All Forum Posts by: Steve Milford

What @Tyson Cross said. Keep your money in the bank, and find another source of income to keep growing that pot.  

Get the real estate license, then interview brokerages to find one that suits your fancy. All of them will offer contracts to you if you are a go-getter. Your first deal should be regarding your employment contract. Find one with a style you like. I like the School of Hard Knocks. Others like lots of formal training. Every brokerage has their own business model, and you will be surprised of the variety once you start talking to many. Then work on looking at inventory, and talk to as many people as you can.

When I started in this business, I had and still have a FT job separate from real estate. Why? I found that I have a low tolerance for risk, and more importantly I like shorter sales cycles. In addition, having a job creates peace of mind to make sure the mortgage is paid. Yes, no job is guaranteed, although finding just the right "deal" is as much a risk. It allows me to focus on what I love about real estate, helping people make money or find good deals, and it allows me to be patient building my business. The biggest curse and blessing with real estate is that you are your own boss. No one is responsible for your failures but yourself.

Regarding the shorter sales cycle, I now see much less risk comparatively and greater ROI to flipping than I do with buy and hold. I initially didn't think that. If you haven't seen it yet - the market here is getting softer...more and more people are not getting financing like they thought. More and more homes are coming BACK onto the market. If you don't see this or other trends then wait until you see it.

When I first started in this business, a little more than a year ago, I thought I wanted one thing and realized after being in it that I really want something different. I enjoy the negotiation of the deals the most, ironically, so the more transactions I can do, more fun for me. By working in the business you also might find a unique niche. I thought that I would focus one area and that is not how it has worked out either. And if you become a Realtor, ignore what you hear about 'how long' it will take you to find your first deal. My first paycheck came 3 months after getting licensed. You have to hustle, but it will come.

I am willing to connect if your up for it. 

Ok @Michael Brown let's go back to your numbers based on what we know right now...btw the neg fee info is usually in the private agent notes in the MLS (it is usually for us). That's why you need a local Realtor on "your team".

1) The list price is a fictional thing - it's a made up number from the Realtor. We don't know what the bank will agree too.

2) A $5,000 cash payment is needed at closing from the buyer. It's a trustee or negotiator payment - that is why it is not in the deal.

3) The mortgage most likely is right around $185k +/-. Let's say we go with $300k for resale. 

So let's revisit realistically. $300k (sales price) -$5k (neg fee)-$81k (rehab) = - $8.8 (holding fees) - $5 (closing costs twice) - 18k (Realtor fees) = $182,200 - $20,000 profit =  You will want to pay a max of $162k to make the profit you want. Now the big question of the day is, will the bank accept that? There is no way to know for sure until you submit an offer that sticks and work through the process. If you offer, it gets accepted, and you are wrong - the bank holds your EM until they tell you that they will not accept your price +/- 6+ months from now. 

Is this a good deal?

Well, it would be to me if you can get the home for less than $162k. And that is still a big if.

Steve 

I answered a similar post just now. I am wondering why you are re-starting the direct mail. What worked before and what didn't work? You would know if you tracked it. If you didn't, you should start now.

I send post cards 100% of the time. I scrub the addresses fairly hard, I create each mailing as a merge off the ink-jet printer using software, purchase 1st class stamps, and also use a PO Box for the return address. This way, based on what returns I receive I can find out if a list is good or not. And then when people call, I ask them what card they received. Cost wise, it is the least expensive I have found with good results. And yes, I change the message - sometimes my changes perform better and sometimes they are worse. For me personally, I throw away so much junk mail, if it was a letter, I would still throw it away/recycle before I got into the house. At least with post cards, is my thinking, the recipient might read the message before it gets tossed - or kept if there is interest. In the past I used mostly BW, although am now testing color to see what my results are. 

The biggest problem I find with those "lists" is that many properties are vacant with no forwarding addresses. I have the best luck with lists I create from my own methods of researching neighborhoods and by home ownership.

Many have told me, and having been in sales a long time, that most deals are made after the 4th or 5th contact, yet I have been told by people that call that my post card sits on their fridge or desk until they are ready (which can be up to 6 weeks so far.) So I don't beat myself up about it much. 

Also, what is your definition of a lead? To me a true lead is a someone that is inquiring. Everything is just fodder for farming.

I have heard that skip tracing can be a good method to find owners, but again, for me right now, the cost outweighs the reward based on other methods I use.

1. Trial and error. Pick a method and then work it. And then pick a different method and work it. This is called A/B testing. You can also test different messages withing the same method. Track everything, including how much it costs, its how you learn what works and what doesn't. i.e. I personally dislike sending out post cards, yet it is where I get the most seller leads from, aside from referrals. I also test the types of messages I send, and different post cards have different response frequency. In the end, you need to figure out how to make your phone ring. Another i.e., when I send marketing emails, I track what links get clicked on and then I focus on those types more. It is not what I want, it is what the customers want. My true per lead cost from posts cards is averaging $81 per transaction, essentially for every 200 post cards I send out I get 1 transaction. Of course I would like to find a way to lower that cost although I will still take what I can get. I have a investor/flipper friend that is happy with $500 per transaction "finder's fee" through his post cards. What should it say? Think like a seller and what would catch you eye? Different things work for different people. For those cash buyers/investors/flippers out there, here is what I see the most of, "Will buy your home for cash!" or "Buying homes for cash! Any condition!" Or go donate to a non-profit, and if they can give you face-time with their clients, what is the return on it? I have invested in one this year that on the surface seems like it would net out, yet hasn't resulted in a single lead. Could it be my message? Sure, but since I change the message each time, it just doesn't work for me. 

2. Go to your county GIS property search tool to find the owner. Sometimes the process is easier said than done.

3. The more people you talk to people, more "investors" you will find. Many people just say they are looking for a "good deal", which is coded that they have money to invest. It is impossible to tell you what you will find first. I found investors after I helped them sell their homes. Finding the deals first is something I am working on - it takes time.

Best of luck, Steve 

See https://www.biggerpockets.com/real-estate-investment-calculator

What about working this problem backwards? 

Let's say you have a home that you want to sell? Does anyone in your area buy homes for cash? This can be another version of hard money. Would anyone want to be your partner? Start asking those questions.

I know I always wondered until I started wondering out loud - then things started to click.

Best of luck, Steve

ReferenceUSA/InfoUSA. 

Contact a Reference Librarian at your local library, and tell them what you want and they should hook you up. I have never seen where it is not accessible through a library web site, once you set up an account.

Or go to the census web site, factfinder.

The only thing you can do is make sure that your numbers work. There are two ways to look at this in my book.

Look, in my market, first-time home buyers are causing prices to increase dramatically because there is no inventory > $250k-$300k. Go much higher and there is plenty of inventory. there is even a lack of buyers.

Will we peak? Who knows for sure. In that FTHB market, there are programs to allow people to buy with almost no money down yet the peak will come when it is perceived as cheaper to rent versus buy, even with rents going up. And that just hasn't happened yet. For that buyer, home ownership is still cheaper than renting and that is what is keeping this "bubble" if it is one afloat. I had a buyer recently that bought a house with seller financed closing costs and a 1% down payment.

Another measure is to look at remodeling projects.  People vote with their wallets. The mentality for many years was, "Why remodel, when I can just sell? It is a faster upgrade" Now though, with appreciation rates high, my contractor friends tell me they have tons of work so maybe the market is cooling a little. 

In the end, the numbers have to work for you. If you have a rental that must rent at the current market rate, that may not make sense if the market dips.

@Justin S. what @Chris Parrish said. Every single thing is negotiable. The caveat is that you have to ask for it to get it, and a lot of people don't want to take the time to do that because it often means you get picky. You need to find out what the true need is. You may have heard that deals are made or lost when you make them. This includes not only price, but the details of the contract as well. Creativity in contracts is only limited by your imagination. Worst case, when you ask, is that they say no. And the type of deal you present, even in lending, is a huge factor. i.e. I am currently seeing more Conv. mortgage deals stick at a lower price, than FHA ones at a higher price on the same property.

Figure out how to really negotiate. The first step is getting someone to agree to your contract offer based on first look. The second step is to negotiating the finer details and problems that come up so that everyone feels like they "get something". And the last step is seeing the contract through to closing. As a Realtor, I haven't lost a deal yet, but I also micromanage it and negotiate every little nuance until it is done. Personally though, I have walked away or cancelled more than my fair share of them when they turn south mid-way through. 

Negotiating with a lender (in my experience) is usually not property specific - it is more based on what you have to bring to the table and who the lender is. Don't like your terms? Walk out door!

If it is cash flowing negatively already, you are already supplementing it now with your regular income. So I guess the question is, do you ride out the debt or sell to stop the negative cash flow? 

There is no way to know because I don't know what the equity capture could be. For example, if you sold now and broke even is that better than waiting another year with negative cash flow (of potentially a smaller amount) and gaining $10,000 in equity? Only you can answer this.

Good luck, Steve