All Forum Posts by: Larry Turowski

@Alexandra Yates-keller you should find your local REIA and network with local investors. Take people out for coffee. Ask them what they do, how they got started and how they picked their niche. You'll learn a ton just from this. Eventually you'll meet some that are doing exactly or pretty close to what you want to do. Find one or a couple that you trust and ask them if they'd help you evaluate opportunities. You'd be surprised at how helpful people are.

Besides your local REIA, try calling rental ads for the types of properties you could see yourself buying. Get to the owner and ask them out for coffee.

Commit to making enough contacts to have at least one, or better yet two coffee appointments each week.

Excellent post @Scott E.  this reminds me of 2008 when the business leaders were saying there was zero visibility. That’s the problem even with commercial real estate. We know there is going to be pain but we don’t know how much or how it’s going to happen. Are owners going to go into foreclosure? Are they going to bring in more money in order to refinance the remainder?  Are they going to be able to even sell?

Cap rates seem to be holding steady in spite of the high interest rates. It doesn’t make sense to me.

I don’t have the fog lights (the information or mental acuity) to pierce through the cloud of uncertainty.  So I don’t know that I could identify what is truly a deal until after the fog lifts. 

Quote from @Ryan Boutin:

I have read that flippers tend to sit around the 70% mark for buying vs ARV for flipping properties. Is this what most use as a number? What do you use for a percentage?

That’s an old formula: buy at 70% ARV minus cost of rehab. You just have to go by the numbers and see if the deal makes sense.

Deals can still make sense at 80% or even 85% depending on how much rehab (if any) is needed and how high the ARV is.

Quote from @Dominick Johnson:

Depends on the type of debt. Consumer debt should make you feel anxious to pay it off. Debt that is making you income while someone else is paying it down should make you smile and want to do it more. Leveraging other people's money and paying minimal taxes is how the rich get richer.
To answer your question about what kind of loans, I started my real estate investing with a hard money loan to do a flip. Would not recommend doing that as your first investment. Then I got a HELOC on my primary residence and focused on buying rentals. Best of luck with your investment journey!

 This is the perfect answer. I tell my kids (and everyone) debt is only good for ONE thing. And that is making you money.  If debt isn’t making you money then it is bad debt.

You still need to be careful about over-leveraging.  For a young person, buying a car with debt might make sense to get you to your job to make money. But you don’t need a new Lexus. 

Even though debt makes me money, I’m still somewhat debt averse. It’s just my personal comfort level. I’m fairly lightly leveraged in my portfolio right now. I like to get as much debt as possible on as few properties as possible to reduce the closing costs. But across the portfolio I’m only about 33% leveraged, meaning I could borrow another 33-40% should an opportunity arise that I wanted to seize.  I love having that flexibility. 

Quote from @Ronald Fontenot Jr:

@Larry Turowski there is no mortgage nor liens. I was thinking to get the seller to owner finance it to me with no payments for one year. Wouldn't this solve that issue?

Even better. Have them owner finance. Give them 10,000 down so they know you’re serious, do interest only at, say, 0.5% per month with a balloon payment due in 12 months. You might want to put an extension clause in there as well that says something like if you give them another $5000 principal at the end you can extend it for another 12 months.

Write up the basic details and give it to your attorney to draw up a contract. You’ll save a lot on closing costs so this would be a really good deal.

@Ronald Fontenot Jr this is a really bad idea. You’ll be putting tens of thousands of dollars into somebody else’s house that you do not own.  Don’t do it.

Consider a Sub2 deal where the seller deeds the house to you subject to the existing mortgage. You'll need to make mortgage payments and will pay it off when you sell.

There is a very small chance the bank will call the loan and even if they did you should be able to complete your rehab and sell before those wheels get turning. 

@Marian Smith Owner finance, right? 3.8% is a pretty sweet interest rate these days. Assuming they save $10k in interest over three years and get $10k in cash flow and $10k in appreciation, it’s kind of similar to the cash offer, but definitely more aggressive. Do they have a way out of the balloon payment?  Or are they performing some sort of arbitrage and they are not the end buyer.

I’d ask them questions directly. Ask to prove this isn’t a scam. Let us know what they say. 

@Darway Dalmeida you’re biting the hands that feed you. Everyone has an interest and you shouldn’t begrudge them for protecting it. If I were a hard money lender (I am not) I’d definitely want to charge interest on money set aside for you, for you to draw one whenever you get around to it.  Otherwise I could lend it to someone else. How would you like it if the lender said they leant their idle funds out and would get them to you whenever they got around to it?

Quote from @Jon Q.:

Quote from @Larry Turowski:

@Jon Q. Smallish-time investor here in the Midwest (technically northeast, but whatever) and there is still opportunity here. 2021 I was involved in another business so didn’t do a lot, but bought 7 properties in 2022 and I’ll be closing on a couple more in early May.  A couple of those were flips.

I don’t see any sign of a major “correction” for SFHs,  maybe in some super hot markets, but overall I’d be surprised to see a correction beyond 8%. Prices are still going up here with record low inventory.

Can I asked what city / cities your in?

The cities with larger corrections have been those with larger run ups than most others (ex. those with strong population and job growth).

Just in and around Rochester NY.  But this is a small-time market and I'm a small-time investor compared to many on this thread.

@Mohit Thakur fix things once, fix things right. That’s the most important thing.

Other than that don’t wait until things fail. If they are on their way out, fix them now. You can think about tenant proofing your rentals. LVT vs carpet. Tension shower curtain rod vs wall-mounted / screwed in. No on the wall toilet paper holders. Stuff like that.