All Forum Posts by: Matt Moreland

Hi @Nicholas Monroe! That's a great question. 

In my experience as a real estate agent, investor, and homebuyer myself, the answer is generally no. To the seller reviewing your offer with their agent, the number they are typically concerned with is the net amount of the offer that they will be receiving at closing. So total purchase price minus any concessions, repairs, etc.

You may occasionally run into a seller who is adamant that you put down a certain amount, but at the end of the day that is between you and your lender and is not up to the seller. These are often the same individuals who do not understand that a buyer putting down 5% on a conventional loan typically has MUCH better credit history than a similar buyer that is being required to put down 20%. 

Oh wow! @Brittany Warner I had not heard anything until reading this thread. Wow! A whole sea of red flags waving, this is wild.

Hey, @Kyle Fairbanks! Austin, Dallas, and Houston are all incredibly hot right now. Speaking with other agents and friends in those markets, they're seeing investment properties going for far above appraisal value and buyers are having to bring enough cash to the table to cover the difference if they really want it. For your first one, I would consider looking at markets such as Lubbock, San Marcos, and even smaller communities around San Antonio.

I can't speak for the other markets, but here in Lubbock we are seeing a higher sales velocity than we've ever seen before. Although we aren't seeing 40+ offers on single listings like in Austin, we are consistently seeing properties selling for above asking price and receiving 3-8 offers within the first day or two of going live. A lot of it is coming down to finding something before it hits the market through your connections in the local market, or being ready to pay top dollar for the property that you know will cash flow and appreciate at what you paid for it.

There are still deals to be found on market, but they are becoming harder and harder to find and requiring more creativity. Currently working with a Tech student and investor (won't tag him unless he wants to chime in himself) on a short sale deal that is providing him with massive amounts of built-in equity out of the gate since he was able to get it so far below market value. Other buyers were not willing to deal with the sometimes frustrating process of short sales and the associated lienholder approval process, so he was able to come out on top due to his patience and insistence on buying based on the numbers. This is the way to do it, and any investor looking to purchase in the Lubbock market (or any TX market right now) needs to do the same and focus on the numbers rather than hoping things will work out. That being said, if you buy right in Lubbock, things lease up FAST and it is known for being much easier to assemble a portfolio of cash flowing properties here than in many other markets.

If you are willing to wait for the right deal and purchase based on the numbers alone, you can still find deals that will work well for your strategy. Best of luck, Kyle, and don't hesitate to reach out if there's ever anything I can do to help you in your investment journey.

Great question, @Seth Lacey! 

These are all just my opinion of course.

PROS:

• -Below market value properties
• -Eliminates the work involved finding cheap properties
• -Can be some great deals
• -Great opportunity to build relationship and reliable funnel of deals
• -More opportunity for margin than many MLS deals
• -Usually good honest people

CONS:

• -Many worth even less than wholesale price
• -Most do not allow buyer protections
• -Typically cannot have an inspection done
• -Usually cash only w/ quick close
• -Lots of bad actors. Especially since gurus started selling wholesaling courses.
• -Seem to go hand in hand with plumbing/electrical issues and hoarders
• -Usually not in appreciating neighborhoods

Buying a property off of a wholesaler can go either way, so in the end it is important in my opinion to know the individual you are working with. There are some wholesalers that I will not even bother to look at properties they send, whereas there are others who I start making calls to let my investors know before I even have time to load all the pictures. All comes down to finding a great group of wholesalers who consistently bring awesome deals to the table, and above all else are honest in their dealings. 

There are some phenomenal wholesalers here on BiggerPockets all over the country -- when speaking with wholesalers in any particular area, my recommendation is always to ask for references of agents and investors that they have previously worked with and their contact info. Hearing firsthand how the deal went, what communication and negotiation was like, and whether or not they would purchase another deal (or if they have) from the wholesaler is an immense value. If they do not have references they may be new so tread lightly, and if they refuse to provide any references, this could mean they burn bridges on each deal and is a red flag.

My first question is what type of commercial real estate business? Brokerage, development, buy and hold?

For a brokerage/client services type business, I would start out by outsourcing content and SEO for your website. So hiring an experienced copywriter who can provide blog and article content for your site to help improve your search ranking and also do it much quicker. Most copywriters can crank out high quality content much quicker than the average person, so you are paying for efficiency and effectiveness of the content you are receiving. On the social media side, that is one thing I believe you can outsource, but carefully. If you are the brand, it still needs to be genuinely you and the content if outsourced can come across as ingenuine. 

If your business is more on the development or property ownership side, I would outsource things like skip tracing for potential land owners who you could contact to purchase their land for developing new property on or finding and providing you with lists of commercial property owners that are out of state, delinquent on taxes, distressed, etc. Your ROI on your time is much higher when you spend your time calling these people than combing through databases and putting together the list.

A good way to look at it is do what you are great at and outsource the rest. Work you way from the things you are the worst at up until you are able to outsource everything but the activity that is the highest and best use of your time and talents.

@Abigail Veit

Hey, Abigail! Just my thoughts here, but I would get started as soon as you can. If you end up getting promoted and have to move as part of the promotion, rent it out completely! I would consider using a low down payment conventional note so you aren't stressing about FHA requirements for occupying it for specified length of time.

It can be hard to come by a good opportunity to house hack, and it only becomes less convenient later on if you get married, start a family, etc. and live a lifestyle less conducive to house hacking so I say go for it now and start building up your portfolio while you’re as young as possible!

@Peter Mckernan

I 100% agree with this. For the cost of an appraisal, you could save substantially more than just the difference from not utilizing an agent. On that note, it is always risky to go into deals with no agents on either side in my opinion as they are there to make sure the process is going smoothly and everything is following state regulations and is in compliance.

May try and see if you can get your landlord to agree to pay an agent 3% to represent you or 4% to double side it and make sure everything is done legally and correctly. They will likely save you more than their cost right out of the gate, not to mention the time and headache that comes with a FSBO with no reps involved.

There's another thread on the forums from yesterday about this where the FSBO seller (OP) lost the earnest money because nobody ever followed up with the buyer about it being delivered until after the contract was terminated, and now there's nothing that can be done since it was their responsibility and would have been an agent's. Protect yourself and best of luck taking down this house!

Hey, @Brett Mather! Sounds like an interesting situation. 

I would reach out to a local Realtor (or three) and ask if they would mind running comps for you on the property and letting them know what updates have been done to it. I have a feeling if the market there is anywhere like it is in much of the country right now, he could likely get $1.1m pretty easily for it. However, I would use the average of the comps provided from all the agents you speak to in order to come to a decision on whether or not you're getting a good deal or not.

If it ends up being that the average is still less than his number minus the 5%, I would provide him with this information and data from the Realtors backing it up as part of your justification for your offer. On that note, if that is the route you pursue, I would come to him with a solid offer as part of the proposal so that he has something to sign on if he is agreeable to everything.

Hope this helps, and best of luck! Sounds like a great opportunity to start building equity in a quickly appreciating market!

Hey @Account Closed! Nice choice making the decision to get into real estate investing, what an exciting new chapter.

As far as potential pitfalls - there are a few that I would be mindful of on a 6-plex built in 1940. Plumbing is something to check out, most MF properties that old are going to have some backups in the sewer lines that will need remedying or replacement, so get some quotes and consider budgeting for that. On electrical, make sure that it is in good shape and nothing is overly corroded or in need of replacement. Some or most outlets are most likely not up to current safety standards, and could need replacing in order to prevent any liability if there is a resident injury or fire related to non-GFCI outlets.

As far as the LLC goes in protecting you, at the end of the day it is not too hard to pierce the corporate veil if someone really wants to get aggressive with litigation so I would do it but not expect to be completely protected from any and all things that can go wrong.

The laundry pitfall is a great opportunity to force appreciation by installing a laundry room down in that basement and increasing that NOI. Put up a simple cyclone fence with a lock to keep residents from accessing any furnaces, boilers, etc. (moreso as a risk to them not to your equipment) and utilize the rest of the space.

Being an older property, it is likely VERY inefficient as far as utilities go, particularly water. Might reach out to someone like Anselmo Torres or someone similar who offers great products that cut utility bills significantly and boost your NOI.

Same for electric, see if you can't get it individually metered during that first year.

Those brand new units should not be too much of an issue for you, as the $1700/mo tenants are not likely going to be looking at the $950/mo units, so that should not cause you too much trouble!

Hope this is helpful, it sounds like you've got a great opportunity in front of you! I'm excited for you!

@Matt Stricklen y’all stay warm in Austin!!

Time to check the pipes and remind tenants!! People seem to forget to drive in this weather too down here in TX LOL.

Looking like we will be getting down to 8°F and 1°F on Saturday and Sunday night respectively here in Lubbock, Texas. 🥶