All Forum Posts by: Patricia Steiner

@Mark Towey

Mark, thanks for reaching back out to me.  And, for providing more information.  I have a few recommendations to get you started in learning what matters when becoming an investor focused realtor.  Please know that I was a real estate investor for most of my life as my family is big in 'dirt.' I was also ran wealth banks so building wealth, valuation, lending were also part of my toolkit before opening my own investor firm.  Start with:

1.  Attending every inspection you can.  Follow/shadow the inspector - LEARN. Ask questions.  Knowing construction and building codes are critical to building credibility.  Read every 4-point and wind mit you can get your hands on.  And, also attend appraiser walk-throughs...read every appraisal report for investment properties that you can beg, borrow, steal.

2.  Collect names of trades; and do this by seeing who is working in your market and at what properties.  I don't recommend approaching them on the job site but it's not a bad idea to follow-up by phone later to find out what type of jobs they specialize in and who is fueling their business.  Keep a current contractor's contact list.  And, make sure you vet the heck out of them before ever referring/recommending.  And, I don't mean vetting by checking google reviews...perfect five star ratings means the guy's got a lot of cousins.  Do the deep dive.

3. Talk to lenders who specialize in investment financing.  LEARN.  Know their criteria, know current rate structure, determine what type of financing they're the best at doing.  This isn't Fannie/Freddie stuff.  And, as such, make yourself a cheat sheet of all the terms and calculations that are used in financing and in valuating properties and return.

There's a lot more to it - and not one of these can be done quickly. If you 'wing it' with an investor, you'll get to 'wing it' ONCE. You won't get another chance after that. Until you know the market, the business, the market demand, how to assess ROI, Cash Flow, Valuation - don't even attempt to jump in. Build your knowledge, your bench strength (you will never be the expert in every aspect of real estate investing because it's complex, ever changing, and lots more).

Hope this helps.  I hope you'll look at building your business by building your knowledge and expertise as an everyday investment in yourself and your business.  Feel free to reach out to me if you want me to increase your homework!  It's worth the time, effort, and feeling small before making it big.  Best...

A lot of great counsel has been given here already.  I strongly suggest that you tell your realtor what you are wanting to achieve - the whole story - so the realtor can advise you on whether that's realistic in the current market, help you fine tune your expectations and goals, as well as target specific properties. If you fail to give them the full story, you're wasting their time...and yours.  And, yes, you should send the realtor properties that you are finding that might be of interest to you so they can be vetted.  What looks good online, is just that - good online.  

And, one more thing:  you always hire people who know more than you do.  Always.  If your realtor has no experience in what you're attempting to do, you've got the wrong person.  Best...

As a landlord, you can report/file a rental reference on the credit bureau (Experian offers this service) - and I recommend you do. While your chances of getting paid are low, so will be the tenant's chances of getting that new phone, car, or next rental. You up your chances of repayment when you make it really tough for them to have any toys and decent rental. You can also assign it to a collection agency; many are fee based and several take a cut of what they collect. This will more than likely require you to get a judgement against the tenant for the unpaid rent.  

And, not to rub salt in the wound but why 5 months?!!! Tenants who don't pay, don't stay - and the process should start as soon as they miss the first rent payment.  Being out one month's rent is a whole lot less than five.  Make sure your PM contract sets a standard for valuing your money by taking action as soon as it is required.  

Comparable Sales in itself is meaningless...no two properties are exactly alike so those sales need to be adjusted to make them 'comparable' to your property - aka Adjusted Comparable Sales is the method that appraisers and brokers utilize to establish valuation using this method.  The Income Approach is used by appraisers and commercial real estate brokers; 'It is based on the expectation of future benefits. This method of valuation relates value to the market rent that a property can be expected to earn and to the resale value.' (End).  There is a formal process that is completed to determine valuation based on both methods. Ask to see the calculations used (actual document) - the adjustments made, the current to future rent forecasts.  If you're using a residential realtor, the transaction will be a challenge from start to finish...it's a different skill set altogether.  Ask for documentation on how the list price/valuation was determined.  

Start the eviction process first.  Next, you need eyes on the property; if your state requires notice of inspection, send it immediately. Most states allow email as proof of notice delivery.  Find out who is living there and the condition of the property.  You'll also want to review her application again; actually do a google street map search of the addresses listed in her application (amazing how many people have a previous address at Taco Bell!).  Call the employer - AFTER doing a google search and map search of it (amazing how many people have a friend pose as their employer).  And, search the tenant by name (amazing how many folks live their lives outloud - actually too loud - on social media).  Don't be surprised if she and many more people are living there - and the 'tenant' may also have leased it to a third party or more.

You have to ACT TODAY.  NOW.  Make sure you follow all the landlord/tenant laws (don't turn off utilities or change the locks).  You accepted her as a tenant and you have a security deposit so you're obligated to act as a landlord.

Fingers crossed she's just gone...

Several recommendations:

First and foremost - BREATHE!  The lender is making a business decision; they're in the business of making loans.  They simply are unsure about a transaction and they are asking that you make their concerns go away.  The more you panic, the more 'taken aback' by their request, the more it will appear as though there is something to hide.  This is business...and if this lender/underwriter found this mortgage, another one will as well. Stay the course and get it cleared up.

Next - document the transaction.  Be formal.  First Section:  Transaction Description (why did you do this; who is the lender (don't call her elderly or a slow check casher -just give the facts).  Second Section:  Payment History (yours) - list the payments and show an estimated ending balance.  Attach copies of the checks and/or your bank statements.  Provide the address that the checks were mailed to each month.  Note:  Be careful what you say about the private lender here. You can note the clearing date delay but state only that this was a regular/routine and rather annoying practice by that individual  throughout the course of the loan.  Thirdly:  Send a formal request for a Mortgage Rating/Verification Letter to the private lender at the payment address.  Send it by overnight delivery with proof of delivery confirmation.  Provide a copy of the documents sent as well as the envelope/overnight envelop to evidenced your action with the underwriter.  AND, give the underwriter ALL contact information for this woman.  Don't suggest she has dementia or might be in a nursing home because it makes it appear that she may not exist.  Facts only. 

Send the documentation to the underwriter and to the loan officer who took your application and ask for a conference call with him and the underwriter to review your submission.  (And, the loan originator didn't sabotage you - he makes a living by closing mortgage loans; he may not have included it in your application because he thought it was closed/paid off).  What you're experiencing is the perils that come with private mortgages that are not well-documented and reported. Just give the facts, ask 'how can I help further,' and get it done - forever.

You got this...

I concur with all those who posted before me...when it comes to vacation rentals, my thought process is more along the lines of 'have I maxed out the income potential or is there something else I can do/add to increase it.'  I have a benchmark for each of my properties but I don't consider selling until it is reached, I'm in seller's market environment, and I have found another property or other investment for reinvestment.  And, another reason to sell:  it's more trouble than it's worth/bored with it/just done.  Congrats on being in a position that you can ponder next steps.  I do recommend waiting to sell until interest rates drop; I recently sold a successful vacation rental property located in a highly-sought after beach community - and the buyer pool was dramatically different than a year ago. 

Just a few questions for you...

1. How many realtors is that investor working with currently?

2.  What is his budget for purchasing and renovating?

3. How will he acquire the properties? Do you have a POF or prequal?

4.  How will you get paid?  If you approach a homeowner who hasn't listed the property, they're under no obligation to pay you a commission.  It doesn't sound like the buyer has offered to do so.  

As a fairly new realtor, this is a strategy that could burn up a lot of time and leave you with a whole lot of nothing.  I know you know that a lot of people living in run-down houses arent' the owners right?  And, some of those types of owners are loving the cash flow they're receiving on their slums.  You don't become an 'investor realtor' by acquiring an investor. You have to know that side of the business and that only comes with a lot more knowledge in analysis, markets, renovation costs, scope of works and more.  I recommend that you select a market and make yourself well-known in it.  Know the business.  Protect yourself (you would be surprised how many realtors do a whole lot of work for someone and then don't get paid...happens every day).  Again, start by making yourself the most visible and knowledgeable real estate professional in your market. You do know I still study a couple of hours every day as this is one complex and changing industry.  I hope you'll rethink the opportunity, shore it up, and approach it from a different angle.

I like to do 'the count' to give an indication of why the closing may not have taken place.  If it comes BOM (back on market) within 5 days, chances are the buyer did not place escrow.  That's not on the property but on the buyer.  At 10-15 days, that's the inspection period.  Chances are it didn't pass inspection and whatever caused it not to do so, the seller refused to correct.  That taints a property.  At about 20 days, that could indicate that the property didn't appraise and the seller wouldn't lower the price.  And, at 25 and on, that's the financing commitment time so if it fails then, you know the buyer couldn't obtain financing.  This information is helpful in how you approach the seller and in structuring an offer.  Hope this helps.

I think you'll find that the '1% Rule' isn't applicable in most markets - especially those that are high demand - and that it hasn't been for some time.  It isn't a 'rule' as much as it is a quick and dirty way to determine if it's worth the bother to look at it further.  For my clients and my own acquisitions, I prefer to do a deeper dive right off the bat; it takes just a minute or two and is more tangible.  Hope this helps...