All Forum Posts by: Victor Menasce

Almost every project I do isn't local to where I live. The key is to create a fully self sustaining team that you can rely upon in each geography that you do business.

If you were creating a restaurant, a hotel, a technology company, would you even consider these without hiring the right people? Of course not. So why would real estate be any different?

Real estate is a business like any other, except the dollars involved are a lot bigger, and therefore the mistakes can be a lot bigger and more painful. 

I recommend getting a job working for a real estate developer, or someone who is really successful as an investor. This will teach you what you need to know. There aren't any classes out there that truly teach the full process. 

Sure, there are lots of real estate education companies willing to charge you tens of thousands of dollars. The problem is that they tend to focus on the transactional part of real estate investing. That's actually the easy part. The investors who are successful treat real estate investing as a business and understand the application of business principles to  real estate. It's just another business that works with bigger ticket items. Because of that, the opportunity is there to make larger profits. 

Real Estate investing is a relationship business, first and foremost. Successful wholesaling a matter of figuring out what is in demand and getting there faster than anybody else.

But wholesaling generally isn't a business on its own. It's simply a tool in the toolkit. I will find properties that I want to develop myself. Sometimes, I'll sell those contracts to another developer in exchange for a fee. Doing this successfully requires really knowing what the buyer wants. It's hard to do that if you haven't been the buyer before and understood their criteria.

Many wholesalers focus on finding properties. That's actually the easy part. Getting properties under contract is easy. Finding properties that someone else will buy is the hard part. Start with developing relationships with buyers.

I personally like markets with high demand for land. Toronto is a good example. There is very little developable land left within the city. There continues to be an influx of about 75,000 new residents a year, so the demand for housing is high. If you can assemble 2-3 smaller parcels together into a bigger parcel, that has huge value. A single acre can sell for $2-10M depending on the location and the zoning. With prices like that, it's easy to attach a contract assignment fee of a few hundred thousand. 

This is a business of creating value, like any other business. The value is in the eyes of the buyer. No different than if you were dealing in antiques on ebay. If you have a rare collectible, and you know what buyers are willing to pay, you can make money. Wholesaling property is the same. Know your buyer, and the only way to know them is to develop a relationship. Hard to do on the internet.

Good questions. Your title agent with the title company (or closing attorney) should be following a letter of direction from you for the disbursement of funds. That letter is part of their contract with you. They have a fiduciary duty to complete these items. Disbursement of funds held in escrow must meet the conditions of the escrow agreement. In this case:

1) Recording of a mortgage or deed of trust. 

2) Execution of the promissory note

3) Are you requiring the borrower to give you any personal guarantees? If so, this must be signed.

4) Receipt of insurance certificate naming the lender as an insured party.

5) Purchase of a title insurance policy naming the lender as a co-insured ensuring the title is warranteed if you need to foreclose. This step ensures that the title work has been done and both the borrower and you have clean title.

6) Recording of the deed.

If the funds are being loaned for construction, I would lend the money in draws, upon completion of phases. This way, you are minimizing risk and ensuring the funds are actually going into the building. You are securing the loan with a building. Materials sitting in the back of a pickup truck aren't part of the building and therefore can't be part of the security. Those funds are unsecured. They're only secured once part of the building. Create a draw schedule, combined with inspections to ensure the construction plan is being followed. The borrower should be willing to sign a sworn statement of construction as an exhibit to the loan. This usually is accompanied by an AIA form.

You should also be having the borrower sign an assignment of rents. If the property is rented, and the borrower is in default, you need a mechanism for the rent to flow through to you until you get repaid.  

If you do all these, you should be well protected.

The way I stay motivated is by doing projects. Projects don't come in the mail. I know there are education companies out there telling you that is how to find deals. 

In my experience, deals chase money. I don't go hunting for deals. They come to me. 

How do I do that? Even if I'm using other people's money, I'm always positioned as representing the money in the project. The key is to get good at raising the necessary capital to complete your projects. 

By developing relationships with other investors who are doing the types of deals that I want to do, I get visibility of the opportunities. The marketplace is truly an all-you-can-eat buffet of opportunity. Successful investors have more opportunity presented to them than they can possibly undertake. A percentage of the cast-offs will still be good deals. 

Hope that helps.

The presence of the tenant should not affect the servicing of a critical piece of equipment. We put a lock box on the property in a location where our service staff can get the keys. Alternately, the service staff will stop by our leasing office to pick up with keys on their way to the job. If entry to the unit is required, the tenant must be notified according to the legal notice period (24 hours in most places). Their presence is not required. 

For most HVAC related work, we design our buildings so that the mechanical closet can be serviced from a locked closet in the common area hallway. This does not require unit access or tenant notification.

We have a system for problem notification. This is usually a hotline number. Our front office will determine how time critical the fix is. It could be an emergency (plumbing leak), or a routine maintenance issue (change the filters). It will get scheduled accordingly. In every case, the key is to communicate with the tenant and set expectations appropriately. Problems arise when there are long periods of silence with no communication. The tenant is left feeling like nobody cares. Rapid response is the key. You can say that the fix will happen in 4 days, as long as you respond quickly.

Title companies may be willing to record the deed. But if you don't buy title insurance, and if you don't give your buyer title insurance, you may not have a truly marketable title. No bank will lend against a property that doesn't have title insurance. Some title companies are bowing to bank pressure and will refuse to insure title in re case of a double close. Do your homework.

A risk is only a risk if it's not part of your plan. If your plan assumes a complete rip-up and replacement, then you're not assuming any risk. 

I think you can assume there is mold, and possibly rotting of the structure beneath the bathroom. I would assume that major parts need to be torn out. Cost out the project assuming it needs to be done. If the reality is better, then you won't have a problem. But bear in mind, you will need to rip out a lot just to determine the scope of the problem. 

Question is: What's a deal?

If you're hoping to find something trading at a 40% discount, just sitting there, waiting to be snapped up, you may find a handful over a period of time, but not many.

Our definition of a deal is one where we can adapt the property to highest and best use. That usually means redeveloping the site and new construction. Those are much easier to find. What types of projects do you specialize in?

Hard to see what value that practice could have, apart from possibly building a list of potential buyers. It's clearly false advertising, and there are laws against that. 

I'm trying hard to image what they're thinking. Maybe it's something like....

"I know, I'll steal someone's listing that looks better than mine. When the buyers call, I'll tell them the property has been sold, but I have another one that's just as good. Once they come out to see it, they'll fall in love with my house and buy it. Yeah, that's it."

Some people are just really stupid.