All Forum Posts by: Michael Roy

I don't look at cap rates or demographics. The only thing I care about is my cash on cash return (total investment cost divided by annual Net income). I want this number to be at or above 20%, although many investors are fine with 10%.

If you can, pay cash up front and finance later. Cash offers that can close in less than 30 days give you negotiating power.

I budget 1-1.5% of purchase price for annual insurance premium, as a general rule.

If you have family there, that is a great idea! Also, if it is just 1 duplex, you should be able to manage it from your home. The only thing you need to stay on top of is maintenance requests and leasing. Leasing can be done online through postlets, which posts to all major real estate search sites (or you can use an agent if you prefer). Tenants are required to let you know of any problems with the house, so they can send you their inquiry and you can have a vendor go check out and confirm the problem.

What are the reasons you aren't handling this yourself now?

Are you sure that you can use the FHA loan to finance the entire quadplex? I think it would still classify as an investment property since the majority of the property is used for investment purposes. I would look into that more if you're not sure.

You're smart to place as much debt as you can, although I will say that it would be a good idea to start building a relationship with a banker to provide conventional investment loans. The best way to prove your worth is to build a track record. What this means is that you shouldn't be shy about flipping your first property relatively quickly if the numbers look good. If you're trying to finance a property, a bank will either see someone with zero experience, or someone who knows what they're doing. Especially if you want to do large complexes within 5 years, that means you have 5 years to flip as many deals as you can so that a banker issue the loan with ease knowing that he's dealing with a veteran, not a 5-year investor that knows how to buy and that's all. Anyone can buy, few can sell.

Good luck to you!

P.S. agents would rather sell because they aren't entrepreneurs by nature (although they will staunchly defend themselves as such since they "own their own business" as an agent). People like yourself are willing to take the big risk of locking up your money for an indefinite amount of time, hoping that your hard work and market appreciation will yield a return worthy of your time. Agents are content making 100k/year with 0 skin in the game. You prefer to have all your skin in the game for 1mil/year. That's a true entrepreneur. Keep it up.

Some good language below (only if applicable):

- Cozy

- Family friendly neighborhood

- Near the school

- Spacious

- Warm

Highlight rooms as the "breakfast nook" or "dining room" or "family room". Men like to see garage space, if applicable. Hopefully the yard shows well, as that is another good thing to highlight.

Do you plan on doing more deals in the future? If so, there's no better time than now to start building a relationship with an accountant, especially one that specializes in real estate transactions. Yes, it's a bit pricey. But the long-run savings are more valuable. Not only will the accountant ensure that you file correctly, they also know of the potential write-offs, shields, etc. involved in real estate transactions.

Good job keeping your receipts for expenses, that's important. I don't have any recommendations for people in your area, but I strongly recommend you find someone. The only thing worse than paying an accountant is spending the many hours doing it yourself only to have the IRS come knocking on your door asking for more money or not knowing that there was a tax shelter you weren't aware and therefore didn't take advantage of.

Before buying the property, go to the county clerks records search site, and see what documents are available for the property. You can find all of the liens, including contractors liens, deeds of trust, etc. on the property. Make sure you always have a termination option if you're worried about making a bad deal.

Once a property has been placed under contract,

1. Build a relationship with an inspector. Make him/her your 3rd best friend (behind your banker and title agent). Have your inspection done right away, and make sure that they are thorough. 

2. Get the survey from the buyer

3. Make sure the title is clear

Sayo,

I would absolutely not give it to a real estate agent. Once you ask the agent to provide you comps, they are going to want to get a commission, and that demotivates a seller and weakens your negotiation position by X thousand dollars (depending on how much the seller would have to pay the agent). If you PM me the zip code, # of bed/bath, and general condition of the house (new, great, average, decent, needs some work, needs a lot of work), then I would be happy to run comps for you and message them back to you. Free of charge or ulterior motive. I have time and would be happy to do it.

To answer your second question, you might as well get it under contract, so long as you have a termination option. That way you can decide if you really want it, but be able to opt out of the contract if not. 

P.S. the best comps can really only be found on MLS. Although you can search "For Sale" properties on many website, you want to see what homes actually sold for. Sold data is most readily available on MLS. Let me know if you want me to run comps for you!

There isn't much additional information they could provide you just by driving the houses. If you wanted to, you could teach them to search the property address on the appraisal district website, so they can also get you the ownership information so you know where to send your letter of inquiry.

For something of this scale, and these are friends of yours, I would keep any contract you write very simple. Depending on how much you plan on paying them for any finders fee once you close a deal, it might be more worthwhile and cost efficient to just pay $50 for any property they bring you that you either confirm is vacant or pursue for purchase. It enables the finders to have steady money and incentive to get you bulk properties, and it would probably save you in the long run if you plan on doing multiple purchases. 

It depends on what you want to use it for. Can you provide some additional info?

I recommend staying away from wholesalers. If you buy a property listed on MLS, you're minimizing the risk of being taken advantage of because of its exposure in the market, legitimized by a licensed broker/salesperson. If you're going to buy off-market deals, build a relationship with that person, and fact-check the things they tell you about the properties they own. Find out what deals they have done in the past.

If you ever are looking for properties in the Dallas/Fort-Worth market, let me know! I own a few and I am always willing to help someone look. Good luck to you!