All Forum Posts by: McKellar Newsom

I like your terms, particularly the 30 years.

I'm not sure what you mean by "the deal got escrowed". Did the bank escrow your rehab costs? The banks usually escrow taxes and insurance. I have had one bank escrow my rehab costs. It took a bit to get the inspector to come out, confirm the rehab then get the bank to release the escrow money back to me. Be careful to keep every receipt to show the bank if for some reason you have an issue with the inspector, etc.

You might have meant that the bank sold the note to another bank? mck

I like southern cities for many reasons. Most importantly, a trend is that businesses are moving from the north to the south. Chattanooga is my favorite spot. I moved here from Montana because of the growth potential, cheaper houses and steady rent. I also like Memphis and Nashville.

I like a population of 100,000 or more in a cities' market area. You could check out large cities in Mississippi, North Carolina, South Carolina, Arkansas, Louisiana, Texas and Georgia.

I'd shy from Alabama because of their court system there.

I have a system for choosing cities based on specific criteria.

One of my mistakes early on was to invest in too many different cities at once. I'd find one city and really focus there. Good luck. mck

After buying property on my own, I thought it might be easier to try a few turnkey properties. I tried companies in Ohio and Tennessee.

I would never again use one company. Their deal ended up being my worst deal ever, hands down, for so many reasons. Why it was so bad is a long but ultimately comical conversation. Hints as to why it was bad? Think of lost equity, incorrect rehab costs, property not secured, incorrect rents quoted, 2 title issues, including one inherited lawsuit. Unfortunately, I can go on. Ultimately, the entire deal was horrible because I obviously didn't do sufficient due diligence on the company or the property.

On a happier note, I'd still buy from the other company I tried if the right deal presented itself. One of my best deals came from that company. The company has been great for so many reasons.

If you buy from a turnkey company, make sure you do all your own due diligence. Tell the company exactly what you are looking for with the numbers, rehab, rent, area, etc. Don't just believe them when they tell you the numbers, rehab costs, rent, etc. Research it all when they bring you deals. You could treat the turnkey company as you would a wholesaler or a realtor, they are another resource to send you deals.

If you want to know company names, feel free to call me because I don't feel comfortable mentioning specific companies here.

Good luck. mck

I'd say no based on price and estimated rent.

Also, your estimated rent might be wrong. You are getting a rent estimate from a realtor. The realtor's motivation is to sell you property.

I'd get a better handle on the potential rent because it might actually be lower. Ask a couple of property managers and look in the paper and on Craig's List to compare rents. Call the numbers on "for rent" signs in the area, etc.

My realtors are usually high on rent and low on rehab costs. I wonder why that is...

One last thought, have you bought a townhome yet? Read up on some issues with townhomes versus single family rentals.

Good luck. mck

I'm not sure about the answer to all your questions but here's what I do regarding replacement insurance or "at cost" insurance.

For my cheaper properties, I decide what I would do if the property burned down. Would I really rebuild or would I be better off tearing down the property and selling or donating the land? For the ones I would tear down and sell the land, I have an at cost (or something like) insurance with Shelter. Shelter does my properties in Tennessee but not in my other states.

I believe they cover a lot of the south. You could try their 800 number and see if they cover North Carolina.

For my properties that are more expensive, I get replacement value insurance. My plan is to ultimately get all replacement value, but at this point I would like as much cash flow as possible and the extra insurance adds up.

By the way, Bryan, I used to live on Graburn Road off Carmel. I love Charlotte. mck

Congrats on your deal!

Great terms on your loan. In Chattanooga, I've seen 15 year notes at 4.99% for personal loans and 5.24% for loans to an LLC, 20% down. Did you get the loan in your LLC or personally?

You might already know these ideas but here are a few things I didn't do with my first deal but now have as part of my post closing system.

- Call your title company in a week or so to thank them for helping expedite the deal and make sure they dispersed funds, especially for taxes and insurance.

- Draw up a prioritized punchlist with deadlines and start following your plan. I often hold off on a few non-essential items and wait until I get the first month's rent then have that money pay for the final items.

-Be careful not to over or under rehab. It's an art and a science. You might solicit local investors for their opinions.

-Even if you are using a property management company. Meet the neighbors as you go by the property. Tell them you are looking for a good tenant and will give them a referral fee if they bring you a qualified applicant. By the way, I never disclose that I own the property. I "help" the owner. Technically, I am helping the owner because I buy with an LLC.

- If you bought a foreclosure, count on a few months of heavy repairs once you place a tenant. Warm bodies often find a few things that everyone missed in the inspections, particularly with plumbing.

Good luck. mck

I'll email you, Greg. Thanks for gathering the list. mck

Interesting article, Rich. Great name, by the way.

I agree with Jon that sometimes it's a matter of making the right decisions at the right time rather than working harder. Actually, real estate investing doesn't feel like work to me. Well, except for some of the paperwork.

I feel rich. I think the sooner you feel rich, the faster you will be. McK

I still feel fear with every deal.

For me, having a goal and a detailed plan helps me deal with my fears. When I really feel fear, I run or play tennis. Keeping active alleviates my fears somehow.

If the deal is good enough, you can:

1. Fill in a pool for a price.
2. Put a sturdy low to the ground deck on top of the pool. I've never done this so I don't know if you need additional insurance.
3. Remove an above ground pool