All Forum Posts by: Ryan Webber

A POF is a little much, but I absolutely do ask very pointed questions about an investors financing.

I usually start off with some questions like how many deals have they done and how many are they working on right now. If you have someone who's done one or two then I understand that their financing might be an issue. If you have someone who owns 20 rentals or does 10 rehabs a year then they probably already have their financing lined up.

I always ask, "Do you have your financing lined up already?" And then I usually ask who they're working with on their financing. If they tell me a mortgage broker I know I don't have a serious buyer. If they tell me a bank then I clarify if they are working through the commercial department or not. If they aren't working with a commercial loan officer, they aren't a serious buyer. I always keep it very conversational. You never want an investor to feel like you are interrogating them, but figuring out how solid their financing is makes the difference between a serious buyer and a tire kicker.

Another great question is, "How fast can you close?" This will give you insight into their financing and their true experience level.

The thing is that most "investors" are a waste of your time. As a wholesaler you need to find the heavy hitters. You are looking for very serious investors that can close as soon as you have title work done.

Be cautious of the "I'm paying cash" answer. Many investors that utilize hard money say they are paying cash, and so do many wholesalers who are just flipping it someone else. There are "cash" buyers out there but just be sure to protect yourself by requiring earnest money from any buyers.

Will's sharing some very simple but extremely valuable nuggets.

1. LARGE database of REAL buyers with their CRITERIA

Don't find one or two. Find 50 or 100 or 500. Its a numbers game. Usually 10% of your potential buyers list will be serious buyers.

Make sure they are serious buyers. If they haven't bought many properties yet, then they probably aren't the buyers you are looking for.

Know their criteria. Don't call a low end rental guy with a high end rehab to retail. Know your buyers and give them the respect not to waste their time.

2. PROPERLY analyze investments

What is the REALISTIC ARV? What is the REALISTIC rehab? How much profit is REALISTICALLY on the table? What is a REALISTIC cash flow on the rental? Does it need TOO much work to be appetizing to an investor even if it fits into your 70% of ARV formula?

3. SUCCESSFULLY market to desperate (I like the term motivated better but desperate is accurate) sellers to achieve GREAT purchase prices.

You are not going to wholesale something unless you are selling it at a GREAT price. If you can't successfully find motivated or desperate sellers to sell you the house at an even GREATER price then the GREAT price you are selling it at, then you will fail as a wholesaler. Your whole goal is to buy houses at such cheap prices that most people will think you were lying when you tell them what you bought it for.

You will have to be able to develop a solid marketing plan to find those sellers that are motivated enough and have enough equity to take your stupidly low offers. They're out there. The question is how are you going to find them?

You need to become the best deal finder and have the best network in town. That's what it takes. Finding deals and building your network.

The issue with conventional is you are going to get maxed out at 4 loans (not sure if they've changed that again).

Commercial may be shorter amortizations and higher interest rates than conventional but it normally has lower loan fees. The higher down payment can be an issue but there are commercial lenders (usually local banks) that will do lower downs.

On top of that qualifying for a commercial loan is not nearly as stringent as conventional. Commercial lending is based more on your financials and relationship rather than on the particulars of your credit report and income verification.

Eddie, though your example is absolutely achievable, I think you missed the point.

Let's say you cash flow $5,000 a year on that $15,000 rental (which is not realistic with taxes, insurance, maintenance, and vacancy factored in). That would be a 33% percent return on your money, which for most investors is a respectable ROI. You would still have to wait 3 YEARS to buy another one with the profits you generated.

Part of my point is that rentals require large amounts of capital invested to make large returns, so its better to focus on strategies that generate capital initially and THEN invest into rentals.

If you wanted to make $4,000 a month passively from rentals and all your rentals had an ROI of 40%, then it would require you to have $120,000 invested to reach that amount of income ($4,000 x 12 months divided by 40%). So unless you have $120,000 sitting around, then you will need to find ways to generate more capital faster, hence rehabbing or wholesaling.

Wow, that was a lot to say just to KISS it at the end, but I like that so much I'm going to say it again. :D

Wholesaling requires time
Rehabbing requires time and money
Rentals require money

There are exceptions to each but that's the basics.

Sorry Michael for repeating myself but I've been asked that question many times and just had that wonderful epiphany moment of simplification.

The knowledge required to profitably run a rental/wholesale/rehab business isn't really that exhaustive. Much of the knowledge for one carries over to another.

Wholesaling is all about finding and analyzing deals and building a buyers list. Rehabbing is all about finding and analyzing deals AND getting the work done efficiently. Rentals are about finding and analyzing deals, getting the work done efficiently, and dealing with tenant management.

I do all three. Wholesaling easily feeds into rehabbing or renting, because you can find great deals for yourself to rehab or rent while you wholesale. Rehabbing feeds into rentals because a make ready on a rental is a piece of cake for a good rehab contractor.

I would say there are multiple components to analyze to determine which single or combination is a good fit for you. Time, money, credit, and goals are the main components to look at.

Wholesaling and rehabbing are ways to generate capital, while rentals are a good way to invest capital. Wholesaling requires very little starting capital while rehabbing usually requires fix up costs and/or closing costs and down payment. Rentals normally are going to require at least a down payment and closing costs but not always, and they may need to be fixed up, also.

Wholesaling and rehabbing are time and skill intensive, while rentals are by nature passive and can be delegated out very easily.

If your credit is in the toilet, building an extensive rental portfolio may be out of the question right now. Wholesaling requires no credit and rehabbing can require little or no credit.

Your investment goals can range from you need to make $2,000 in the next month because you are broke and unemployed or you make six figures at your job and are looking for a safe place to make 15% on your money.

The answers to all these questions are what determine which is better for you.

If you have $25,000 and you invest in a rental property that will cash flow $10,000 a year then that's great, but you have to wait 2 and a half years to be able to invest in another. During that two and a half years you could have taken that $25,000 and done a rehab to retail and then another and then another until you were doing 1 a month. Let's say you profited roughly $15,000 per rehab and over 2 and a half years you amassed $250,000. At that point you could invest that money into 10 rentals at the same return and make $100,000 a year.

But if you are a doctor or an engineer making $200,000 at your J-O-B, it might be a waste of your time to do rehabs and you would rather just invest your 401K of $250,000 through a self-directed IRA straight into rental property.

Or maybe you are a complete poindexter and you wouldn't know the first thing about swinging a hammer and you still don't have any money or credit, you could start off with wholesaling. Over 2 and a half years you could amass let's say $100,000 and start investing some in rentals, and maybe you've developed some contacts that can take care of the remodeling for you so you start doing some rehabs, too.

Point being, there are multiple ways to make it in real estate, and it depends on your time, money, credit, and goals.

Let me KISS it:

Wholesaling requires time
Rehabbing requires time and money
Rentals require money

There are exceptions and caveats but that's the basics.

Cash for Keys can also be a very effective eviction strategy as Peter shared. I've used it several times also. Just always make sure that they are completely out before you give them the cash. Even with cash for keys, I've had problems moving along tenants fast enough, and if you've delayed the eviction a month then you're behind the curve that much more With a 3 month eviction process, I would definitely lean towards the discounting the price more strategy and doing cash for keys.

As for worrying about the condition of the property because they're deadbeat tenants, absolutely. Let's be clear, most wholesale deals are going to be in horrible condition. That's the nature of this game. That's why you can buy them at such a discount.

As for assessing the property condition, its actually better to have a bad tenant in there, because when you ask the tenant what's wrong with the property, you can be sure that they will tell you about every single little thing that isn't working properly.

Well if you don't have access to a couple hundred dollars to get a deal done then I think there's a bigger problem here. Its your personal finances. Making more money won't solve that problem either. You can be broke at any level. Whether you make a $100 a month or $100,000 a month, if you are living above your means you are going to be broke. If you don't change that now, it doesn't matter how much money you make in real estate.

Tell you what, Joseph, if a couple hundred dollars for an eviction is all that stands between you and getting a deal done, I'll personally loan it you when the time comes.

With interest, of course. :D

You know I've been on this forum for over three years now and I don't ever recall seeing anyone brag about how much money they make in their introduction and/or their profile.

From the smell of your humble cologne, I'm guessing you're a slick guru. :cool:

Well I just looked at your signature and I guess I was right. :D

Either way welcome to the forum. You at least have the benefit of living in the best state of this wonderful country. Its always good to see a fellow Texan added to the ranks.

Welcome to the forum Nareth.

I'm going to have to disagree here with Blake. Forming a sole proprieter LLC allows you to pick any tax status with the IRS. You can even declare the LLC to be non-existent in the IRS's eyes so you don't have to file a tax return for it (which means less you have to pay an accountant). I've also never seen any case showing that the corporate veil can be pierced any easier just for the fact of there only being one managing member. Of course checking with a qualified attorney in your state is always the best way to go for that.

Now I do have to agree with Blake that Texas is the best market in the country to find cash flowing properties.

And doing some rehabs or wholesale flips are great ways to increase that capital to reinvest into rentals.

Either way you came to the right place to learn more about the business.