All Forum Posts by: Robert Whitelaw

@Jay Hinrichs Yeah, understanding the dynamics of your market is really the only way to "future proof" things as much as you can. Nothing is for sure, but I like to stack the odds in my favor as much as I can.

I also think that some of this comes down to where your properties are. I know in my area, rents went UP in the downturn, not down. As folks had to get out of their homes, they still needed a place to live so rental demand when through the roof. Some areas were different. They saw a drop in rental demand and therefore a drop in rents.

I am not the light my hair on fire and ride the bull style investor. So I like to put in extra effort to have a cushion in case rental markets decline.

Having said that, I think in most markets what a downturn tends to equal is a hit to equity but not a hit to income on a rental. So your paper value may decline, but your cash position remains good. Does that make sense?

R

In my business, I am working pretty heavily with veterans using VA loans. There is no reason that you could not use a VA loan to finance the purchase of a lease option. However, you are going to have a hard time finding a seller that is willing to tie up their property in a lease option without any deposit monies put in by the buyer. If the buyer has not submitted a "deposit" or "earnest money", they have nothing to lose by not exercising the option. One way to get around this - in terms of not giving up a chunk of cash on the front end is to agree on a higher than market rent amount with the overage being designated as your deposit. The only other thing to be aware of is that the VA appraisal is a different animal from a typical appraisal. There is a pretty good chance that the result of this appraisal will be a request to do work on the place before the loan will fund. I have been doing this for over 25 years and while things have gotten more manageable over the last 15 years or so, I still get some odd demands of what must be done before the loan will fund. Another thing to keep in mind is that the VA appraisal is one of the few items I have been able to push back on with positive results when it comes to work they are asking to get done. A good recent example is an appraiser who note "Worn linoleum in the laundry room". This spurred a demand from the VA underwriter to replace or repair the linoleum. I was able to push back and point out that this was solely an aesthetic concern as there were no issues with the floor itself. So when the time comes, you might just be able to prevail with some common sense - and rarely does common sense win the day with lenders.

Hope that helps,

R

I did a quick google and came up with this link that looked halfway decent:

http://realeflow.com/home-repair-estimator/

I just bring a contractor with me. Very analog, but it often works. Also, the good folks here at bigger pockets have a book they print on the subject - mine just arrived the other day, so I cannot say if it is great or not.

R

Hey Andrew,

First, good on you for getting into this early. I started in real estate at about the same age, but not as an investor - which I constantly kick myself in the butt over.

Anyway, I think your best strategy is a mix. Find a real estate agent you like and use them as your best way to maintain an MLS search that is fine tuned for what you are looking for. If their MLS is like mine, you can have them send you a daily summary of property updates and activity. It is a great tool. However, over the last 25+ years, the best way to locate your next property is to go out and find it. Look for the worst house in a neighborhood and write down the address. Then look up the mailing address for the owner. I use tax assessor records for this which I have easy access to in my area online. If the mailing address is different from the property address, that is awesome sign #1. It means that it is either a rental or it is just sitting there vacant. Send a letter off to the owner and let them know you are interested in buying the home. Make sure you note is not one that feels generic, they need to not believe this is bulk mail.

Another way to go is to simply get a list of all the homes in the area you like where the mailing address for the property is different from the property address. I can get these from my local title company. When I was really trying to farm these deals, that is what I used and I had a pretty good success rate. In those cases, I did end up sending a bulk mail - there were hundreds. If it is a more manageable amount, you can do each one individually to make them feel more direct and not bulk.

Cheers,

Robert

You should target your approach more. Drive areas and find properties that look promising. These are usually under maintained homes for the neighborhood they are in. Once you have the address, in many areas a real estate agent can get all the contact info for you for the owner. You can also usually check the tax assessor rolls for the county it is in the get the mailing address of the owner. Then write a note that is specific to them and their property - not something that sounds like a generic mail piece.

R

The only thought I would suggest is doing a little experimenting with some number of selections to see if any of them seem to be more desirable than other choices. It would stink to select a style with your first effort that you stick with that may be failing to get you the maximum payoff. Not a huge deal, but something to consider.

R

I am currently looking at multi-family units in Sacramento. Every pundit out there is expecting Sacramento to boom in 2017. In looking at the numbers - and with insights like yours - it sure does sound like that is starting out the year being pretty true.

R

This would seem like an odd change to the "highest and best use" of the property. Not saying there would not be situations where it might make sense, but it would not be something I would do. Duplexes  tend to make more cashflow than single family units. If it is already set up to satisfy the housing needs of two families and it benefits the landlord at a higher rate, why change that? 

In this scenario, I would just keep renting out the other half of the duplex and pocketing the profit till it makes sense for me to purchase an SFR and still keep the duplex - then rent out the side I vacate. Very sexy.

R

So think carefully about what you want out of this. My case is a bit different since I am also a real estate broker. However, if you are looking for someone who can also coordinate transaction paperwork, etc. you can often find someone local to the area you are doing business who also has a real estate license to do this work for you.  It sounds like you are coming at this from a different need, but maybe this comment will help others that are more in my area of need.