All Forum Posts by: Ryan Urban

There's an old saying in the writing business: "The only people making money in the writing business are those who are teaching people how to make money in the writing business."

As I look around the current REI landscape I see a ton of "gurus", "new concepts", "can't miss systems" and "the new wave of the industry" sales pitches, not to mention wall-to-wall informercials.

I'm fairly new to REI, but I'm making aggressive offers on solid properties, I have more than sufficient funds set aside for down payments, and my credit is good. In other words, I'm doing it the "old fashioned way."

I've also looked at all the different strategies, from wholesaling to mobile homes to quick sales to birddogging, and I've seen testimonials from students who liked the courses and "really hope" they'll "make a lot of money with this program."

So here's my question (and sorry for the long preamble): Are there really people who are following these programs, and who are making significant money with them? I can see the flipping strategy working, but what about wholesaling, tax sales, pre-foreclosures?

Is this stuff real, or are the only people in the industry making money, those who are teaching others how to make money in the industry?

Funny, that kind of thing was the trigger for me too. I just stumbled onto one of those cheesy infomercials and it started the ball rolling. I then started ordering books, talking to people - and I joined this board. Now I'm looking for properties aggressively.

It's like watching TV stock picker Jim Cramer. You don't have to follow his advice, but he does provide good basic industry information that gets you thinking. And either way, you're still responsible for becoming educated on your own.

I appreciate the input. I'm trying here to just focus on the offer itself, assuming all due diligence and financials have been calculated. Assuming that the property itself has been carefully inspected, etc. etc.

I very much agree with the "make offers on two or three properties a week, get about 10% of them" approach. I'm patient and I only want to purchase properties at a significant and true discount.

Given today's market, having my cash earn 5% in a money market fund while I look for the right deals is just fine!

Justin:

Amazing. Let me know how this deal goes, I've been hearing a lot of horror stories from lenders, just as you described.

I agree about keeping the down payment down, just as you say. It also hit me yesterday that if I wanted to sell the 5-unit place down the road it would be much more difficult than a four or less unit, due to the rules. Therefore I'm dumping the idea of the 5-unit, there are other fish in the sea!

The only thing is, I wonder if a 20% down payment would make the process easier than 10%.

So the strategy now is: Four units or less; Acceptable financials on the property; 10% down to save funds for more purchases; and start offers as low as possible and work up. If everything goes my way, I'll sign on the dotted line. If not, I'll keep looking.

The education continues...

First, I'll be in positive cash flow territory, partially because I'm putting enough down and partially because the city I'm buying in is pretty investor-friendly (strong rent demand, low house price-to-rent level ratio). And it's buy and hold. Regardless, if I can create even better cash flow by being a smart buyer, I want to do it.

Second, I agree with the idea of shooting low often, missing many, but getting a great deal now and then. The philosophy "if they accept your first offer you paid too much" makes a lot of sense as long as you're not unreasonable and you nail one now and then.

So if all other pieces of the puzzle (area, condition, rents, etc.) are okay, is it reasonable to start at 70% or 75%? And is there any rule of thumb that multi-family units are a bit easier to get a bargain?

This is a critical topic, I'm glad it came up.

Let's take a hypothetical situation (and yes, no coincidence, it's the kind of deal I'm looking at!):

Duplex in average condition
Lower-middle price range
Average part of town
No good feel on motivation level of seller
Asking $100,000, value is roughly that

Two questions:
With what you know, what would be your first offer?
Is there a rule of thumb--are multi-family properties easier to bargain on?

Thanks!

Mike:

Yeah, good point. As my mom used to say, my eyes may be bigger than my stomach right now.

I just got off the phone with a lender, and the lowest rate for a 5-unit property I've found so far is 9.25%, even with 20% down. I don't want to put more down than that because I want to look at other opportunities. So your thought of starting smaller is looking better and better.

Thanks.

Great, great stuff guys, as I anticipated, thanks.

Indeed, I feel like I'm working on an REI PhD right now. For all my whining in my first post, this is fun and very educational.

Just looking at 7 or 8 properties with my knowledgeable RE agent was fascinating and a great learning experience, as she walked me through the steps and pointed out what to look for and avoid. By the end of the day, I was taking the steps myself and pointing out this bad staircase and that leaky gutter!

Exactly the same is holding true with finding financing. Based on what I'm learning in here, I can see that the search for good financing is just as important as the search for a good property, and that you have to be patient and informed.

Thanks again, I'll keep you posted on this adventure.

You nailed it, local bank!

Would recommend a national/online bank?

And thanks!

Thought I would share with you how things are going on my first deal. I'll keep it as brief as possible.

I identified a city that has several properties that can generate positive cash flow with just 10% down on multi-family units, and obviously even more with 20% down. In my town, Colorado Springs, such properties are very rare. But in a town south of here it's much easier.

I found a realtor experienced in multi-family properties and we looked at several last weekend. I found a couple that interested me, one in particular that is a 5-unit property.

Boy, what a mess. Properties with more than 4 units have an entirely different set of loan rules and requirements. To make a long story short, even with 20% down, the lowest interest rate I've found so far is 9.5% to 10.5%. The loan is assumable, but that's just too high of a rate.

So back to the drawing board I went. I called a lender about 2-4 unit properties. I had spoken to her before, and she warned me that 5+ unit properties were a pain, and she laughed when I told her about my experience so far.

Then she told me "since you have no history of being a 1-4 family landlord, they will not use the potential income from the tenants to qualify you income-wise. To use the rental income, you must have a two year history on your tax returns as being a landlord. This is critical, because you would have to qualify for both your current house payment and the 4-plex payment based on your current pay."

So now I'm doing a pre-qual that will give me NO credit for rental income. Maybe this is a result of the current mortgage mess, but this is ridiculous. Good down payment, good credit, postive cash flow day one, and I'm STILL getting the runaround.

I'll keep you posted.

:shock: