All Forum Posts by: Ryland Taniguchi

No offense to real estate agents (and I am a licensed agent myself), but you won't find real estate deals here in Seattle on the MLS through realtors in today's hot market. I have people going through the MLS everyday, make multiple offers constantly, and we find great development deals but virtually no flip or BRRRR deals.

You'll have to get deals off-market. I know several good agents that specialize in off-market deals but honestly I go through their deals constantly and not finding anything. So out of 52 projects that I have going right now, not a single one came from another agent.

It's going to find 1% rule rentals in Seattle unless you have a way to get higher cash flow like a vacation rental. It is possible if you develop lots into higher density townhomes but that requires development experience.

The areas you mention are great areas. Look for properties inside of the urban villages in those areas. I particular think the best chance for 1% rule is in Rainier. One area not on your list is Shoreline. 

With increases in density, you'll get a second appreciation from zoning in addition to the normal appreciation from supply and demand and inflation. 

 In our extremely liberal state of Washington, you have to be very careful about going after sellers with "stress". This state law RCW 61.34 says that you have fiduciary duties if you target any owner occupied seller who thinks they are in distress. The Supreme Court in our state recently interpreted to include even situations where the seller was not in distress. In our state, after three offenses it is a felony to skim equity from sellers. In other words, you can't get too good of a deal if the seller has "stress."

I would discuss options with a local attorney to make sure your direct mail campaigns don't get you into any trouble. The enforcement here is also no joke with FBI agents actually searching through investor mailers to pre-foreclosures.

This is an anti-capitalistic and anti-investor state. So much easier to do this in other states.

Systematic driving for dollars followed by massive direct mail

Sounds like the rehab cost you $55 per sq ft. I am constantly seeing what other investors are paying per square foot and it seems in line with other investors are paying in Seattle right now.  $50 to $60 a sq ft seems in line with what the original photos are at.

5 years ago I would have done this rehab at $35 per sq ft but today I would have probably budgeted $65 per sq ft. I would say you probably still came in under budget by $10 per sq ft (could not tell if all the electrical, plumbing and HVAC were completely redone) which means you have very good construction management systems.

We are sending massive mailers, have done a drive for dollars on almost every street in Seattle, have a door-knocking team and get deals by coaching 350+ wholesalers, and yet I am finding zero flips that fit my criteria. The numbers are so bad generally on flips right now that I pretty much stopped flipping here in Seattle. I have seen labor shortages and construction overregulation that I never since since starting flipping in 2004. It was so much easier to flip back from 2010 to 2013.

For beginners reading this, it is definitely challenging to flip in this area now. I am rehabbing or building 154-units right now and found only one flip that penciled. The one house that pencilled was the one in Ballard that I thought would be a flip but It now makes more sense to me as an AirBNB rental. 

My observation is that the one making all the money on the flip is the hard money lenders. If you a typical 12% and 3 pts on this deal with 2 pts for a 90-day extension past the 6-month mark, it would have cost rough $35,000 on interest and $15,000 on points. Someone less experienced than you would likely have taken 12-months and paid $60,000 in interest and $25,000 in points (add another 2 pts for the 3rd 90-day extension). So the hard money lender would be making $50,000 while you take all the risk and got helped by the market for a $74,000 profit. A less experienced investor who took 12-months may have paid $85,000 to the hard money lender and taken a profit of $39,000.

When the market crashed in 2008, the prices in Bellevue dropped by about 10%. In this scenario, the price would have dropped to $575,000 and would be a loss of $43,000 plus up to 9-months of holding costs for another $45,000. 

I think flipping in Seattle is just flat out a risky investment right now.

 Depends who you finance through. We have a local bank here that will loan at high 4% on fixer properties but they will only loan to you a total of a $1 million. Another local bank will loan as much as you want as a commercial loan. The problem now that all these local banks are based on one's relationship, track record and assets under deposit.

I actually am working for a solution on this and in the middle of raising $35 million for BRRRR financing. Would be too separate loans with the first hard money which it sounds like you don't need. The second part would be a 30-year fixed loan at 6.5%, 2 pts, 70% LTV, no seasoning, asset and cash flow based loan, 600 credit score, and minimal income and reserve requirements. It is private money. Would be nationwide and available in maybe 4-6 months. You could do unlimited refinances as long as the cash flow numbers work.

 I have a great property manager in King and Pierce county and so I talked her into "trying" out Thurston county. Although they are not looking for other clients now, who knows maybe they'll add a employee down south later. 

Yes anytime you make decisions on on another investor's behalf, it is a security. Advertising that you provide 8 to 12% ROI on JV is definitely a solicitation on a security.

You can pay $60,000 and get a Reg D Rule 506 private placement exemption. If you get a Rule 506 exemption, the following applies:

1) The Sponsor must not engage in general solicitation or advertising of the opportunity. The Sponsor must have a substantive, pre-existing relationship with any investor to whom they offer the Securities. 

2) The exemption allows an unlimited number of 'accredited' investors.

In a Rule 506(b), you cannot advertise but can raise unlimited accredited investors and up to 35 unaccredited investors. If you solicit even one unaccredited investors, the disclosures requirements are way steeper including financial statements and opinion of counsel.

In a Rule 506(c), you can advertise but only accredited investors can participate. You must also verify that they are accredited. 

I use private money on BRRR but on the take-out refinance loan. To acquire, I use hard money for the first loan and sometimes use private money for the gap funding. But I have a long track record with my private lenders and have been doing investing for 16 years and so it's not something you're going to get as a newbie.

Aloha and welcome to BP. I am also from Hawaii (Waianae) and live here in Seattle.