All Forum Posts by: Lesley Resnick

I am not following your numbers.

500 a month is $6k a year.  How does that get you 100k in increased value?

Forgetting the legality for a minute, acting as a broker without a license.  The whole concept of wholesaling is bit on the questionable side.  I get grandma to sell me her house at a fire sale price to pay for grandpa's surgery and I resell it before I own it and make a few bucks.  With few exceptions it is a win / lose situation.  It is about finding someone at their worst moment and taking advantage of them.  I can appreciate a good deal, and it is a business but....  

A flip is a value add, I find something in bad condition and make it desirable.  

Buy and hold, providing a safe clean environment for people to live in at a profit.  

Passive income is the goal.  I do not want to spend my time fixing and filling units, due to a rent increase.  It is a poor use of my time and rarely is it profitable.  If a unit sits empty for a moth, it costs you 8.3% of the years gross plus any other money to prepare the unit.  Additionally, it has an impact on cash flow, since you still have the same expenses.  My approach is no increase if you pay on time and don't trash the place.  If the tenant eventually gets a below market rental, good for them.  I never want to chase the last dollar, it is the most expensive.  

The truly big money has been made already this cycle.  If you had money in 2009 and bought, you look great.  Just a few years earlier 2007 and you are not in great shape at all.  We are in a long cycle capital intensive business.  I agree that once the idea hits the TV and Vanilla Ice has a flip it show, we are no longer on the upswing.

We are seeing a lot of new people come into the market.  It is a good thing, it brings liquidity to an otherwise non-liquid vehicle.  The stock market is a scary place right now and RE is looking a whole lot better.  As PT Barnum used to say" A fool and his money are soon parted" 

There is room and opportunity for people who want to learn and work hard.  There is no quick and easy path to success.  

I would double check your numbers.  Go to bank rate or one of the other mortgage sites and run the the payment schedule that breaks out interest and principal for a 20 year Amortization.  You will see that without appreciation, it will take around 75 months to get to 20% equity.  I would make sure you have a plan for "what if" in 5 years. 

Putting in $5000 is a attractive to control $450k worth of property.  Cash is king and this allows you to put your other funds into the next project.  The 3 year balloon is going to be tough.  You will need the property to increase in value 20-25% in 3 years to get a more conventional loan?  If you had outlined a big value add play, then it would be easily to make the increase.   

As a practice the last dollar is ALWAYS, the most expensive one.  Whenever I have tried to squeeze out the last dollar, I have regretted it.

 I am with Victor, the zoning is your first challenge  The 2 big ones are:

Are you zoned duplex?  You can look it up online or contact zoning in the municipality. 

Do you have enough land? - There are strict guideline on how much land the duplex is built on.

Assuming you meet both criteria, will the project make sense financially? Most SFH do not lend themselves to conversion. I have looked at SFH with attached garages and thought about making it an apartment. The hassle and the numbers have not made it worth the trouble.

As far as the duplex, I would think long and hard about only purchasing half.  You share a common roof, firewall, possibly a fence.  However, there are a lot of Town House communities that are connected in the same way.  I would research it further and make a decision on  a case by case review.

 There is always a bit more art than science.  Initial take is the numbers are fair, with that said I would ask for the following:

Expenses:

Power, water/ sewer

trash

maintenance - is there differed

property management - 24 is going to be tough unless you can be almost full time on it 

any other related costs.

Is there an opportunity for a value add, raise rent, improve property.

 Rent is 538 per unit.  Could it be higher?

If it is truly 100% rented and it can be proven it is an huge piece of the puzzle.  You can reduce your vacancy loss % in your calculations.

I typically want to be a 1% a month, it gets harder to make that number as the number of units grow.  With that said, IF the 100% occupied is verifiable, there is no deferred maintenance (roof  a/c), utility costs.  This could be a winner.

There are fannie mae loans specifically for student housing, i dont recall the terms but I could check it out.     

The closest model I have seen is to buy distressed properties and stabilize them.  The goal would be to get out in under a year.  In most cases it it a cash business.  Hard money financing is expensive for projects this large and would still require a lot of cash down.  The exit strategy is to find a buy and hold investor who uses conventional financing.   Not quite wholesaling, more like a flip.    

The deal makes sense and is reasonable.  The 0% for 7 years is great.  As far as the legality of the owner passing, it is your place and you owe him a debt, or his estate.  The estate will be under contract until the 7 years runs out.

The bigger issue is your financial stability.  You need to consider your own viability.  You have to plan for the worst case scenario.  All the numbers above are estimates or historical.  There is no way to predict what will happen. 

How old are you? 

How stable is your job?

Do you have a spouse that works? Kids?

ETC.

I would recommend finding a partner, friend, relative, so on.  Taking this on by yourself could destroy you financially.  The down side risk is huge.  People on BP are sometime to aggressive in their approach and risk way to much for my taste.  This is a long race and it is more important not to lose money or make a mistake then any individual deal.