All Forum Posts by: Tim Soto

Hi @Minh Nguyen, 

Welcome to Bigger Pockets. Good luck in whatever path you take in real estate. 

Hi Kevin,

Get ready to enjoy the best weather year-round. I agree with Gabriela in regards to your budget determining your options. Near the beach is always the best, or convenient areas near the 101 frwy whether it's Ventura or Oxnard.  Good luck with your move.

Hi Sam,

I do the initial analysis manually because it's quicker. I use the following information to determine if I'm interested. Also, you can usually find the numbers you need from the marketing package or Offering Memorandum from the listing broker/agent. If you're buying it directly from the owner, then get the information from them and verify the numbers: 

What's the annual gross income?

Annual Expenses? Don't forget to add the new assessed tax rate. You can Google the name of the county and "tax rate" then multiply that by the new purchase price.

Subtract expenses from income to get the Net Operating Income.

Divide that number by the purchase price to get your cap rate (ROI without debt service).

If you're going to have debt service then subtract the annual debt service form the NOI. That's your annual cash flow before management and reserves.

Now, do the final numbers work for you and your investment goals?

Is there upside? Vacancies, under-market rents, extra land to add RV/Boat storage or temperature-controlled units, cell tower, Uhaul rentals, etc.

Is the seller motivated enough to drop the price?    

How's the competition in the area? How close are they to your property? usually a good Offering Memorandum will have the numbers form the area competition, which will save you time and can be an indicator of where the property could go.

This is generally how I personally make a quick analysis to see if I'm going to move forward on a property or not. If the numbers don't work, but I'm interested anyway, I'll send a Letter of Intent with a low offer and add a special provisions letter to justify my number. This can open up dialogue and see where it leads. Hope this helps.

Tim

@Jolene Blazey   There are other places around you that, in my opinion, have more reasonable prices and can give better returns like Antelope Valley, among others. 

Once you receive a response from a letter you send, ask the seller questions. Try to get to the bottom of why they're selling, what's their pain/motivation, and how can you help them solve that problem. Build rapport and be transparent. If the seller is motivated enough, you can probably even negotiate for seller financing, subject-to, or lease option. And yes, you can wholesale it to an investor.   

Hi @Jolene Blazey, welcome to BP. Are you limited to your area only or can you look at other markets? @Cornelius Charles has a great point, what may look like a deal to you, may not actually be a deal, especially after considering all back-end costs. 

One way to get started with little to no capital is to drive around and take down contact information of agents, who have for-sale signs out. I would then reach out to them and see if they can use a part-time assistant. If they already have assistants, I would go on to the next Realtor(R) until I found one, who needs an assistant. Now I would be able to study the real numbers in my market and determine if a property has potential or not. I'm not implying that going to a real estate agent is where you can learn about investing or rehabbing. I believe that this is where you can learn about the numbers because of the data that's available. If you become great with the numbers, now you have value to add to an investor or partner.

I would also drive around neighborhoods and take down addresses of houses that look vacant or in disrepair, send a post card or letter to the owner, and ask if they're interested in selling. You can also attend area meet-ups and REI clubs to network with investors and other industry professionals. Stay consistent and continue taking action. Good Luck!

Tim   

Hi Mark,

Welcome to BP! Nice start. You've come to the right place to enhance your business. I Look forward to running into you at one of the local meetings and hearing more success stories. 

Regards,

Tim

Hi Matt,

Looks like you both know what you're getting yourselves into. In regards to creative financing, one option would be to offer a 2 year Lease Option. This strategy allows you to lease the property at mutual agreeable terms with an exclusive right to purchase it at the pre-negotiated price within the next two years. Attaching your business plan along with the Letter of Intent/Offer would also benefit you, as it would show the seller that you both are prepared and understand what you're getting yourselves into. 

Additionally, let the seller know that you plan on exercising your option to purchase immediately upon showing 12 months seasoning to the lender that'll be refinancing and cashing them out. This may help ease the seller's pain when you explain that you can only put 5% down, and if they're really motivated, it should be enough. 

I hope this information was helpful. Feel free to contact me by phone or e-mail if you have any other questions about this type of transaction. Good luck. I hope everything works out for you all.  

Kindest regarsd,

Tim

After contacting title company to open escrow, contact bank to wire earnest money deposit (EMD).

Verify utilities. 

Other due diligence include inspections,  unless that was done prior to making the offer. 

For rentals, contact seller or your rep to obtain and verify lease/rental agreements.  

Hi Tracy,

Welcome to Bigger Pockets! 

Hi Jose,

Your client is buying these properties from a non profit, then wants to sell to another non profit? Has he looked into or mentioned any interest in trading up through a 1031 exchange, which would avoid those capital gains taxes?