All Forum Posts by: Crystal Smith

Quote from @Erick Pena:

Hi everyone,

I’m new to real estate investing and just finished reading Brandon’s book on investing with no money down. I’ve found myself particularly interested in multifamily properties, but I’m struggling to grasp what exactly defines a “good deal.”

When evaluating listings, should I primarily focus on properties that seem undervalued? Are there specific market indicators or property traits I should be paying attention to? I feel like I’m missing the bigger picture of what makes a property a great investment opportunity.

If anyone could share some pointers or insights on how to identify a “good deal,” I’d really appreciate it!

Thanks in advance for your help!

 A "good deal" is in the eye of the beholder.  In my opinion, you have to establish your own investment objectives.  Do you need or want monthly cashflow, tax write-offs, betting on appreciation,....   

We invest in some deals because they meet our Hurdle Rate/Return on Investment objectives.  There are times when we see deals on the table that won't produce any cashflow or not enough cashflow to meet our target hurdle rate but the tax benefits or appreciation potential may make the deal attractive.  The bottom line for us is that the financial benefits associated with the deal must far outweigh the risks.  

Quote from @Kimberly Venable:

Good morning, 

I have been a lurker of this website for a while. Got analysis paralysis few years ago. I also allowed the fear of others to take me away from my long term goals. This year I am ready to make my first step towards financial independence. My plan is to start house hacking. I do get nervous with finances and want to be financially responsible. I am divorced. Currently changing my mindset of I can’t do that, to how can I?

 Take it one step at a time and use the forum to help you with the steps. Your first step is- Get approved for a loan (unless you plan on paying cash).  Getting pre-approved you'll know how much you can afford.  If you need lender recommendations use the forum to find out who others have used in your area.  Once you have decided on a lender and get pre-approved let us know, so we can celebrate that first step and you can start the 2nd step.

Quote from @Nilusha Jayasinghe:

Hey all, I'm a smalltime investor currently living in a flat of a Chicago 2-flat while renting the other out, and also have a SFH rental in OH. I'm not looking to scale anytime soon. I have my personal emergency fund stored away in a HYSA, and am working to build up a15k property reserve as well, but am conflicted on where to keep that 15k. We don't have kids (might in the future), my husband and I are young and healthy, have stable high-income full-time jobs, and just put in a lot of work to both properties so don't expect huge expenses in the near future. Both properties are in A areas with great tenants. I know that the general guidance is that emergency funds aren't to be invested, but given our financial security and the fact that we already have a personal e-fund in a safe, non-volatile location, would it still be crazy/unwise to invest this 15k in an S&P500 index fund in a brokerage?

I've looked through the forums and can't find answers to a question similar to mine so I thought I'd post. Would love to know your thoughts and hear if anyone does anything similar with their personal vs property funds. Thanks in advance! 

This is a great question.  An emergency fund needs to be liquid, and immediately available to you in addition to being low risk and protecting principle.  For these reasons, we don't invest our emergency funds in anything that has volatility and we can't write a check against it the same day for an emergency. I don't like the returns but we use regular savings accounts.  The returns suck at a little over 3% per annum but we deal with it. 

Another idea that we have been exploring is using the cash value of whole life insurance funds for emergencies.  We'll only do it if we can access the funds immediately.
 

Quote from @Cody Ford:

Im currently looking at a property that has tenants living in them. I thought the posting said 3 unit but my realtor gave me the paper work on it. I looked at the paper work and its  a 4 UNIT  property. Im waiting to hear back to go look at the last unit. The 3 units one is renting out for 950, 700, and 650. Everything is functional in the property it is a older home. The property does have heated radiators through out each unit. everything is separated for each unit electricity, gas, and window units in each property. Year built 1922. The property is selling for 224k. All units are occupied. This property does look good in my perspective. Im still waiting to see other unit and see what is it renting for so i can crutch some numbers on it. 

I looking to take action 

Can anyone help with some questions I have

Will this property cost me to much down the road?

What are other ways to get this property with out having to owner occupy, FHA, conventional?

I would like to know more about ways to use OPM

The only way to determine if the home is going to cost you a lot down the road is by determining the age of the mechanical systems & if the structure of the home is sound.  You can make the determination by examining the mechanical systems yourself and finding out their age or hiring an inspector to evaluate the systems. An inspector can also evaluate at a surface level the structural integrity. If.a general inspector sees something of concern they will then recommend a structural engineer review the property.  One of the things we do and recommend to our clients is to purchase a home owners warranty to cover all of the mechanical, electrical and plumbing compenents. This is one way to manage costs risk.

The ways to own the property besides FHA & conventional loans is with private loans, investor DSCR loans (non owner occupied); seller financing, lease options, partnering with others to take the property down.....  Too many strategies to address  on a post like this but I recommend you research all of the above.

Quote from @Jayleco Mcgaughy:

Hello BiggerPockets community!
I'm new to real estate and have recently become interested in wholesaling as a way to get started. I’ve been researching a lot about the basics, but I know there’s so much more to learn, especially from those who’ve been in the game for a while.

I’d love to hear from experienced wholesalers about their journeys and any advice you have for a complete beginner like me! I’m willing to put in the time and effort to learn and grow in this industry, but I could really use some guidance on where to start. If there are any books, podcasts, or resources you think are essential, please share them!

Thanks so much in advance for your help—I’m excited to be part of this community and learn from all of you!

 So, I am not a "professional wholesaler".  I am a real estate investor & an agent.  And over 20 years, my partner & I have wholesaled or assigned quite a few deals.  So my perspective on how to get started may be different than others who are professional wholesalers (100% of what they do is wholesale). Here are my recommendations:

1. Get familiar with the laws in the state you will conduct business in. In some states, such as mine, you can do one assignment per year without a real estate license otherwise, you will be fined $25K per transaction. 

2. Understanding the law can help you decide what strategy you will use for wholesaling. If you have the cash to purchase and close, then you will not need to use assignments. You can double close. If you don't have the cash to purchase and close, then you'll need transactional funding to support double closing. 

3. Establish a relationship with an investment-friendly realtor. Not to find deals on the MLS but to potentially use the MLS as a tool to sell your deals. One of the challenges of beginning wholesalers is they do not have a buyer's list. And although many investors say they are only looking for off-market properties, the largest buying list is still the MLS.

4. Establish a system to stay in front of potential sellers & buyers. Yes, this means making an investment in a CRM that may include tools for direct mail, email, and text messaging...  Can you get started without a system- Yes.  But you can't scale without a system.  If you can't afford a system, then partner with someone that does.

5. Consider getting a real estate license and joining a company that focuses on working with investors. With a license, you'll have access to systems for prospecting & training. Successful realtors prospect for listings using the same methods as investors. The difference is investors make offers direct to owners.

6. Make a plan that eventually leads to owning property that throws off cash after you purchase it. The challenge with wholesaling is you will always be chasing the next deal. Eventually, you will want to stop chasing and just have cash come in every month from what you own.

Quote from @Tar-U-Way Bright:

Hello Everyone,

I'm preparing to purchase my first investment property in the new year, which I plan to house hack. I already have an LLC that I originally set up as a business entity to facilitate managing, overseeing, and expanding my real estate ventures. My goal is to grow in the real estate space, and I plan to self-manage this property.

I'd love your insights on how best to utilize my LLC in this process. Should I use it for asset management, rent collection, property management, or other roles? Are there specific advantages or potential pitfalls I should consider when structuring these activities through my LLC?

I also understand accounting and legality may play a role. I'm more so wondering what makes the most sense as I do want to treat my investing journey as a business.

Thank you in advance for your advice!

If you intend to pay cash for the property, then purchasing it in your LLC is a good idea. A better idea is to purchase it inside of a LandTrust, making your LLC a beneficiary of the trust. If you don't plan on paying cash and have to leverage with an owner-occupied loan product then you should set up your LLC as a property management company because you will not be able to borrow in the name of the LLC. Have all payments from the tenants go to your LLC.

Once you have grown to the point where you are beyond house hacking and are purchasing for pure investment, not a place to live, then you can really start using the LLC or other strategies.

Quote from @Craig Sparling:

I consider myself an old school fundamentals guys.  I've read about Benjamin Graham and Warren Buffets approach to investing at large and it resonates with me more so than the crypto-generation.  Real estate's "gross rent multiplier" is Wall Street's "sales to revenue",  "cap rate" is roughly "P/E ratio".

When evaluating markets and investments I tend to start with GRM (or lazily the 1% rule), then attempt to return a cap rate based on assumptions about costs, then I work my way to multiple years of projections (assumptions about inflation, amortization, tax benefits, etc), and if I am partnering with one of my smart friends I have to pull up an IRR (internal rate of return).

I also look at regional employment levels, median income to rent ratio in the zip code etc.  And here in Chicago I always check my favorite local homicide tracker whose name violates usage restrictions.

Is there other favorite metrics out there that I am missing?  Is anyone else willing to share the math-side property screening process? Is there other market wide metrics that apply here?

 Great question.  I expect you'll get great feedback on this post. i'll address one metric that we use to use but we have thrown it out.  The so called "local homicide tracker".  We stopped using it because we realized we had missed out on opportunities where neighborhoods were on the verge of gentrification or there was an opportunity to invest in a project with potentially great returns and no change in the demographics. So we no longer use the "local homicide tracker."

One metric we do use when we're able to pull the data are permits pulled & what type of permits pulled in an area. Often times this data isn't made public so some calls have to be made, but for us it's an indication whether or not there's a trend of investments being made in an area.  From which we can decide if we jump on the band wagon or not.

Quote from @Daniel M.:

I’m looking at a property that checks all the boxes—good numbers and fits my buy box—but I haven’t seen it in person. I’ve visited every other property I’ve considered in the past, so this is uncharted territory for me, and it feels a little out of my comfort zone.

I’m considering putting it under contract sight unseen to lock it up, but I don’t want to make a rookie mistake here.

I'm looking for some advice here. Do you rely on inspections, local contractors, the agent, or property managers to get eyes on it?

I feel like there’s a balance between being decisive and being reckless, and I’d love to hear how you guys approach this. Any tips, warnings, or real-life lessons are welcome!

I won't say how many offers we make on properties for ourselves or clients in a typical week.  Needless to say, it's a lot & there's no way we will see all of them before making an offer.  In my opinion, making an offer site unseen is not a risk. The risk is not including due diligence caveats in your offer, like inspections.    Our offers include clauses allowing us to do our due diligence before closing and protect Earnest Money Deposit (EMD). We may offer site unseen, but we will not close site unseen.  The only time we will not make an offer site unseen is if we run into a situation where an owner or a realtor won't accept site unseen offers. 

So using your words "Lockup" the property but make sure your offer includes due diligence items to protect yourself.

Quote from @Emmanuel Rugamba:

Hi everyone I am 26 year old professional athlete looking to buy his first home but also house hack in the process. If Anyone has additional information on the Chicago market right now and some insight Id love to talk.

 Here's some information on the Chicago Market.  As the 3rd largest MSA in the country it's hard to generalize the Chicago market as it's actually over 100 different submarkets when counting the 78 communities in Chicago property and then adding in the various suburbs, including in and around Naperville.  With all of that said without know more specifics about what price points you're considering and location I'm going to Generalize

1. Median Prices for single families homes in the Chicagoland region went up about 7.4% as of November 2024.  Here's a link to the data:  https://mred.stats.10kresearch.com/infoserv/s-v1/vwxD-yIT

2. Median Sales Price for condo in Chicagoland went up about 8.4% over the past 12 months as of November 2024.  Here's a link to the data: https://mred.stats.10kresearch.com/infoserv/s-v1/vwxJ-5gH

3. Median Sales price for small multifamiles in Chicagoland went up about 11.2% over the past 12 months as of November 2024. Here's a link to the data: https://mred.stats.10kresearch.com/infoserv/s-v1/vwxv-Zs5

What this data shows at a Macro level is that the Chicago market is doing fine, but the market is too large to use that data to make any decisions about where you want to house hack. In my opinion the best way to house hack is to purchase a multifamily where you can live in one unit while renting out the rest. The decision you must make is where do you want to live from a lifestyle perspective. We've had clients over the years who love Bronzeville & Hyde Park and have purchased large buildings with condo quality finishes or updated the buildings & are cash flowing while living in the building. While other clients prefer the Northside or are looking at the gentrifying Near West Side & others that want to live in the suburbs. The lifestyle question is one that you must determine, then narrow down what parts of Chicago provide you with that lifestyle, then we can really answer the question- How is the market doing in those specific neighborhoods?

Quote from @Jennifer Fernéz:

Let's say you are a brand new investor. You are 40 years old and you have a family. You have $80K in your savings account, and you decide you want to invest in real estate.

Knowing what you know now, what would you do with your 80K? How would you make it grow the quickest?

 Before I give my answer I'm making the following assumptions- Your credit is decent, you have stabe income and make decent money; your debt to income ratio is relatively low. 

In my opinion the fastest way to grow the $80K is Flip, Flip, Flip- then buy and hold and repeat again.

1. Establish an LLC & a bank account for that LLC

2. Get preapproved for a Hard Money Loan- Many of these lenders can only lend to LLCs Many of these lenders will give you 100% of the renovation and 80 to 90% of the acquisition. Your rates will be higher wih no experience

3. Start Networking to find partner(s) with experience.  You don't want to do your first one on your own.  Also start networking to start buildign your team of find contractors, handymen, private lenders, real estate attorneys, title companies, architects,wholesalers....  You don't want to get a property under contract and then start searching for the right people. Start it now

4. Research your local market to see if it fits the following criteria. Are there communities where you can acquire homes for around $100K or less AS IS that will have After Repair Values of $170K or more. I chose $100K because you'll need to use about $20K of your savigns as a downpayment for the acquisition.  If you can't find that in your local market then you may have to go to a higher price point but it means using more of your savings which I'm advising against. Another option because of your networking is to joint Venture with someone to get into a deal. Add your $20K with someone else's $20K.

5. With the financing ready, your team in place, the market research complete- hire an investor friendly realtor. Pick one that also has a great network and can not only source MLS deals but will partner with you to source off market opportunities

6. Be patient- Get a fix and flip deal under contract. Minimum Net Profit $25K to $50K. This means looking for a lip stick project that can be completed and resold in 6 months or less

The formula in a perfect world

Fix and Flip a home- Make $25K to $50K (Yes you'll pay short term capital gain tax); Repeat the process 3 times; Now you'll have an additional $75K to $150K added to your $80K of savings. Then look for a property to buy renovate, rent & refinance (cash flow).