding how "difficult" it is to convert...

It depends on the layout of the property, how much capital you have to invest, your contractors, and availability of materials. I know that doesn't answer your question, but there's difficult, and then very difficult. But don't let difficult be the reason why you can't or shouldn't do it. No matter what, real estate will be difficult. The ones that can solve difficult real estate problems are the ones that do well and succeed in real estate. I hope that helps. I am all for people creating ADU's though!

Great post @AJ Wong and really appreciate the transparency. I love the Oregon Coast too. So much potential and still active with transactions. Just helped my clients close on a boutique hotel that was listed and undervalued. A few modifications, adding different systems, operations, and management, and they'll be seeing huge returns soon. I'm excited for them but also reaffirming that the Oregon Coast is alive.

I think it's easy to look back on previous properties and think "oh I should have done this because I could have had a better return." I think about that with my first home in Lebanon, OR. I sold it for $226k in 2020 and right now it's probably worth around $315k. I originally bought it for $185k. And it would have been cashflowing well if I had simply refinanced. But even if you selling wasn't the most efficient action to execute on, you still acted, and you still made a great cash on cash return and your return on equity was used to create profitable flips. Maybe we get so caught up on making the best decision, when sometimes even the 2nd best decision is still really profitable? We tend to get stuck trying to find out the best decision when really we just need to make a good decision.

Best of luck to you and your clients and a profitable New Year as well.

Welcome @Drew Wasserburger! Glad to have you hear. This is an older post, I hope you found the help you are needing. But here are my thoughts:

House hacking is a great strategy, one of my personal favorites. It may be difficult to find a house hack potential on that much acreage and at that size in a reasonable price range. You may have to start off smaller and work your way up. But it's definitely doable.

Income seems to be a bit of a snag indeed. Credit score is very easy to clean up, you can get that repaired fairly quickly. Many lenders have connections to companies that specialize in that or can give you great pointers in how to do it yourself. However, you being paid under the table creates some issues with lending. If I were you, I would create an LLC and create some sort of business structure and start recording your income. Yes, you'll have to report it and pay taxes on it, but you have to play that game to be able to play ball in real estate if you want to get started. Otherwise, they have no way of confirming your income and you won't be able to use a dollar of it towards qualifying for a mortgage.

If you are needing help getting started, this is a great place to start! Don't hesitate to ask questions, we are all here looking to help each other out in that way. 

Best of luck and we look forward to seeing your next post soon.

Hey @Noah Sopher,

Way to go in finding a star agent. They are few and far between sometimes. I purchased a 4plex and each unit had a different address. I did not run into any issues with the appraisal. The issue was simply finding similar comps that have sold in the last few months. But we got it done, and we also refinanced it and did well with comps too.

It's completely dependent on the appraiser. Maybe you can provide the appraiser with your own comps that have different addresses for units and see if that supports your claim. But I've never ran into this issue with my place but I also wouldn't be surprised since appraisers are all different.

I tried getting a HELOC a while back through a credit union and the lender told me that because my 4 plex (2 duplexes with different addresses) were two separate buildings, they valued my entire property based off of one of the buildings and said I didn't have enough equity since it was being valued as a duplex. Weird, right? Just keep asking and you'll find someone that understands!

Hope that helps! Let us know how the triplex turns out!

I’m not a property manager, but my assumption is that they will prorate the rest of the month to you that was paid for. So if rent is $3,000/month and you close on the property on the 20th, they will prorate you the 10 days you own it ($1,000). It should be held in some account. You should also verify if there's a security deposit that needs to be transferred to you as well.

As far as notices go, there should be a signed PMA (property management agreement) that may disclose how to go about and how soon you need to send notice. Maybe reach out to another property management company and see what they require? Or ask an attorney to draft something official if necessary. I don't think there's any state or city regulations but it's strictly between you and the property management company. But I think you can terminate at anytime for any reason. You're paying them for a service, it's your property. 

I don't believe there's any recourse. The fact that you probably don't have a signed PMA with them should indicate that you are not working with them. However, when you purchased the property, you should have signed something or discussed with your agent and the listing agent about how the property is to be managed, if the signed PMA with the original owner transfers to you, who get's what in rent, etc., all of the logistics to this. I would look back on your PSA (purchase sale agreement) as well and check it out or talk to the agent you used. In all honesty though, you don't have a signed PMA with them, so you don't need permission to take it back. They may not be able to execute your request though because the manager may be the only licensed individual for the business and legally no one else can perform those duties.

Let us know how it goes! Hope that helps you out.

Hi @Bonita Woodbury, congratulations on taking action and getting your first whole sale deal under contract! That's exciting.

Now you're at the tricky part with finding the right buyer...I think you could assume that the first buyer didn't think the numbers made sense. But here's another thing: because you're new, they may not want to take the risk. As unfortunate as it sounds, trust is your key to winning in wholesaling. Sellers have to trust you. Title has to trust you. Buyers have to trust you.

Now it's going to be hard to know exactly if your numbers are off without details of the property. But having a rehab estimate difference of $60-70k is significant. I would be completely transparent and ask how he got his number without coming across as rude or arrogant. They'll show you their numbers and then you can be the judge of what the true rehab budget should be. But they may not, they may not want to share their secrets, and that's fine. Here's the truth: no matter how good a deal you have, you may not be the right wholesaler for them, and they may not be the right buyer for you. So you move on. And if it's a good deal, you'll find someone. Go to REI meetings. Network. Talk to everyone. Talk to experienced and trustworthy wholesalers! Don't spam facebook groups, everyone hates that.

If I were you, this is what I would do:

I'd find the top wholesaler in your area, someone that everyone trusts. Or someone that is nearby, not exactly in your area but has influence and a track record for success. I'd bring them this deal and I'd give them profit for their help in return and learn everything I can from them. Because what you'll learn from them is worth more than one deal could ever get you. You'll be able to do the next deal on your own and scale up and do more and more deals. Or I'd first offer a profit split, 50/50. Go from there. But either way, I wouldn't be afraid to give away momentary profit for knowledge that costs thousands of dollars through courses and mentors and have the ability to repeat and grow more deals.

Hope that helps!