All Forum Posts by: Russell Gronsky

@Matthew Koch, First, what are you trying to do? buy/hold, flip, wholesale?

Second, get a deal first and see if RE is actually something you see yourself doing long term. Then, worry about LLCs. No point in spending money setting one up and writing operating agreements if you realize RE is not for you. Plus, depending on what kind of investing you are doing, you might need one soon, much later or never.

Ohhh, okay. @Cody Weiss, you are talking about doing IRR analysis to see at what year and level of renovation would yield you the highest profit on an exit, so you can then reinvest into the next, bigger deal. Start with the book, "What every real estate investor needs to know about cash flow" by Frank Gallinelli. The entire book is dedicated to properly evaluating things exactly like that, as well as doing comparison evaluations when you have 2 or more dels on your desk but can only invest in 1 of them. He also has a website that provides the calculators to crunch these measures for free.

@Cody Weiss, I'm not sure I understand your question but if you want $200,000 per year in passive income and you net $150 per door, per month, you'll need 112 doors (assuming vacancy and all other costs never falls below your estimates).

Commercial multi-family would be the path of least resistance for this but you're probably not going to be able to buy a 100+ unit building by yourself any time soon. That's big money territory so you'll have to syndicate or buy up smaller deals and work your way up to the big stuff.

CoC is hard for me to talk about because I don't think in percentages. I could care less about them to tell you the truth. I know I'll get investors who say the opposite but to me, cash in hand means everything as I can't use 15% or even 30% CoC to make my life better...but I can definitely use $200,000 to make my life better.

If you are buying property and you are out of state, the title company can have a mobile notary meet you somewhere to sign all the documents. Usually, they send over a notary familiar with Real Estate documents.

I've also gone the UPS route but I've never had one tell me what I need and don't need. I find that strange actually, but I suppose you'll see everything if you're around long enough. Thanks for the tip.

@Theo Bandy, if you are asking about best practices for framing and insulation, you're probably not going to save any money trying to be your own GC. If you want to build a house, you don't start with framing and foundation. You start with zoning, architects and structural engineers. Probably a civil engineer as well.

Maybe find a small fix and flip house to do, hire a GC for that, and learn how to manage a renovation. Maybe do this a few times with bigger and more complex renovations so you get an idea of how things are done, best practices and the order of what needs to be done first and what jobs depend on other jobs. Then, you might CONSIDER being your own GC.

Start with reading J Scott's books on flipping houses. He does a great job of giving the reader a 30,000 foot view of how a renovation goes. After you are comfortable with the topics to an extent, go find that small flip and work from there.

@Kevin Pereira, I'm not sure what you mean the properties aren't worth the list price? Don't look at it as a prudent investor, look at the situation for what it is. If someone is willing to pay the price, then it is definitely worth that price...to that person. And the value for a 3-family property is based off comps. So if someone bought a 3-family for $1.2M down the street from you, guess what, your 3-family just went up in value. Probably not up to $1.2M, but it just went up considerably. The bank looks at what the appraiser provides them for an appraisal report and pretty much goes off that. 

I know that seems silly but frankly, banks loan money based on your ability to pay the loan back, not so much on the true value of the property. If you want to do a sanity check on what a property is worth, bring the deal to an asset-based lender or a hard-money lender. These guys will actually analyze the asset they are lending on and it's ability to provide the returns you claim it will. 

@Account Closed, when I first moved to Baltimore and decided to set up a flipping business, it took me 14 months to nail down my first deal. I have a full time job so between working and learning the local market, it took 8 months. It then took another 6 months and about 15 offers before I hit it. But don't look at the number of rejections and freak out. I don't worry about rejections. I use them as tests to see what the market (and sellers) will bare.  

People are much more willing to give you your price (or close to it) if you drop your "outs" and shorten your time to close (or leave close flexible, based on seller's needs). 

But I'll tell you where it gets interesting. After my first, I closed my second, 21 days later. And after that the flood gates opened. I hadn't even finished my walk through of the 1st property, I already had a neighbor asking me if I was a flipper and if I wanted to talk to her friend who was looking to sell a property down the street. I'm at the store buying 2 sets of kitchen appliances and the guy taking my order gives me his brother's number because he has a house near one of my projects who is looking to sell. I was taking some pictures of the exterior of another project and the neighbor comes out to tell me the guy across the street just passed and his family is looking to sell the house since none of them want to be landlords. 

The streets are watching what you're doing so keep at it. Make those offers, drop as many outs as you feel comfortable with and be patient. The market resists you at first but once you break through, you are quickly rewarded.

@B Nich, it's easy but time consuming. Watch You Tube videos but watch more than just one. Some of them leave out important details like, how to cut your tile to fit against walls that aren't square. Lots of them also skip over how to level your floor or how to install cement board if you are tiling over sub floors. It will also be a huge pain in your knees and back. Get some quality knee pads. 

Not much advice to give, @Kevin Pereira. Everyone is in this boat right now when they look at the MLS. This is a good lesson for your REI future. You know you're near the top of the market when people are willing to buy on projected pro formas rather than actuals. Don't let this discourage you. Keep analyzing deals, keep making offers that only make sense to you. Today, you'll probably not hit much but once the correction comes (no one knows when it will, but rest 100% assured, that it will most definitely come) , all these people buying off projected numbers will be the first ones putting these properties on the market at hefty discount just to get out from underneath the liability.

Most people who are in it today, got into the RE game AFTER the 2008 crash. So they have only seen the bull run of the market. They haven't seen the side where your projected rent/value increases never happen, and instead, you have tenants moving out mid-month due to job loss and it takes you 6 months to find another tenant, only to have them do the same thing 4 months later. The guys who poured every penny into a deal based off projected earnings, making $100 a month per door today, won't be able to weather the storm once they wipe out 3-5 YEARS of earnings off a single 6-month vacancy. And guess what....those mortgage payments are still due, every month! 

Be patient, save cash and be ready when these deals start popping up.

@Bill B., this is my point exactly!

@Ben M., I don't use them on my flips because I target very distressed properties I'll be tearing them apart anyway so no point. 

You can hire an inspector who uses that stuff for your first purchase, and follow him around the house and ask questions to learn. Or, get on YouTube and you can get a 15 minute class on how to use them. Combine that with a little practice and you'll be as good, if not better than an inspector.