All Forum Posts by: Russell Holmes

Historic downtown Mount Dora FL is a really cool historic area with a huge demand for STR year-round. It doesn't get as much coverage in national lists since it's a small pocket without the volume of Kissimmee. Most STRs are single family bungalows and small 2/2 and 3/2 houses under 1500sf within walking and biking distance of downtown (Centered around 5th Ave and Donnelly). The older and more character the home has, the better. Newer block homes 1-1.5 miles outside of the central town still do well also, especially if kid and pet friendly. There are frequent street festivals downtown and plenty of markets and eclectic restaurants to draw people in even when there is no official festival. Most VRBO and AirBnb listings are booked solid through May currently.

https://www.whattodoinmtdora.com/

The city and residents and visitors love the old historic vibe and do not want large hotels there. The small businesses downtown thrive on foot traffic.  As such, the city is very STR friendly and many guests come back year after year.  It is only about 40 minutes to Disney, but most go to Mount Dora for the old Florida enjoyment away from blatant tourism of the plastic mouse ears.  Little 2/1 bungalows in Mt. Dora average $120-130/night, 3/2 houses can easily do $150-180/night.   Good houses in the desirable areas can be found for $200-250k.  As long term rentals they may only bring $1500-1600/mo for a 3/2, but STR runs much better numbers. 

@Shafi Noss depending on whether you're jumping into it full time to start, ask how flexible their training is, the cost, the schedule, etc. Is it required to be in the office for a one-size-fits-all training or can it be tailored to your schedule and interests within the industry? Real estate is a broad industry, being in a class of 15 or 20 agents all pounding the phones for expired listings and FSBO can burn someone out quickly. That's one of many different lead gen methods and not for everyone.

What types of marketing tools do you have at your disposal with the brokerage?

What are their policies on personal deals?  If you plan to invest, find out if they waive broker's split on a few per year. For truly loose restrictions on investment deals you'd need to go to a flat rate brokerage that doesn't offer training, but most that do offer training and support still allow a handful of personal deals per year and have minimum broker fees over that amount.

What flexibility do you have on setting commissions and what are the minimum broker fees if you sell a cheap listing or discount commission for an investor client who does volume with you without major headaches? 

What is the annual cap?  Are there franchise fees/market center fees/ etc on top of that?  This is important but do not make it your top priority.  You'll get a lot of training before paying in your first dollar of broker split.  A 100% brokerage with no training has the 'best split' and you'll be completely on your own and it may take a year or more to sell your first.  A team with a 50/50 split may have the 'worst split' but get you up and going quickly.  Take it into consideration among other things.

Will you have a local go-to person to ask questions that come up on the fly?  This could be your broker directly or a mentor, agent you're shadowing, team leader, etc.  Nothing worse than cold training to the masses without someone to get answers from on unique situations that pop up.

Are there any successful teams within the brokerage you could interview with also?  I was very dead set on being an independent agent and I don't regret it.  But I really should have given more consideration to joining a team to start with also yet I didn't interview with any.  I'd likely still have gone independent, but it could have been of great benefit to start out as a buyers agent for a team with a little more guidance.  I've met several successful independent agents that got their start on a successful team.

@Andy Zorychta are you firmly set on Sarasota? It's a great area, my grandfather sill owns the house a quarter mile from Siesta Key Beach that he built in 1960 and my Dad grew up in. He bought a canal front lot and built a house for $68k back then. My Dad and his brother used to dirt bike throughout the dirt roads on the key before tourism took hold. My grandfather's house has never flooded but is only 9' above mean high tide while regulations now require 11' above to be mortgage-able and insurable. His lot alone is worth at least $800k and neighboring houses have been demolished and rebuilt on 3' of fill. I'm not incredibly familiar with the RE market in Siesta Key or mainland Sarasota since most of my time there was far before being licensed, but I know the demand is very seasonal. Population triples during the Winter and it's very quiet during summer months. It's a different town entirely during snowbird season compared to the rest of the year, so I feel that STR demand may not be consistent throughout the year. Obviously people do visit all year, but there isn't the huge rush all year like there is October to May.

I'm up in the North Orlando area where there are some great pockets for STR. Obviously there's a lot of STR down around the theme parks, but it's a double-edged sword since it's highly competitive with a lot of supply (both those for sale and those for rent). Downtown Mount Dora (Lake Co.) in particular is a great STR market which is just 40 mins north of Orlando and still within a quite straight shot to Disney down the SR-429 toll road. Many call historic Downtown Mt. Dora 'festival city' due to the year-round festivals drawing people to the city.

https://www.visitmountdora.com/

Nice little single family homes walking or biking distance from downtown can be found for $200-250k that rent for $130-180/night with year-round demand. They pop up on the market and go pending quickly, but they also are easy to keep rented all year. In general, Orange and Seminole counties are not very STR-friendly but Lake and Osceola are more so. As always, make sure if in an HOA that STR is specifically approved since if it isn't, it will likely be banned.

@Christian Sidaros welcome to Bigger Pockets!  The answer to your question is 'it depends'. 

Do you already have the capital to begin investing, have a job you enjoy, and only seek the knowledge to get started on your investment journey?  If yes, getting a license, in and of itself, may not benefit your journey. Instead, finding local meetups, networking with Realtors, lenders, investors, contractors, etc can have every benefit you'll need.

If you do not have the capital to invest, and/or don't like your current job, and you are interested in the Real Estate career path, getting licensed can be great. You can learn a ton about the industry and get an immense amount of investment and property knowledge all before you've done a deal of your own.

I got licensed because of my interest in real estate and my desire for a real estate focused career change. My goal from the start was to someday build a portfolio of cash flowing rentals, but my path before real estate hadn't got me there in 10 years and I was hungry to jump in and get to work learning everything I could in Real Estate. I was running a local service business I started over a decade before, I lacked the capital to invest thanks to a costly divorce, and I wanted to learn and grow as a Realtor. I love the transaction side of the business AND the investment prospects. I've met and connected with so many investors and vendors that I never would have met without being a Realtor. I've struck up a JV partnership with an early client, having our first flip on the market currently. I find and negotiate deals for investors that have no need for me as a partner, but I get to be hands on in their deals and learn from their thought process by being their Realtor. My only regret is that I didn't get licensed sooner. But I love this as a career so it was a natural step. I aim to do more investment deals and build more partnerships in time and maybe someday I'll phase out of the transactional side of the business altogether when I'm busy with building my own portfolio only.

But being a Realtor is not an easy path to wealth nor an easy path to a first investment.  It is very much running a business in the real estate industry and it is something that many folks who 'give it a shot' bail from before seeing any significant success. It is self employment that can make anywhere from nothing to hundreds of thousands per year.  It ties in well with investing when you've got an interest in both, but there are plenty of Realtors who don't invest and plenty of investors who aren't licensed.

For me, the two go together extremely well and I'm happy I got licensed. I know several investors who had licenses previously and intentionally let them lapse as it wasn't for them. 

@Austin Bright a lender is going to be looking at your ability to cover the full payment so they will consider the whole PITI (principle, interest, taxes, insurance) as a 'debt payment'. If there's PMI on the loan, they count that too. They want to make sure that with PITI and any other debt payments or obligations you have, the total of all your payments divided by your total monthly income is below their specified percentage. They are securing the loan with the property and need to make sure that the taxes and insurance are paid since both of those protect the asset that secures the loan. It may not be 'debt' per se, but it is the 'housing payment' and that is what is important to them.

Unpaid taxes or lapsed insurance are not good things for the bank, so they escrow for those payments with the same priority as the portion of the payment that goes to principle and interest. When you owe a mortgage payment you must pay the full PITI amount in order to satisfy that month's payment.

Think about it from the bank's perspective: They don't want to have a house fall past due on taxes and have to deal with tax deed sales. They also don't want to go do a check on the house when mortgage is late to see the charred ruins of a house fire with no insurance. If there's an HOA dues amount, they will count that as well even though they don't escrow for it. Believe it or not, HOAs can foreclose due to delinquent HOA dues.

@Layla Sewell I'm not sure if it'll work in South Carolina, but in Florida you can go to the county property appraiser's website for the county the home will be in and find a 'tax estimator' tool.  Even here in FL it's in different spots on the website county to county, but see if you can find one for your county. If searching the website fails, try Google searching "Tax Estimator ______ County, SC" 

  We've got homestead exemption and a few other exemptions that can save on property taxes so you select yes/no on those options, put in the sale price (since that will be the starting appraised value most often), and it'll give an estimated tax range.  It will typically only estimate on 'ad valorem' (value-based) taxes but not on 'non ad valorem' taxes. If you're not buying from a builder and building on your own (so no final sale record), use a slightly inflated value just in case.  If there's a sale that will hit records, they'll likely use that number.

 Non ad valorem would be taxes that are evenly applied to all properties regardless of value on a per-property basis, commonly for community road improvements, new fire stations, CDD (community development district), or other items like that which impact a small part of the county which those seeing benefit repay over a period of time. To see if there are non ad valorem taxes you could check around on a few residential single family properties in the same community (regardless of value) that have been completed for over two years and see if they have non ad valorem taxes on their tax bill.  I say two years because depending on the sale date it can take some time for the true tax to show up on records. The ad valorem taxes are the largest portion and often the only portion of property taxes so estimating those will get you in the ballpark.

Also talk to your lender about how they'll figure these into escrow and payment to be sure you're on the same page. Typically the lender will pad the escrow at closing and require a monthly escrow payment to overshoot the estimated amount the first year to be sure there's enough to pay the tax bill when it comes. They *should* ignore the vacant land tax amount and base numbers on estimated taxes. Taxes are paid in arrears so your bill due at the end of 2020 will be from closing/C.O. until then. Then when your mortgage company gets the tax bill to pay, they'll pay it, analyze your escrow, refund the overage (or charge for a shortage), and adjust your mortgage payment going forward with the actual estimated taxes based on a real tax bill. This should be done all the time, but I live in a builder neighborhood built from 2009-2013 and heard horror stories from some neighbors where lenders mistakenly used the vacant land taxes of a few hundred a year to calculate escrow and monthly payment. Folks would be loving their brand new home and unrealistically low mortgage payment for a year. Then they'd get hit with a $2000+ escrow adjustment bill and a monthly PITI payment increase of $150-200/mo increase to their mortgage. Being on the same page with what the lender's going to do on the way into it is good.

@Precious Thompson early on I'd get so wrapped up in having one or two properties in escrow that I'd put everything I had into making sure they progressed to closing successfully and I didn't miss anything or screw anything up.  I'd be worried about things that were the duties of the inspector, title company, buyer, or seller.  I'd get to closing, leave with my check, and realize I had nothing in the pipeline for the next sale and only then start working on new business. I ran a small service business before becoming a Realtor where I was laborer/secretary/maintenance man/marketing/HR/Accounts Receivable all wrapped into one.  It took me awhile to to realize I didn't have to do it all in Real Estate.

I've learned to lean on others (lenders, title companies, inspectors, PMs, etc) throughout the process, keeping tabs on all the important things, but still showing houses, marketing for listings, networking and putting leads into the funnel while I'm getting closed sales out the bottom. I recently had three in escrow at the same time, two active listings, and a JV rehab in progress, yet I was still showing and making offers for other buyers throughout. All three closings happened within about 20 days of each other and I had another under contract shortly after. The interim period of nothing in escrow and only the active listings felt foreign and hadn't happened in several months, but offers were out awaiting response and more showings happening at my listings and me taking buyers to see others.

  Successful agents who often have 5-10 in escrow at any one time learn to put systems in place, become better organized, and do more in less time, working with buyers, sellers, and through escrow with others at the same time. The beautiful thing about this industry is anything that seems to be overwhelming has someone who does that one thing as a full time job which you can eventually hire it out. I'm still playing transaction coordinator, buyers agent, open house host, etc, but I can see a day when I bring in others to do those tasks.

It still feels like herding cats at times as I build momentum, but I'm getting better at keeping things moving so I don't ever finish with one closing without anything at all on the horizon. You'll learn something new from each one to put into use on your next.  They do get easier in time.

I was talking with a team leader I know who does $40 million or more in annual volume (with a small team of a couple agents a transaction coordinator, and a marketing/inbound sales rep).  He casually mentioned to me that it was a little hectic because he had 'four closings tomorrow'.  I'd love to get to the point where four closings in a day is just 'a little hectic', haha. He doesn't work 90 hour weeks, he simply put systems and people in place as he grew.

@Mike Rosback I hear that excuse as well of not wanting to be bound by the ethical rules of being a Realtor. Honestly to me it just seems to be a cop out unless someone actually plans to be unethical. I know several successful wholesalers who are licensed agents and run large wholesaling companies. The only disclosure requirements are to let parties know you're licensed and to not be unethical. I've never seen that disclosure of 'agent interest' to be an issue at all. I honestly find it easier to deal with agent/owner listings from the buyer side than those who are listed by agents for owners who may not understand real estate. I'm sure some will disagree with me, but I feel like having a license and being bound to be ethical is far more valuable to credibility than the downside of simply needing to disclose you're licensed. Some brokerages are quite strict on what deals are allowable and many of the big names don't allow wholesaling at all. I can't wholesale with EXP, they don't want the liability. But that's not a Realtor guideline or state law. That's a brokerage level limitation, not based on license. The friend of mine I mentioned is with a flat rate brokerage who's part of the MLS. Anything that is legal by state law is permissible with his brokerage so he's never had an issue.

Having a spouse with a license could definitely help on the paying of referral fees to the licensed agent, but it still makes me skeptical of the unlicensed brokerage of real estate.  Many claim they are selling the equitable interest in the contract not the property itself, but when the email has pictures and stats of the property that would likely be a tough point to prove in court.

I'm on several wholesaler lists and would definitely consider buying the right deal from one.  I'm not just a huge fan of the industry as a whole since it's flooded with lots of newbies who really don't have any business being involved in real estate transactions with no skin in the game, no investing knowledge, and no penalties if they screw a buyer or seller over.

@Mike Rosback check with your brokerage on 'personal deals'. They'll often waive brokerage fees on a couple of deals a year if you're the buyer or seller (being a member of the LLC buying or selling works too). My brokerage is a 20% broker split up to an annual $16k cap (plus $40 e/o and $25 broker review, both of those hitting caps as well) and they allow three personal deals a year with no split. I can set my own commission at whatever I want, but if my gross commission is below $2500 on a non-personal deal or 4th personal and beyond, there's a minimum $500 broker split. They waive that if the property is really cheap and a 3% commission wouldn't get to $2500. If I were to sell 4 personal deals in a year, I could list the Fourth with a $500 listing commission (plus e/o and broker review if I hadn't capped) and they'd be perfectly content with that. Every brokerage is different, but I'd imagine most have minimum fees and exclusions for personal deals.

I find that I learn things working with investors that help me dealing with 'regular sales' and I learn things from those regular sales that help me on the investor deals.  It's good to have a broad perspective of transactions since oftentimes the end result of an investment is either a retail sale or a market-rent priced rental to a buyer or tenant who isn't an investor.  Since those 'end users' aren't investors, working with some regular buyers and sellers helps to see what they find important and apply it to what should and shouldn't be done on rehabs.

Whether or not the brokerage will waive their cut, you can do a couple of things with your net share.  You can get it paid to you like a normal commission, or concede it back into the deal for a better price if it's written in the offer that way.  On the sale side of a flip, you can simply list it with whatever minimum your brokerage requires and then offer the buyers agent their commission, or list it with a normal commission to you paid out at closing, splitting the proceeds among partners after.  On the buyer side it depends primarily on if you want a better deal or want the income at the time since the commission is set by the seller before you come into the picture.  I think it depends on the deal and your equity share in the project on which works better.  Realtors I know who do deals themselves often make offers which include 'buyer's agent commission will be credited to closing costs' effectively putting less cash into the property and then they list finished flips with 0% to them and 2.5-3% to the buyer's agent.

I'm a newer agent (2yrs) still building my momentum and income to support a family which is from commission sales primarily for now, so I don't have much capital myself to do solo deals. In building my transaction volume and working with investors, I've struck up a JV partnership with a client who bought a flip with me as his agent. On the front end, I was just playing the helpful agent role, so I made my commission and he bought the deal. Diving into the rehab, he realized he was short on time and skill to be as involved as needed and brought me in as a 'handshake partner' since I brought time and skill that he didn't have. I'm not a legal owner and it's our first deal together, so I'll make my commission on the sale while it will be deducted from my profit share check he writes later. My broker won't cut me a break on broker cut since I'm not a legal owner. It's a 'learning experience' flip without a huge profit that took far longer than it should have, but my partner valued my assistance and wanted to be sure I made commission even if it ends up breaking even or with little profit. The lessons learned for the next are priceless.

Before the next one, we're going to establish an LLC that we are each members of which is the beneficiary of a trust funded by his SDIRA. I'll then be 'legal owner' guided by a JV agreement we have outside of the legal title to the property and will have the option of selling as a 'personal deal' without broker splits.

In asking around, I've found many Realtor/Investors operate on JV agreements on each property rather than putting together partnership agreements that survive beyond one property. Even if you do several deals with the same partner, it's best to approach each one taking into account what works on that deal. The next one you may decide to shift obligations, equity splits, how you use commission, etc. You'll also, at times, find investors that don't need a partner but need an experienced Realtor so you'll obviously just stick with commissions on those.

@Mike Rosback I agree with you that it's definitely not permitted to pay any sort of significant finders fee to an unlicensed wholesaler. I don't understand how some wholesalers can spend thousands on marketing, guru courses, etc. but won't simply get a real estate license. Without joining Realtor associations and the MLS, it's really not that expensive or hard to get a license. Many non-MLS 'referral brokerages' are under $100/yr and still allow off-MLS transactions or referrals from MLS deals. I feel a 'marketing fee' would need to be completely separate from the sale to be considered allowable. If it's based on a closed sale, they need to be licensed to get more than $50-100 depending on state.

I've got a win/win referral agreement with a licensed friend similar to what you mentioned, but it works since we both have licenses. He's a licensed Realtor with a flat fee MLS brokerage. He runs a sizable house flipping company with his own and investor capital and that operation is his primary focus/business model. He lists his finished flips on the MLS, but he doesn't care to list other people's houses. He spends a small fortune on off-market advertising, has an acquisition manager, project managers, designers, etc on staff, so monetizing everything he can is important. He'll wholesale deals here and there when he gets something under contract that isn't in his target area or that doesn't fit the model he has. However, he'll also come across sellers that have distressed houses that are paid off or otherwise not urgent to sell so they don't need to take the discount, they simply don't have the money to fix up the homes to sell retail. He'll talk me up as his 'go to' Realtor and I'll list the properties on the market to sell them for more than he can pay to flip. The buyers I find are often non-investor types that are handy, buying for themselves and they need more house than they can otherwise afford, so they buy and fix it up themselves out of necessity rather than investment focus.

He's a super upstanding and ethical guy (who is also licensed!), often it'll be "look Mr. Seller, I can only pay you $125k for it to work for me, but I really think you could get $160k on the market, net of $145k+ after costs of sale since you really only need a roof and XYZ to be a great home.  Would you like $125k now to be done with it or could you wait a couple months to potentially get $140-145k?".  When he gets them under contract to wholesale, he's also being honest about the process of being licensed, putting his own money down to ensure he'll follow the contract, and he typically finds a buyer or buys it himself.  But he'll recognize the sellers that would likely be better on-market and offer them a solution. I wouldn't call him a 'wholesaler' but he does wholesale.

I pay a healthy referral for these seller leads because he's put so much into getting to that meeting, he's already set a baseline with his aggressive offer and a timeline that it can take a few months to sell a distressed house for top dollar. I'll also pay a smaller referral fee when those sellers need to buy something else. Then when I sell it for a net of anything over his base offer, sellers are thrilled and my friend who found the deal gets some marketing capital back.  He gets to monetize leads that would otherwise be 'dead' and I get a couple leads a year that basically are handed to me ready to go.

I wish more wholesalers would get a license and hang it with a non-MLS referral brokerage so I could work with them and pay referrals. But wholesalers with no license? Sorry, I can't help you there.... I'm not one to worry about reporting unlicensed activity, but I don't get involved in it myself either. Not worth the risk to my license.