All Forum Posts by: Leland Barrow

What war? That would be prognostication on any investor's part. Deployments should be a concern if you are investing around military bases. Americans do not do war like we did in the past and we will not do war in the future like we do today. The days of massive troop deployments are behind us. What you see happening in Syria is probably the new standard. Dropping bombs, unmanned planes, drones those are the new ways of waging war. The vast majority of soldiers are not at an age to be home buyers. When deployments do happen many of the renters continue to rent even though they are deployed. Maybe some Pyongyang real estate will be at a deep discount if you can deal with residual radiation.

It is not about scaring away anyone. Real estate is about regional and local markets. Unless you are putting in an offer on the same house as me in San Marcos, TX then you are not competition and I hope you are very successful in real estate investing. The OP is taking a business definition of wholesaling and applying it to real estate. Real estate has its own lingo and ambiguous terminology. As an example cash flow as it is discussed on BP is not a business world definition. Wholesaling in real estate is a broad term that essentially means sourcing property, getting it under contract, and assigning it to an actual buyer. The profit is in the delta or assignment fee. If you buy a property and resell the property within a 1 year time frame then that is considered flipping. You do not have to value add the property, you can simply sell an under market property for market value and collect that delta as income. What the OP is doing is trying to use flipping to make a case that wholesaling is legal. Flipping and wholesaling are not the same.

Wholesaling is an opportunistic and often predatory practice of seperating ignorant people from the equity in their house. The goal is to acquire property for less than what it is worth and selling it for market value. Real estate professionals like real estate agents add value to transactions. A real estate agent is required to look after their clients best interest. This is a relationship that we have with all professionals like CPAs, lawyers, and doctors. A wholesaler has no obligation to look after anyone's best interest but their own. 

Go to Craigslist and search investor, investment, or wholesaling under real estate. You will see the neighborhoods that wholesalers often operate in. In San Antonio they are in hispanic neighborhoods, that tend to be uneducated, and less savvy. A bilingual real estate pro solicits them to convince them to sell their property via any means that the real estate pro is ok with. The ethics and morality of the conversation are left entirely up to the educated real estate pro's own conscious. The real estate pro's goal is to simply talk the home owner into selling for the least amount possible in a less than honest process. 

This is not true in every situation and for every wholesaler but it happens often enough. 

A real estate agent looks out after the best interest of their client and facilitates the buyer and seller relationship.

A flipper adds value by performing repairs, re-marketing, or improving the property.

A wholesaler's value add to a transaction is questionable at best. Sending out mailers and being arguably dishonest with people is not a value add.

Gel stain can be used on almost any surface. It is very consistent in color and durable. I use it all the time on faux wood and facades. If carpet was removed from the stairs then be careful that they meet code with riser height. I have never pulled carpet off of stairs that the stairs met code. The issue is that the stairs become a trip hazard and of this is a hold and not a flip property then your liability is tremendous. People are so in tuned to coded stairs that they will trip when the heights are wrong or uneven. I have pulled out a couple of stair cases because it was easier to do it right and less expensive than working with the builder grade crap. From just the picture I would even them out, fill the gaps with wood filler and use a gel stain that is closest to matching.You can pound the staples in and just use wood filler to cover the hammer marks if you use a darker gel stain. You can paint the risers a contrasting color for a custom look. Although dark treads with lighter colored risers is a better look in my opinion. 

You can buy trim faux wood pieces that include bull nose caps, conversions etc in the laminate flooring section. They are designed for laminate floors. You can sand those lightly and use gel stain on them. Stairs can make or break a first impression. Wood to carpet to wood seems like it would look odd. Painted would probably look odd. 

You are inaccurately trying to use semantics to justify and support your argument.

I think you would be better off saving money to invest into real estate. On a scale of 1-10 I would rate your risk with pursuing this a 10. We are at the top of a market cycle and you are basically jumping into a busy highway. Hard money, first deal, sellers market, MLS; I don't see the winning equation in that. Save up 20%, save up operating capital, educate yourself....win.

Wholesaling is a grey area. As it becomes more popular I personally hope that it becomes more regulated. Not always...but often enough it is equity theft. It is often very sophisticated and educated professionals using their knowledge and the home owner's bad situation and/or home owners ignorance to acquire the property for less than the property's market value. Laws are often put into place to protect uneducated people from opportunistic predators. I am not saying that is always the case but it is true enough. The grey area is that the wholesalers is brokering a deal. The assigner has no intention of purchasing and every intention to find a buyer. That is essentially what real estate agents do. You may have benign intentions but the vast majority of wholesalers are just predators looking to steal some blue collar poor person's equity by leveraging that person's ignorance. Once again that is a broad generalization and does not hold true in every situation. Still true enough.

Flipping is market cycle dependent. Finding enough inventory to flip is difficult. It is a very hard business to scale. It can often be very inconsistent. There is very few barriers to entry other than capital and even due to HML capital is not really a barrier to entry. Those that will fall hardest fastest in a cycle change will be HML and flippers. It happens every cycle. I cannot tell you how many people I have met that used to flip houses. Essentially your entire business model depends on buying enough real estate that meet very specific requirements in order to produce a job based income. No barriers to entry No consistency Cycle dependent Difficult to scale As for your question. If you try and chase a flipping market you will always need to chase a flipping market. You would have to have a very dependable crystal ball. Flippers are starting to struggle because their inventory funnel is shrinking. When they can no longer pay their bills they will be working as greeters at Home Depot and eagerly willing to tell someone like me of their glory days when they used to flip houses. That may come across as snarky but there is value when someone takes the time to point out the risks.

2 27 year olds with a 100k of OTPM considering flipping or rental properties. Flipping is fine, people make money at it. It is extremely difficult to scale, is unpredictable, and doesn't hold up well long term. The model depends on inventory that fits a fairly small financial window when acquiring. It is really no different than working a job or owning your own business just with scalability and consistency issues. Rental properties are considered passive investments. The downside is that they take large amount of capital to acquire and often hold. A 100k may not go very far. Rentals often have to be seasoned, recourse loans can be tough, non-recourse loans can be expensive. In my opinion the best strategy is to house hack. By the maximum amount of doors for the best rent and live in one side. Let the property season until you can refinance your down payment and repeat. This is the brrrr method and it allows you to use your seed money over and over again. I wouldn't flip houses in this market cycle. I think flipping is overrated unless you just want to learn. If you want real estate to be your career then I would suggest you work for a construction company within the real estate industry. This will give you more consistent income, less risk, and you can learn from experts instead of learning by trial and error.

Appreciation is something that you can count on in the long run. Appreciation is not that hard to estimate if you are looking at 25-30 year spans. My guess is that your current strategy is to buy cheap houses in bad areas, pay cash, and rent them out. 12k per year is possible in that situation. However, those types of homes do not appreciate. In fact they can lose value in the long run. There are different strategies for different people. It depends on what your long term goals are. You do not need 500 properties to become wealthy with brrrr. If you use the positive cash flow to pay off your rentals faster you can have ten properties paid off, worth over 2 million, and cash flowing $15,000 per month in ten years or even less. I don't know of a model where junk properties that require $50k-80k of your cash can out perform that. They are and always will be just junk properties that require a lot of your hard earned cash.

I didn't see what your goals are? Much of the advice given is for their goals. Some questions that you do not need to answer is...what does your retirement look like? What about your heirs? I don't want to leave a bunch of properties with debt for my less sophisticated heirs. What they do with my portfolio is their business. My goals are to have at least 10k in free and clear income from rentals in retirement. If I die that gives my wife a very good income base and huge amounts of equity to cruise through retirement. Along with the other income and assets that I have. If my wife and I both die my heirs will have a paid off portfolio to split up or liquidate. I don't mind having debt above and beyond what I mentioned above. But that debt is to be liquidated and paid off in my will. I look at real estate as a way to diversify income and investments. Handing a unsophisticated person a debt heavy portfolio can be a burden and problematic. It may even do more harm than good. At 55 you should have a very detailed plan about your retirement. No one except Uncle Sam can take a paid off property from your heirs.