All Forum Posts by: Russell Holmes

@Erik Schneider ah ok, so you are the one who did it all, which makes it easier than if that was done 15-20 years ago. Maybe the finance company simply needs to see the docs you used to do that? My guess is the lender wants to see that's been done on the legal side. Seems to me the county and not the lender would be the one concerned with the structure itself. With mine, it was a copy of the old original "vehicle" title that was the missing piece being dug out of a dusty paper file somewhere.

@Erik Schneider I'm in FL so it may not be the same.  Are they looking for a structural certification of the physical foundation or a document that makes the home a permanent part of the land as opposed to 'personal property'?

I closed a manufactured home on a half acre with buyers earlier this year with what sounds like a similar circumstance (if it's the document side you need). My buyers were using HELOC funds from a home I had listed for them, so financing wasn't an issue, but closing and insurance were bigger headaches than I expected. The insurance company came up right at the end needing to get the original 'Retired Mobile Home Title' for their records. Basically, mobile/manufactured homes are titled like a vehicle at first and considered personal property. They stay that way on rented lots with annual registration stickers like a car tag, but they become 'fixed' to an owned lot through 'retiring of the title' which also involves removing the axles (if any) and strapping or bolting them down to a foundation per the code at that time.

 That original 'vehicle title' is retired and the house becomes 'real property' taxed through property taxes instead of registration like a vehicle. From that point on there is no more 'registration' to renew and records are instead kept through the county property appraiser instead of the DMV.  The one I sold was from 1993 and had been 'real property' since 1993.  Luckily the same home sold a few years back at the same title office, so they dug through records and found the copy there. The original title literally looked like any vehicle title I've seen, even had a spot for odometer reading that comically said 'exempt'.  If the title office can't track it down, you may need to check with either the county property records or the DMV depending on who handles that. If you've found a VIN number or identifying tag anywhere on it that may help.   I'd first reach out to your title office for reference on how it's handled in your state.

If, instead, they are looking for some sort of certification that it is properly tied down to the foundation, I'd think you could call your county building department about that to see if it's an inspection process.  At first we thought this is what my buyer's insurance was requesting but they clarified it was the documents showing it had been 'legally fixed' to the property, not 'physically fixed' to the property. It was an odd process to me to say the least.

Whenever strange things like this come up, I typically find that my contacts at my local Title office have either personally dealt with it or know someone who has, so they are my first go-to for odd ball questions on closing technicalities.  Reach out to them with the request and see if they can point you in the right direction.

@Zeeshan Mallick although you'll be the one to pay the mortgage technically, it will be with money that your tenants earned and paid in rent. The only time decreased equity hits you in the wallet is if you want or need to sell. Your mortgage is amortized from the moment you buy it.  Other than property taxes and insurance that can change, the Principle and Interest payment is set for 30 years regardless of what the market does. You can, on day 1, see how much principle you'll have paid off after 10 years of paying the set payment.  How much equity you have is in relation to the current day appraised value....which only matters if you plan to refi or sell.  Your tenants don't care and your mortgage company doesn't care.  They keep paying rent and you keep paying the mortgage on the terms you agreed to at closing.

 You don't want to overpay, of course, but if you live in a relatively strong and stable market (population growth over time, good employment numbers), rents likely will not drastically decrease even if home values do  for a brief correction period.  Many who lost a fortune in the previous crash were buying for appreciation only, leveraging homes to 100% loan to value, and were either not cash flowing at all or even bleeding money each month (negative cash flow).  They hoped appreciation would make up for it and it didn't, so their house of cards fell apart.  Many others who had bought smart, kept some equity in each property, and stayed steady for years before the crash simply held on through it. Sure, their equity dropped from 08-13 or so, but their tenants continued paying their expenses, paying principle down, and earning some cash flow.  Maybe they didn't increase rents as much, maybe they had an uptick in vacancy, but they didn't sell and so they never 'realized' that loss since they didn't have to sell during a low point.  Now values have come back up and their principle balance on mortgages is lower than it was 10 years ago.

Nobody can guess what the market is going to do for sure in 3 years or 5 years.  But I can almost certainly guarantee that anything you buy next summer will be worth significantly more than you pay in the year 2050 when you pay off the mortgage.  Buy and hold investing is a long term strategy not effected much at all by short term market shifts that historically always come back around.

Outside of the mortgage payment, you want to make sure to take into account Vacancy, Repairs (Smaller items that come up over time), CapEx (Capital Expenditures...big items like roofs, HVAC systems, etc), property management fees. Even if you self manage, run your numbers as if you hire a property manager so that if you decide to some day you've already planned on it. There's lots of great information on the forums about each of these reserves and how to arrive at numbers based on risk tolerance and the property itself, but my point is that you want to be sure to be setting aside some of the rent every month for these as well as to pay the mortgage. If, after accounting for all of these expenses, you cash flow a couple hundred a month....then you are earning money while your tenants quite literally pay down the mortgage. Mortgage principle pay down and appreciation are just the icing on the cake.

There are some more complex strategies and calculations involved in determining when would be a good time to refinance out additional equity for more properties, sell and exchange for other properties eventually, etc.  However, at it's core, you're buying something with a small percentage down that your tenants will ultimately pay off for you over the course of 30 years.

A great book to read to grasp the long term benefits of buy and hold investing is Building Wealth One House at a Time by John W Schaub.  There are much more aggressive and lucrative methods to build wealth faster and acquire more properties more quickly, but at it's core that book  is eye opening to the power of 'slow and steady wins the race'.  
  

Amen @Tyler Gibson! Well said.

I have had a few out of state investors reach out with these types of misconceptions and it's so easy to think "Orlando" is all the same.

I also agree with you about the flooding of so-called 'wholesalers'. The good 'wholesalers' I know are also flippers, often holding a Real Estate License, simply wholesaling the excess deals that they spend good time and money to find, analyze, and put under contract. It may be one or two a month and their numbers are solid. I'm on several lists and every once in awhile see something decent, but most often their ARV or Rehab estimates are way off to 'make' a deal where there isn't one. Things are so tight that I know flippers starting to lend money and wholesalers starting to put some MLS properties under contract to wholesale for slimmer margins.

Not to say that there aren't deals (there are) or that all wholesalers fluff numbers (they don't), but the Orlando and surrounding markets require local knowledge and analysis and a look at the bigger picture long term. It is NOT a 'throw a dart and hit a deal' type market!

I feel strongly about a point David Greene made in his BRRRR book about looking to buy in 'the path of progress'. Not necessarily buying ONLY for appreciation, but acquiring properties in locations with good core reasons to appreciate in the future. Some of the highest dollar markets are capped out on space and prices are huge. But with growth in all directions and some of these outskirts markets seeing revitalization and new growth, it takes some foresight and analysis to find deals for long term holds.

All of the population growth, overall prices being reasonable for owner occupant homes, strong employment, infrastructure growth, and other factors point to this being a very strong market for years to come. However, it is a blessing and a curse in that this 'hot market' has driven up demand and competition for distressed houses.

I've got a JV flip listed on the market now considering what to do next with my partner. In looking around at the current offerings from all sources, my partner and I are strongly considering BRRRR or new builds to hold since slimmer margins than flips work on those. I wouldn't buy only for appreciation, but I don't think rent is going to stop climbing for quite some time even if prices flatten out. A mediocre hold deal now will only get better in time, in my opinion.

@Yosef Katz thank you!  I've been hyper-focused on the growth in the surrounding area for quite some time. I feel that the Apopka area as well as North Lake County (Mt. Dora, Mt. Plymouth, Eustis, Sorrento, Umatilla) will be steadily growing and in demand areas for years to come.  Demand is high and with raw land all around, new development is keeping existing home prices from getting out of hand like they would if there was no land to expand into.

The City Center Apopka project I mentioned breaking ground in the original post is well underway.  The hotel isn't open yet but appears to be most of the way complete.  Street and intersection improvements and restructuring of some traffic flow is taking place to prepare for the next phases there.  A few old buildings have been razed to make way for new in this area as well.

The first anchor store in the Kelly Park Crossing future land use area I mentioned has been approved, there's now a "Publix coming soon" sign at the corner of Kelly Park Rd and Plymouth Sorrento Rd in North Apopka, but the land is still uncleared. I hear the line for publix subs is already forming though, haha.

  New builder developments have sprouted up and are being built faster than I can keep track of, mostly single family homes starting at $300k and mostly on parcels of at least 10-15 acres, they don't bother with smaller neighborhoods.  DR Horton, Toll Brothers, Mattamy Homes, KB Homes, Ryan Homes and others are feverishly building $300-500k homes as quickly as they can. Even American Homes 4 Rent is building an entire neighborhood of 4/2 homes a mile from my house that will be all for-rent (single parcel and management, like an apartment complex of single family homes)

However, your point of not finding fixer uppers easily is also true. With mortgage rates low, 5-6% appreciation in the last year, and extremely low inventory, fixer upper deals have become very hard to find. I'm under contract now with buyers on a live-in flip that took us over 6 months to find after offering aggressively on 4-5 homes and losing out to multiple offers on every one. This last one checked all the boxes and putting in an offer with an escalation clause we finally won out over the multiple offers, but it was a hard road there. ARV of $285k, list price of $245k, and we are under contract for less than that number, enough for some gained equity for my buyers, just about break even if they were to sell immediately. They'll have some gained equity to live in it, but would not have been outstanding flip-to-sell margins at all, likely why our offer beat out others who may have been aiming to flip it. A few of the flippers and wholesalers I know in the Orlando area have been coming up so short on deals that they've begun to offer their capital as private lending to others satisfied with paper thin margins.

I'll give an example to show where the market was 10 months ago when I wrote the original post to where it is now:

I ended up coming in as a JV partner earlier this year with a client I represented in buying a fixer upper in late 2018 in North Apopka. We had offered on 8-9 properties before this one hit the market and felt that a mediocre deal to be his first flip was better than no deal. The house next door in worse shape had sold just before at $173k and this one listed at $125k. We jumped on it at full list in less than 12 hours and had it under contract. With ridiculous GC delays stretching out the timeline and decisions needing to be made to get it back on track, I came in to the project to help manage the managers and dive into some hands on work to get it done. It's a 'hand shake' partnership on this one, ownership 100% legally his, but he'll share some profit and we've both learned exponentially more than we could by reading or networking alone. The 8-10 week rehab turned out to take a year (luckily it was cash not hard money), although lessons were learned and it'll still come out in the black with priceless lessons learned to put to use on our next project. That home was purchased for $125k in November of 2018 as a 1319sf block 3/1 with newer roof and windows. Part of that square footage was a permitted garage conversion adding about 300sf and a needed family room. We added a permitted half bathroom, new HVAC, fully remodeled the full bathroom, new counters, floors, appliances, a few doors, re-sided a 20x20 detached garage plus windows and doors on that, landscaped, etc etc. and its now a really nice starter house getting a lot of showing activity in a few days on market. Luckily in that year it's taken for a 'basic' rehab, the market has appreciated 5-6% to make up for some cost overrun and the entry level fully rehabbed inventory has gone almost nonexistent. It's had about $65k worth of rehab and holding costs (at least $15k of overrun from GC handling things I would have chosen to sub out if I was in it from the start) and we've got it listed at $225k. $190k +/- all in over a year's time with a $220-225k ARV is much tighter margins and longer span than were planned and we think we could do the same exact project again saving at least 6 months and $15-25k in rehab costs. So we're ready to get the next project going (he's got the ability to buy the next now, rehab with proceeds from this sale). However, right within the neighborhood we got this decent but dated house for $125k a year ago, here are the most recent deals that we have come across which are quite representative of deals I've found at a broader radius:

-The same floor plan house without a permitted garage conversion so it's only 1000sf, 3/1 with a single car garage....without new windows, and with a leaky roof: REO bank owned and hit the market at $70k. As soon as I sent out the email to him saying "I found the next, lets offer $70k NOW", the bank pulled the listing and re-listed at $115k and it sold after multiple offers for $121k. Yikes.... It would have taken AT LEAST $25k to convert the garage, install new windows and roof, and get this house to the starting point ours was at for $125k, and there was also no detached 20x20 garage. Even if we kept rehab to $40k after that, ARV without a garage would be about $205k....with a $186k all in that could have swelled to $195k...ouch. Maybe you could buy it and repair to be all in at just under ARV, but no margin in resale unless it's all DIY rehab. Great deal at $70k, hard pass for $121k.

-Literally four houses away from the current project is a 950sf 3/1 with an attached one car garage. No detached garage or new windows but it does have a brand new roof.  I saw the Realtor's sign days before it hit the market, so I called her up to get the price and access code to walk the house.... $154,500.  I got the access instructions and walked it....it's a dump, worse off than the one we got for $125k. Bad layout, nowhere easy for a half or full bathroom, awkward transition if we did convert the garage....  I told the Realtor that it was worth a maximum of $85k and I'd happily put in an offer if the seller would consider being reasonable.  She politely told me to pound sand and the seller would never consider it.  It's still on the market, but will likely sell near that price based on other comps. Realtor isn't crazy for listing it at that, but it's not a deal in my opinion.

This same phenomenon has been going on across the Orlando area. It's not to say there aren't deals, there are still some. I think that with climbing rents and existing (move in ready) home prices remaining reasonable, it is still a great market in terms of strength and stability. For owner-occupant buyers I work with, I can find nice dated homes needing some cosmetic work to allow them to gain some equity and live there.  But the fixer upper deals with margins go in days and you've got to be willing to slim those margins down to the point of a live-in flip analysis on most of them as opposed to fatter profits that were available even a year ago. Many of them sell for prices that I literally can't see leaving any room for profit. Many GCs and small builder operations are starting to build spec infill houses themselves and sell for good prices. I'm still on the hunt for our next project, but in the meantime my partner and I are going to be setting up meetings with a few local builders with a reputation for building in-fill semi-custom new construction smaller homes for reasonable prices.  Our target is going to be 1200-1500sf 3/2 and 4/2 homes since these are smaller than what the national builders are developing in from-scratch communities. They would come in at or below median price as opposed to being 25% or more above it like most new construction competition from national builders doing larger than average homes.  These smaller entry-level homes built brand new sell extremely quickly and for $160-180/sf.  Some preliminary numbers we've compiled looks as if we can build them with land, utilities, and finishes for $110-130/sf with lots of variables we are in the process of narrowing down.  Once we meet with a few builders and get some solid numbers, we're going to run numbers based on a build-to-hold and build-to-sell strategy to see if either or both are feasible.  From there, we'll explore options of buying single lots or larger parcels to subdivide, and I've found a few landowners willing to sell with seller-financing which could make development less cash-intensive. 

So my opinion of Apopka being an incredible market hasn't changed, and in fact I think the growth has picked up speed with low inventory and low mortgage rates (plus 300k people a year moving to FL). However, that low inventory is causing me to at least consider pivoting from what I thought would be going for a second flip or BRRRR of an existing house to meeting with builders to discuss the builds of new homes to hold or sell. If the numbers work right to BRRRR new construction on single family or even duplexes, it would be an incredibly strong strategy in the current low-inventory market. My JV partner happens to be all cash so the option is there for longer projects, but I think with financing (hard or traditional) it would be more difficult to consider new builds. I also think that as well-financed flippers are adding to the pool of available hard money, more and more new flippers are entering the bidding pool on fixer houses dropping margins which further encourages me to consider a pivot to a strategy they can't do with hard money.

I still love this market I live in, but it's taking some creativity to make rather than find deals!

@Nicole Harmon I'll piggyback on what some others have said here with a bit of my own experience.  I think I've moved on from being a newbie to a 'novice', haha. I'm coming up on my two year anniversary of being licensed but still very much learning and hope that I never stop learning more. 

I also interviewed with several brokerages including KW before deciding on EXP.  For me as a new agent in early 2018, I knew I needed some training and support.   I was coming off of 11+ years of running my own local service business, one that I started without any 'system' and grew quite large and successful before getting burned out at the glass ceiling I found.  This gave me a different perspective than many new agents who may be coming out of traditional employment.  I've been an entrepreneur and 'boss-less' since 2007 and am very much a self starter. I'm very unemployable and hope to never have a boss for the rest of my life.  KW's corporate office-based training environment was honestly somewhat of a turnoff to me due to my personality and background. However, I left that KW interview feeling like they really know what they are doing and KW would be an excellent fit for many new agents coming from a more corporate type job, just not for me. EXP which was right for me could be overwhelming to someone who was a better fit for KW.  There's a lot of KW vs EXP bashing that goes on, but they are two separate animals in my opinion with strengths and weaknesses.

  At the time, the commission splits were on my list of things to consider, but maybe 3rd or 4th on my list of priorities, looking back that should have been even lower on my list. KW was 70/30 before franchise and other fees, EXP was 80/20 (after higher split to pay a mentor on the first few).  I believe my local KW had a $27k cap while EXP has a $16k cap and at the time that seemed like a big deal.  That was all on my radar, but was not my sole determining factor.  EXP's training model was much more suited for my 'style' I guess you could say.  I got paired up with an awesome mentor who had been an independent broker before joining EXP, which further fit my style and I've since excelled. I've basically been 'on my own' since the mentorship through my first few, but I've always got EXP training and support to lean back on.  There's one state broker, but several assistant state brokers, so when I email with a question, one of them always promptly calls or emails back with assistance.  It has been perfect for me so far.

One thing I wish I had considered early on is that any amount of split 'taken' by the brokerage doesn't cost you a dime before you close something. Since I was mentally 'full time' but physically splitting my time with my previous full time business for over a year after licensing, it took me 9 months of hustling, training, learning, offering, etc until I closed my first deal. Nine long and grueling months that tested my faith in myself..... I could have been on a 50/50 split with an unlimited cap and it wouldn't have cost me any more for all of that training over the first 9 months that helped me launch my career. 

 If KW or any other brokerage is a good fit for you and feels more 'right' than EXP or others you interview with, I would still consider the difference in splits and caps, but I wouldn't let it it be your sole deciding factor. Training, support, mentorship, and technology systems are far more important than broker split when you're getting started. If considering a team, their marketing and lead gen is another aspect to consider.  You can change brokerages at anytime you choose, but training that is right for you will be vitally important. 100% split of nothing is still nothing.  Same goes for considering joining a team.  The 50/50 split most teams have turns many off to the idea (me included) but it can be a great launching point and I know several successful independent agents that started as a part of a team as a buyers agent or even salaried appointment setter.

Now it's been just a few days past a year since that first closing in late November 2018, and only about six months since I closed up shop with my previous business and went full time as a Realtor.  I've closed 9 transactions (one being double-ended), I have three in escrow to close this month, and two active listings, including a flip that I unofficially JVd with that client who I closed my first transaction with. He got in over his head on decisions, I stepped up to help out since I'm quite knowledgeable on construction/rehabs, and he made me a 'handshake partner' for a minority profit share in return for project management and some hands on help.  We'll put an official structure together for the next with more duties and profit share for me than this one, but for now it was additional learning opportunity and potentially some extra profit (we'll have to see what it sells at!). I did it for the experience, any profit he cuts my way after closing is icing on the cake.

Now that I've got some momentum going and have formed a JV partnership for future deals, I'm starting to 'feel' that split I pay the broker when considering my goal of 24 transactions in the next year. I might cap by my anniversary in March to make 100% on a few, but even if I do, it'll start over again then and I'll paid 80% of what I've truly earned. Even the small 20% that EXP takes as a cut up to that $16,000 is starting to feel costly to me on each successive transaction. Going back to my first point, I'm a very self-motivated independent type person. I honestly haven't plugged into much of the EXP training in several months and rarely go on the cloud campus despite it being an incredible resource. I rely heavily on contacts I have in title companies, lenders, contractors, attorneys, etc. In FL I can get my broker's license after 2 years as an active agent and start my own brokerage from a home office to be fully independent with minimal overhead for E&O and programs that are included in my brokerage fees now, maybe $5k/yr total overhead with a home office. I don't have any interest in bringing on sales agents as a broker or I'd stick with EXP for the systems in place. I crave even more independence and retention of commissions than what I have with one of the lowest split big name brokerages. There are 100% brokerage options I might pursue for easier barrier to entry (no broker's license required). One in particular is $200/mo and $100/transaction with no additional split or fees. If I do 24 transactions it would be about the same $5k/yr that I expect to pay as a indy broker. With 100% commission brokerages, there's zero training and only compliance-based broker support. Looking into 2020, I have to consider if $16,000 is really worth the training that I haven't found a need for recently. As I get deeper into future JV deals where I'm actually on title or part owner of the LLC on title, there are certain guidelines through EXP that may be a headache to contend with which wouldn't exist in a 100% brokerage or on my own as a broker.

  I haven't 'arrived' in any sense, I still lean on experienced folks in all niches of Real Estate, I'm still learning with every transaction, but very few of those I learn from are with EXP or any particular brokerage. Instead, they are other Realtors, Real Estate Professionals, and investors I have met and networked with locally.  Due to this, I may end up leaving EXP to go a route of least overhead and most freedom.  That is ultimately the most investor friendly route with the least restrictive guidelines.  However, even if that's where I soon end up, I wouldn't change anything about starting somewhere that had the right training for me. 

Interview brokerages and focus your questions on their training systems and costs that will affect you before your first sale. You do want to know their splits and caps, but it is not as important starting out as I thought it was. Everything else is just details you can figure out down the road once you've built some momentum.  I don't in any way feel I've wasted money paying brokerage splits into EXP, nor would I feel that way about higher splits to KW or any other if I found them to be the best fit.  I'm simply looking ahead and considering options for the future that wouldn't have been right for me two years ago! I do really like EXP, but I'm not one to say it's right for every person in every circumstance. It's my brokerage now but might not be forever :).  Whatever you do, ask lots of questions, lean on the great folks on this forum, and network locally with Realtors and other professionals from all brokerages.  This industry as a whole is far more welcoming and interested in each other's success than I imagined before entering it.

@Emilio Mendiola that sounds perfect and like you've got plenty of knowledge and support from your brokerage team. Whether they help "behind the scenes" or not, you've got someone to ask questions and guide along the way. It'll be a great learning experience for sure while you're still able to properly serve your new client! Other commercial agents may chime in here with specifics as well.

@Emilio Mendiola what type of commercial investment property? Do you have a previous relationship with this client? I'd be sure to, at the very least, reach out to your broker for some guidance. Preferably you'd bring in an agent from your office with more commercial experience to work along side you or at least 'mentor' you in a sense for a split of commission...or refer it to a commercial agent for a referral fee and ask to shadow them along the way. If it's a very complex deal (large multi, business commercial, etc), your client will appreciate you reaching out for more expert advice rather than to wing it and potentially miss something. If commercial is a niche you're looking to get into, it could be a great learning experience to bring in another commercial agent and split this commission 50/50 with them.  If you feel confident after that, take the next one on yourself.

I have folks reach out to me from BP quite often on very large multi family in my area, assuming I'm an expert on all Real Estate in my market. I speak and write with confidence, but I'll confidently say that I do not know all things in all niches of Real Estate (and likely never will be a 'master of all'). Large multi or other commercial real estate is an asset class I'm honestly not very familiar with (yet). While I'd love to learn that asset class someday, I've been predominantly in the single family space in the two years I've been licensed, mostly investor deals on one side of the deal or the other, but some more traditional transactions not involving investors. I had a mentor through the first few deals, but even since being 'on my own' I never hesitate to reach out to my broker or another more experienced agent to answer questions I don't know. I know that I'd be able to serve a client well on a duplex or quad and have offered on a few. However, somebody that wants 5-50+ units I will happily pass off to a local broker/PM I know who is doing those types of deals consistently. In my market they are typically not listed on the residential MLS and it really takes CoStar and PM knowledge to properly analyze large multi. If you want to still be involved in the transaction, that is great, but be sure you've got a commercial agent's expertise involved in one way or another. If the commercial involves business/retail/office/warehouse type space, that's another realm altogether as well. Our jobs as Realtors is to look out for our clients' best interests. Just because we legally can do something doesn't mean it's in the clients' best interest to jump into every asset class. To me, sometimes that obligation to look out for their interests means telling a potential client that I'm not the Realtor for the job.

@Tierra Petersen I, too, successfully used Real Estate Express. It was dry material, but I found it quite well formatted to come and go from.  I believe I took the coursework over about 45 days and then prepped for the exam for another week or two.  I'm in FL and bought a pre-licensing and exam prep package.  The exam prep was literally about 1500 questions sectioned into 50 and 100 question practice exams.  I went through those practice exams several times, going back to the coursework to study the parts I was unsure of until I felt confident on it all.  I passed the exam on the first try, and as such, I have no idea if that was a 75% pass or 100% pass, they only share percentage if you don't pass :).  If I did it again I might explore other exam prep options, but for coursework I think REE was great. The exam prep worked, but it was even dryer than the coursework being 1500 exam questions only.  Good luck!!

@Rudy Necoechea you're welcome!