All Forum Posts by: Michael Hayworth

Asbestos is a great example of government intervention that turned into a major freak-out blown out of all proportion.

Asbestos just sitting there is not any real big problem. The problem comes with breathing asbestos dust into your lungs over a prolonged period of time. So, for example, mechanics who worked on asbestos brakes for years and years, with brake dust always being breathed in, developed pretty serious lung diseases. Eliminating it from products made a lot of sense, but common-sense regulation quickly turned into pretty ridiculous levels of regulation. And people don't really understand the particulars, so it's turned into this huge scary thing where the average overprotective soccer mom is convinced the asbestos monster is going to crawl out from under her kid's bed and kill him in his sleep.

The two main places it was used in our area are in siding and in popcorn ceilings. On my properties, I generally choose to not disturb it. If we need to re-side the property, we'll install new siding over the old asbestos siding, and it's perfectly fine. Popcorn requires more extensive measures - you'd be fine wetting it down and scraping it while wearing a respirator, but the law requires certifications, testing, blah blah so we typically just leave the popcorn in place in those homes. Thankfully, there's relatively few of those in our area.

You're in California, so whatever laws I have to deal with in Texas, you've probably got 3x as many there.  Now that you know it's there, you're probably going to need to hire someone who's certified and go through a full abatement process, unless you can just leave it undisturbed. Hopefully, it won't be too financially burdensome.

I commend you for wanting to get started young. I didn't figure this stuff out until my mid-30s. I'm wealthy now, through a combo of real estate and starting successful businesses, but could've started a lot sooner than I did. But I really encourage you to think about building for the long term, which is often a slower process than the gurus want you to think. Real estate is not really a get rich quick scheme - it's a steady build over years. (And if you make a really big score, it's often the case that you've taken shortcuts that hurt someone else along the way. )

Some suggestions.

DO:

• Get involved in an REI group near you. Find one with some people who know their stuff, not one with a bunch of hustlers all trying to hustle one another.
• Figure out how to further the career you already have, live below your means, and pay off whatever debt you have. Early in your career, all the Dave Ramsey advice about avoiding debt, pay as you go, etc. is really good advice.
• Read The Millionaire Next Door. Great book, about the habits of real millionaires, as opposed to the $50K earners trying to live a millionaire lifestyle.
• Consider getting your real estate license. You  can do that young, work RE part time, and save lots of $$.
• Take advantage of any opportunity to learn about important aspects of real estate: valuation & appraising, renovation costs and practices, various ways of buying...anything you can learn is worthwhile.

DON'T:

• Spend lots of money on guru seminars. They're mainly there to transfer money from your wallet to the guru's.
• Try to become a "wholesaler" with little or no knowledge of real estate. 
  • Yes, there are people on this site doing it, and even preaching for other people to do it. It's bad advice. 
  • Being a wholesaler is not an entry level job. It requires good knowledge of valuing deals, strong negotiating skills, ability to run realistic comps, good knowledge of renovation needs and costs....doing it right is advanced stuff. After years of real estate investing and remodeling homes for other people, I think I might finally have the skills to be a really good wholesaler if I didn't already have three companies to run.
• ABSOLUTELY DO NOT go deceiving sellers that you're going to buy their property and get them out of whatever financial jam is making them willing to discount the property for quick sale, if you don't have the actual ability and intention to close on the property. If you are putting a property under contract with no ability to close, fully intending to back out if you don't find someone to assign the contract to, you're basically being a liar and a scammer. 
  • Yes, I know there are lots of people preaching that that's the way to get involved in real estate investing when you don't have any money. Those people suck. Go apprentice under an experienced investor, get your RE license, any of the things I mentioned above. Just don't go deceiving people that you're going to buy their home if you don't have the ability to do so. That's ******, and Karma will get you.

Good luck building a solid, ethical career in real estate investing. This site is a great place to learn.

I do BRRR many times a year, often paying cash for properties at the courthouse steps auction, then refinancing them immediately. I can usually have the refi done and be ready to close before the next auction comes around.

This is all done thru commercial lending at my local portfolio lender. So I have to have 25% of my own money in the property, and pay about 5% rates on a 15 year note with one lender, and a 20 year note with the other. That's higher rate and shorter term than residential lending, but it just leaves more equity in the property. I usually keep them 1-3 years and then sell them, so I get all my equity out then.

The key to this was setting up a guidance line/LOC with a local portfolio lender before I started shopping for properties. I started small, with a $250K guidance line when I didn't have much cash, then grew it over time. Now I have a $2M line with one lender and a smaller one with a secondary lender. In the beginning, I wasn't doing BRRR, but now that I do it frequently, whenever I talk to a new lender, I make sure to cover exactly what they will and won't do in that regard.

It seems that you're saying doing it as a commercial loan will make it hard for you to make the numbers work. Truth is, all the clamor about MAKE MONEY IN REAL ESTATE WITH NO MONEY DOWN!!!!!! is mostly ********. It's very hard to make money in this business until you have some money to start with. It doesn't have to be millions - I started with about $30K saved, if I recall right. But if you have limited funds, the best course is to start small with something you can buy with available capital, do the flip, take the profits, then do it again. Or, actually, many people would be better served to live below their means, save $$, try to get promotions/raises at work (or work a 2nd job, maybe as a part time RE agent), and pay off their existing high interest rate debts before they try to make it in real estate.

Why would you not just form an LLC with the friend having a percentage?

 What David is saying is right. I'm not local to you, so there's always the possibility of some odd law, but generally, those zoning laws apply to actually turning the house into a multi-family unit. You can almost always rent a portion of your own house that you live in.

The implication generally comes in getting separate utilities for the rental portion. If it's not truly zoned multi, you'd need to do "all bills paid" - you wouldn't be able to get separate electric, water and gas meters.

Wayne has it right. Those papers indicate the mortgagor has stopped paying. The lender sent someone out to inspect the property and found it abandoned, so they've taken steps to protect their interest. But they haven't actually foreclosed on the property yet.

So the bank doesn't own it yet and can't sell it to you. It'll be auctioned off on the first Tuesday of some month. Here's the Georgia process.  Lists are available for when various homes will be foreclosed on and when. (Why does it often take a bank months between when papers go in the window and when it finally gets auctioned? Great question. Could be, they're negotiating with someone to try to get it current - maybe the borrower, maybe an estate.)

Up till then, you can try to contact the owner of record and work out something to buy it from them and pay off the lienholder. There are numerous members on here who do that via direct mail or trying to reach out by phone or visit and could give you info about that. But I think the generally successful approach is to try volume. If you focus in on just one property, your odds are pretty low. You've got to diversify your efforts in order to have a good chance of getting one under contract.

OK, first some general notes, then I'll get to specifics of your report.

As a contractor, I have little use for home inspectors, unless they're of the "old guy who spent decades in construction and now is a home inspector because it's less physical wear & tear" type. Those guys are worth their weight in gold. But there's not nearly enough of them to keep up with the real estate boom. The other major types are:

• Failed in construction, was frustrated that his genius was never recognized, decided to go be an inspector so he could find fault with others' work. (A lotta these guys are building inspectors, too.)
• Have never worked in construction. Learned from a book or online course.

Then add on top of that, inspection standards make them afraid of getting sued, so they call out all kinds of minor crap that every single house in the world will have. I've seen them terrify buyers over nothing, because there's no perspective to their reports.

It's still better having a home inspection than not. I just wish there were, by and large, a better pool of home inspectors out there. (By the same token, people feel the same way about contractors....and they're right!) That's just background, saying "Don't freak out over inspection reports."

Now, all that said, there are some things that concern me in this report. I would ask for an extension of the option period in order to give a real contractor a chance to look at things. The items that are of particular concern to me are the structural issues:

• There is a noticeable bow/sag to interior ceiling within home AND to roof ridge. The cause was not determined.
• There is ACTIVE evidence of more than one kind of wood destroying insect found in the crawl space. The insects appear to be anobiid beetles AND carpenter ants/moisture ants.
• A licensed contractor will need to "sound"/inspect the structural members under the home to determine which, if any, should be replaced. This should include the main beams, posts, sub-flooring, and floor joists. (I'm assuming this is related to the WDI...they can screw up structural integrity. Usually, it's readily fixable, but they can in some instances do serious damage.)
• It is recommended to modify/replace stacked block support under home with one properly-sized wood post secured to concrete pier pad AND gussetted to beam support

Other stuff, like the plumbing leak, reversed polarity, WDI, discharge pipe, vapor barrier - that's all stuff that can be fixed in a few hours each. If I was the seller, I wouldn't bat an eye at being asked to repair those and complete the sale. Other stuff, like the attic ventilation, is no big deal to me - most older houses won't meet current standards. But the thing you want to avoid is big structural issues that can cost tens of thousands to fix. Get a real contractor in there and evaluate. Don't be afraid to walk away if the deal isn't right.

Andrew has it right here. Real criticism is incredibly valuable.

I own several businesses. One of them is a franchise of a national direct mailing company that serves small businesses. I have sat down with entrepreneurs who've wasted their entire life savings on their new venture, all because no one in their family wanted to be blunt with them and tell them their idea sucked, or that they weren't cut out for running a business. They'd be struggling and decide to buy advertising to try to get more clients, but their really problem was they needed a better business plan.

It's true that there are a lot of negative people in the world, and many times people just want to put you down. But try engaging them in actual conversation to see if there's something, no matter how small, you can learn from their concerns. Over 30 years of running my own businesses and other people's businesses, I've realized I'd much rather have family and friends criticize my ideas, so that I can try to learn from it, than just have everyone tell me how great it's going to be.

Best wishes!

The latest trustee auction purchase, a 3/2/2 in Hurst, TX from 1955.

Always makes me happy when I pull up nasty, stinking carpet and find this underneath.

There is a downright shady move here, but it's not by the buyer. It's someone locking a house up under contract without the ability to perform.

I've seen you respond to other posts on here claiming people are against wholesaling. A few are. But far more of us are against wholesalers who cannot perform except in case of assignment. I buy lots of properties from a couple of reputable wholesalers I work with, and I even wholesale the occasional property myself if I have more under contract than I can renovate at one time. But I would never put a home under contract knowing that I was going to cancel if I couldn't assign it to someone. That's the shady move I see here.