All Forum Posts by: Shiloh Lundahl

@Scott Trench one thing that is interesting about they type of real estate that people chose is how it tends to match personalities. My guess is is your personality values reliability over the art of a deal.

I would say that @Jay Hinrichs' personality is more eccentric in investing in things that are uncommon that most people can stare at all day and still not realize how much money can be created with a specific skill set of converting one thing into something else (set such as timber, land, and high end development).  

I was the kid in math class that would do the problem in my head and get the right answer and just write down the answer rather than write out the steps.  My teachers would get mad at me for not showing my work. I would think that it was unnecessary and inefficient to show my work if the answer was so obvious and easy to do in my head. Similarly in real estate, there are common ways of buying investment properties where banks have underwriting guidelines to reduce their risk but it also slows down an investor's growth, such as seasoning periods. By understanding a banks lending guidelines really well, I've figured out legal ways around them. So my personality is, if can figure out a way around something that is unnecessary and still operate within legal bounds, I'll do that. That is my competitive advantage. 

None of our ways or styles are wrong. They are just different. And I would say embracing the difference and performing at our best within our unique personality styles is the right thing for each of us. For example, if I were to invest like you, I would die of boredom. Steady and consistent produces very little dopamine in my brain. For you to invest like me would probably feel uncomfortable for you. And you might wonder how I can bend the rules so much without breaking them. For us to invest like Jay, we would both likely go bankrupt for getting in over our heads and not having the skills to pull things off like he does.

I think many investors that post on BiggerPockets may forget that their way isn't necessarily the "right way." Where they may have succeeded or failed someone else with a different personality style or skill set may have a complete different outcome. I think we would do much better by asking each other how we find success in our individual styles of investing rather than thinking one way is the "right way" when it comes to real estate investing. 

ARV.

@Chris Clothier Great explanation. Thank you for taking the time to describe that to me. 

So the big advantage of turn key is that you get a property that the property management company knows inside and out to eliminate negative surprises and you are getting a great management company and a good, qualified tenant from the start.  Would you say those are the main benefits?

Also, if we could dive into it further, what does your average investor look like?  Professional, non-professional. Do they pay for the properties cash or do they get loans on them. And if they do get a loan, is it usually a 80% loan or lower? And if it is 80% are they cash flowing at the 230k value and a loan at 184k?

@James Hamling that is a great question. If a tenant buyer does not exercise the option within the three year period of time, then we can do a couple of things.

1. let's say they leave early. At that point in time, we can just list the property and sell it. we have long-term capital gains rather than short-term capital gains, we would have probably experienced some appreciation during that time. And we could just exit early. We wouldn't get as much money but the rate of return may be just as high or higher if we are able to keep the closing costs low.

2. We could put in another lease option buyer for 18 to 24 months.

3. If they the tenant buyers to leave after three years and did not exercise the option, we could either sell it at that point or we could decide to do another lease option with a higher strike price.

I guess the key concept is, because we have equity, we have some flexibility with what we would like to do.

@James Wise Just like any model, there are good operators and bad operators. We all, thanks to you, have heard of our Portuguese friend, who gave turnkey a bad name in Indy. 

I think the important thing is to follow the laws and have everything spelled out in the contracts. But in addition to that, I also connect my tenant buyers with lenders to help them get ready to exercise the option. You can check out my videos to see some of the tenant buyers that were super grateful to become home owners. It would be great to meet up sometime and I can go over the way we set up our lease options to help people buy the properties which is what I really want.  Because in reality, as soon as they exercise the option, I can redeploy that capital into another under valued asset and build wealth quicker. 

@James Wise Educate me. What are the average margins like in areas you are familiar with. 

@Marcus Auerbach Yes. I agree with you 100%. D class properties don't usually produce cash flow in the long-term. And is it possible to build an awesome real estate portfolio starting out with no money? Yes it is possible, but it's similar to going straight from high school into the NBA. Does it happen? Yes. But rarely.

@Gregory Schwartz I would have to disagree about the idea of just improving your skill rather than diversifying your skills set.  There are probably only a few jobs that improving a skills set at that job will pay you more than investing in real estate.  For business owner, I would agree with you. Investing in themselves and into their business will likely create a better return than investing in real estate until they have an exit or a stabilized business at the level that they want it.  Funneling profits into buying real estate from a high paying job or a business and learning the basics of how to do it profitably can create 10's of thousands and 100's of thousands of and even millions of dollars that would be hard to achieve through getting promotions at work. So I would say to continue to develop yourself at work and learn how to invest effectively on the side.

I have never purchased a turnkey property before so I am not familiar with the process. So correct me where I am wrong. 

A turnkey operator finds or builds a property. Then after the rehab or building is done, they put a tenant into the property and they sell the property at market value to an investor. The investor either gets a loan or buys the property in cash. The turnkey company then manages the property for the investor owner until the property gets sold eventually. 

I'd love to know some average numbers for a turn key. From what I gather, the turkey operator will by a property at around 100k that needs 50k to get it fixed up. Then the turnkey operator sells the property at the market value to the investor who pays market price of around $200,000. So the turnkey company has made 50k on their flip without needing to pay realtor fees of 6%. 

So the owner is not stepping into any equity but instead his or her net worth is lower based on the fact that they had to pay closing costs on the transaction.  

The turnkey company then manages the property and gets paid the management fee and all the extra fees associated with the management such as turn overs and lease ups, repairs, and sometimes sales costs. 

Correct me where I am wrong with my perception and walk me through the benefits of going with a turnkey company, where the profit is for the investor, and if the benefits outweigh the costs. 

@Nathan Gesner you just have a high value lesson to everyone. No emotion. Just follow the process.