All Forum Posts by: Joe Villeneuve

Austin & James,

Cash is King...always has been.  It used to be, way back before the year 2000, that if you had a house CF over $50/month you would happy, and rationalized it to be a good investment because of depreciation and appreciation.  Sorry, I never thought that was a winning formula...and the crash preved that right.

Now, at least in my area, if you can't get a house to CF over $400/month with PM and financing, you're not doing it right.  I know there are other areas of the country where this is also true, but it seemed as if we experienced the "perfect storm" for investors over the past 5-10 years...and I don't see an end coming anytime soon.

Austin, you were asking for more specifics.  Here goes with a deal we are in the process of making (all numbers have already been confirmed & PA signed of by buyer/seller):

• $42,500 All cost (cash deal.  Didn't have to be...just the way we do it)
• $68,000 ARV/LTV
• $54,400 80%ARV/LTV (for refinancing purposes)
• $975/m  Rent
• $238      REFI loan pymt (4.875%/30yrs/$35,000)
• $210      T/I
• $120      PM/Maint/Misc
• $400+    CASH FLOW/month

If we take out cash at closing (there's room to do it here) the CF would go down, but we could access our equity (tax free) and use it on the next house...or just keep it.

This is a pretty typical deal too.

Joe Villeneuve
REcapsystem

A2REIC

James,

It all comes down to the market.  You mentioned this person would be willing to go further out.  How far is "further out"?  If the answer is out of state, then you could get at least $2k on that $150k cash.  

The best answer I can give you is based on experience in my area...unlimited, and not actually spend it.  The beauty of cash, if you or a partner has good credit, is that you never have to spend it...just use it.  The idea is to put the cash in, then refinance it all back out.  Then use it again, and keep repeating this until you get tired of doing it.

In my area, the magic number per house is $50k, so your $150k would go three times a far.  In other areas, the cost for that same house would be higher, but I would think that $150k would buy/rehab at least one house in most of those other areas.  All you need is to start with one house...and just keep repeating the process.

Albert Einstein once said that "The greatest invention of the 20th century was compound interest".  Compounding is just a form of duplication...but on steroids.  If you approach your investing like I described, you too could be investing on steroids.

Joe Villeneuve
REcapsystem
A2REIC

Joshua,

I have a local guy that will go up to 10 NOO. 80% LTV/ARV, 30 years, no seasoning.

Joe Villeneuve
REcapsystem
A2REIC

Find a partner, one with the money you need for the down payment.  This can either be a short term loan (GAP Partner) of give them a smaller part of the returns/equity (they put in 20%, give them 20% of the deal).  If the cash flow is good, they will probably get a better return either way they come in, than when they are getting now.  Since they are bringing in cash, show them what their cash on dash return will be.  I bet you get more than one person interested.

Here's the thing.  If they are interested in this one, and they make money, I bet they become a source of cash for you on future deals as well.

Joe Villeneuve
REcapsystem
A2REIC

Chris,  Don't worry about finding an agent that will make the low offer for you.  The one's that won't you don't want anyway since they are not interested in what you're interested in...investing.

Join your local REI's (notice the plural), and you'll find plenty of RE Agents willing to make low offers.

Joe Villeneuve
REcapsystem
A2REIC

Like Christina said,  "The fact it's been on the market for over 2 years tells me you don't have a motivated seller. I will tell you this, it's good to get practice making offers that work for you so you can get over any trepidation of "offending" someone."   Both statements are deadly accurate.

There could be another reason why it's been on the market so long.  Nobody made an offer.  Everyone assumed the house "had a date", so nobody asked...and the answer to every question you don't ask is always "NO".

Also, keep in mind, you can never make an offer too low...don't ever make an offer too high.

Joe Villeneuve
REcapsystem

If you are buying it as a rental, then base your offer on how you are paying for it, as in how you are going to pay for holding it.  If you are paying cash, then how fast will you be getting your money back.  If you have good credit you should look into refinancing right after you buy it (at least ASAP) to recover all of (or most of) you cash so you can use it again on the next deal.  If you are financing it, then you need do consider your monthly payments and how that will change your cash flow.

When analyzing deals, always analyze starting with your "exit strategy" and work backwards...reverse engineer it.

Joe Villeneuve
REcapsystem

Happy,

Why not just keep it for the cash flow?

Joe Villeneuve
Recapsystem

Matthew,

Aa far as starting in your 20's is concerned, my daughter just turned 15...and she'll be retired by the time she graduates college...through real estate investing.

With $50k in cash you don't realize it now, but you just bought yourself retirement...and no I don't want your money.  I can tell you that you do need to commit yourself to never stop learning though.  Every day there is a new way, or a better way, to do this.

As far as using your $50k, once you learn how to analyze properties correctly, and fill out your team (contractors for rehab, insurance for flipping and holding, lenders for refinancing, partners with good credit to refinance with, etc...) you are on your way.

Here is the way I did it (still doing it).  You first need a market that will allow you to have high cash flow.  Here where I am we can buy/rehab a house all cash for under $50k and cash flow it (with a refinance loan, taxes, insurance, and a property manager) at least at $400/month...or we move onto the next deal.  We can do this all day...and pay the Asking Price.

Once you rehab the house, put the tenant in it and refinance (I have sources that have no seasoning period, so I can do this within 30 days or so).  This way, the Cash I put into the house, I get right back out (sometimes more), and I use it again on the next one.  Then, just keep repeating these steps until you get old, or just tired of making money.

Joe Villeneuve
RecapSystem

Chadd,

You're in a great position.  My daughter is 15 (going on 18), and I plan on having her retired before she graduates college.  In your case, with no student loans, and living at home, the only two things you need are cash (not much), access to cash, credit (which you are in the process of building) or someone to partner with who has good credit.  With any of those items, you could be on your way to retirement very soon.

Real estate investing is a great way to pay for all your monthly bills, and any one time or yearly lump sum needs. You need to educate yourself on the different way to fund, enter and exit different types of deals. Most important though, you need to learn how to analyze property "accurately". The most expensive word in the RE Investor's vocabulary is "rationalization". The numbers don't lie, so don't argue with them. If the numbers tell you it's a bad deal, much like a bad hand in poker, you fold in poker, and you fold in REI. Some of the best deals I've made over the years are the ones I never made.

Joe Villeneuve
Recapsystems