All Forum Posts by: Ray Johnson

@Chris Gordon You're going to get a wide variety of preferences because in the world of REI, most investors will invest via the Equity Placement route meaning they're buying cash flow with a break-even analysis reflecting when they will really start "Cash-flowing" on an investment.

I'm sure if you were to ask most investors at which point in the investment property lifecycle they break-even and truly start cash-flowing they either haven't figured that out or don't know how to calculate that number or what the true IRR on a property is going to be because they think once they close escrow with 20% down they are cash-flowing on day 1.

When @Chris Seveney talks about the IRR for a long term buy-and-hold, I factor in a rehab at year 15 of a 30 year hold, whether it's due to wear and tear, or possible change in interior styles to remain competitive in the market. Most investors don't do this, they only factor in a percentage for CapEx but this doesn't cover the rehab over a 30+ year hold, the CapEx is only covering things like HVAC, roofing, etc... at the end of the 30+ long-term buy-and -hold most of these properties will have a negative or very low IRR.

@Andrew Johnson covers a portion of this as he mentioned factoring in his rehab cost during his initial stages, not sure if he's referring to long-term property holds of 20-30+ years.

Also keep in mind these strategies will change based on property type, SFR, Duplex, Quads, etc... will be treated differently than a 20 unit building, which will be treated differently than a 120 unit asset, and so on.... this will also get you different replies to your question as the different debt structures will fulfill different requirements of the investors.

@Byron Scott One of my acquisition strategies is to buy REO's from bank Asset Managers and from the HUD Homestore, HUD sells to the Owner Occupant pool of buyers before they sell to the investor pool so it's a great strategy. You will have to agree to living in the property within 60 days of closing and you can't sell or rent the property the first 12 months after closing. It works for me because I'm ok with moving every 12-18 months.

@Tony Castronovo Whenever I purchase Condos, The fee to do the HOA transfer has always been paid by the Seller, it washes out during the Title process and is typically paid by the Title company to the HOA. If the Seller wants you to pay it you can always ask them to pay it, it's usually a small fee.

@Mauricio Ramos I forgot to mention, there are requirements to be a Sponsor which is why you'll need to do a Multi-Member partnership.

@Mauricio Ramos I think what you are wanting to do is a Multi-Member partnership not a Syndication deal. Unfortunately on BP and in the Guru world the term Syndication gets tossed around a lot by people who don't know what Real Estate Syndication is or how it works. Look into the Multi-Member partnership, Also be careful with how you present your deals, a good investor will expect you to know how to structure a deal before asking them for money. Don't take any shortcuts in the initial stages, get a business plan, talk to an attorney, etc..... You have what it takes to find deals, you're ahead of most people still trying to find deals, make it work in your favor.

@David Polius this is going to depend on the property and the area. I have a 5th floor Condo in the Adams Morgan neighborhood of Washington, DC. that has never been vacant more than 2 weeks. If the property is in a desirable location the 3rd floor location isn't going to matter. Is the property in a high density major city or neighborhood?

@Vijaianand Thirnageswaram I see a lot of Newbies that fall into the Motivated but not Organized category. Like @Andrew Johnson noted, they start off targeting 500 doors and forgetting about fundamentals. I notice on BP daily post like "I got a 40 door property under contract, What do I do now?" or some other form of a Newbie with little or no money trying to scale as many Doors in a one year span as a seasoned investor with a million in cash.

@Christopher Perez nice example. What are your thoughts on addressing the need for rehabs throughout the hold cycle and the associated cost? I know the cost will vary depending on the property Class type but I think it's important to factor in this cost since it's a consistent cost in the buy and hold portfolios. Most people assume this cost will be covered in their 5% CapEx allocation but it isn't.

@Sachin H. The low credit scores you're seeing leads me to believe this is a C- or D Class property. I don't deal in this category of product, however I can answer your question regarding the 700 credit score range.

I invest in Class A properties in Washington DC where I have minimum credit requirements of 720 for my new construction properties, and minimum credit score of 700 for my properties that fall into the B class property category. 

I only invest in major metropolitan areas with extremely high population density and strong property values, in areas like these even people with 700+ credit scores are left being renters because many of them want to be in the area but they can't afford to own so I end up with renters with good paying jobs, and great credit. 

@Tom Gimer Hi Tom, you can count me in.