All Forum Posts by: Ray Johnson

@Kristopher Edwards Often times on BP we get post like yours that are such terrible deals, yet the BP community doesn't want to discourage anyone from pursuing their dreams so we point out subtle things about the deal or the buyer in hopes they'll pickup on the clues without being told you need to just Stop and find an actual good deal. Unless this property is a block away from the beach in CA, you will not have this property stabilized fast enough not to take a loss on year one. The fact that your basic questions about things like lease fees, common area utilities, you're factoring a property at 100% when all properties will have vacancy in year one unless you're telling me all 18 units will be leased in prior to closing. This also tells me that you have not done an IRR on this property. Without listing 100 things wrong here, I'm just going to say, get a little more education on REI, and not from the guy selling you the asset before you commit to properties. This is a terrible deal.

@Michael Schultz This guy is basically shouting out that his way is the best way to go and all other roads travelled are not the best paths to take. I understand he has to do this to sell the merchandise, maintain the advertising dollars, and build the fan base, etc. so I won't hold it against him, it's his selected line of business.

In my opinion the one size fits all talk on a major platform de-values the speaker and their audience.  

@Jeff Browermentioned some people needing to start smaller than doing nothing, maybe Grant doesn't know that he's still a small fish in a big pond. I worked in the private equity industry and I know Grant Cardone isn't at the level most of those players are at and I'm sure he wishes he were. When the minimum equity placement is 20 million cash (from an individual not a fund), most show up with at least 100 million cash to place, and the Institutional placement Manager shows up wanting to place 2 Billion dollars a year would make me ask Cardone, why is he investing so small? He's basically the "SFR collector" on the large scale in America.

Hopefully the BP community understands this is one salesman selling one of many products in the consumer marketplace.

@Steve McRory I'm simply stating that this type of financing product is very risky. You're pointing out the upside of the product which is easy access to properties, What you're not mentioning is that we've seen this product before and what happens when it's used by a lot of people that don't have the discipline, knowledge, or proper planning to use this type of product.

@Steve McRory I'm so looking forward to more of this "Creative Financing" so more risk takers and gamblers can buy houses they can't afford, then I can buy them on the cheap in the next downturn. This type of financing structure requires discipline and long-term planning which most Americans don't have.

@Anthony Gayden I wouldn't say Pyramid scheme, however I do see predatory practices daily, Guru's, and some of the bad property sellers ripping off the uneducated population on a regular basis. Almost daily I see properties posted in the BP Marketplace and many other REI platforms with terrible deals and a ton of people asking for additional information or expressing interest to buy, and when you look at the profile of the interested party, it's a new investor trying to accumulate doors quickly regardless of how bad the deal is.

I don't blame the scammer alone, I also blame the scammed for investing while uniformed. I think we've all seen the post that show up every couple of day stating "I have a (X) -Units under contract in an apartment deal, What do I do next?" This is just one of the many post for those caught up in the Greed of REI.

In regards to Syndication solicitations I don't consider the Pyramid schemes, When I've looked into them, they're actually people looking to do Partnership agreements and raisings funds, but because they're not educated or understand the industry they're trying to make money in, they're misusing the term Syndication, these people who have never purchase one single property trying to Syndicate deals once again is asking for trouble one way or another.

@William George spear I agree with @Thomas S. Why are so many investors taking so many risk with tenants and their properties? You people are making this business way more complicated than it needs to be, I understand with risk comes better rewards/profits. 

Set high standards for your business, run it like a professional business, follow the low, and you'll mitigate most of the unnecessary issues landlords/risk taking gamblers on this site encounter.  

William, What are the criteria you require to rent your properties?

1) Credit Score

2) Income requirements

3) Background

4) Employment "legitimate" W2 status, etc....

5) I also look at Non-related Co-tenants who must be able to qualify for the property on their own to mitigate vacancy risk if one of them leaves, It's not a deal breaker but this tends to move them further down the list of qualified tenants when compared to a married couple, or two individuals who both can qualify on their own but choose to live together, there's nothing wrong with choosing the best qualified tenant.   

@Andy Rousch and @Chris Sellers My preference is investing in condos, easier to manage, easier to rent out in my investment markets of Washington DC, and Orange County California. I will add the fact that there are things you need to keep in mind when it comes to the HOA fees, Never go with high-rise buildings because those common area fees paid by the HOA will kill you, I typically look at Garden-Style or 4 stories and below, I do have one property that's in a 7 story building but the fees were still fairly low.

In regards to the comments about profiting from the HOA's, The HOA's are Not-for-profit entities, If you owned the property management company that won the owners Board voted contract to manage the property, that's an option to make some additional money but you can't make money off of the HOA directly.

I would also suggest paying attention to your competition in the area, apartment buildings, What amenities are being offered versus what you'll be able to offer with your unit, what are they charging versus your all in cost to operate your property, etc. lastly pay close attention to the interiors of the condos and apartments in your market since you'll have to offer similar or a better interior depending on the other amenities with your property.

@Ryan Greenspan In my opinion this will depend on the individual type of investor and how much time and energy they want to spend on their portfolio. Since I have no intention of quitting my W2 job, I look for properties that will require the least amount of my time, money, and energy, yet be a great investment.

With the exception of One of my properties all of them are Class A properties, While they may not be bringing in the $800 +/- a month Net cash-flow that some of the BP posters mention, I'm good with the $300-$550 per month net and never having to deal with the headaches I see many of the posters on BP discussing. I've been doing this since 2002 and I've never had to evict anyone, never had a late payment, never had a vacancy more than 1 month, etc... the list goes on.

The message is in my targeted markets of Orange County California, and Washington DC paying a little more for the nicer property gets you a lot more benefits beyond the small difference in cash-flow you're thinking about. 

@Dale Vance This strategy gain momentum during the rapid equity growth cycle we are now almost out of completely. In 2010 if you bought a property in CA or DC which are my markets, I could do a Cash-out at year one and have another $40K in equity 12 months later following that cash-out, The risk was mitigated by the hot markets. In todays environment the risk is no longer mitigated by those rapid equity building factors, the strategy turns investors into gamblers.

If your property still cash-flows after the cash-out, all you need to do is make sure you won't have to sell it during the next down cycle, if so, you'll have to take a loss if you sell in a slow or no equity growth market because a 75%-80% Cash-out or HELOC doesn't factor in the cost of selling the property.

@Will Lawburg Since most BP investors don't use IRR templates you're not seeing that you will have at least two rehab' s over a 30 year loan cycle that are not accounted for in your CapEx monthly set-asides, What I'm saying is you don't have $700 a month for life. For my long-term Buy-and-Hold properties I factor in the rehab's to show my numbers closer to reality.