All Forum Posts by: Wendell De Guzman

 You're funny Rick.

I see so many newbies try wholesaling and fail because they are not willing to work it until it works. :-)

@Brian J Peterson, it's too much if the rehab + purchase price is such that there is little to NO profit left in the deal. My criteria is: the ROI has to be 20% or higher (if I am using all cash; 80% or higher if I am using a hard money loan) or else, I will not do the deal.

Last week, I posted this:

https://www.biggerpockets.com/forums/12/topics/332...

The bottomline is: to be able to compete in this HOT market, you got to find OFF-market deals. How do you find those? There are many ways - and in the posting above, I shared what's working right now...at least for me.

In this posting, I want to discuss the SECOND way to have "too many deals".

Here it is:

LINE UP MULTIPLE SOURCES OF FUNDING - and you have to line these up way before you have deals. Here are some of these funding sources:

1. Your own cash

2. Business line of credit

3. Hard money lenders

4. Conventional mortgage

5. Private lenders

6. Partners

7. Credit partners

8. Transactional funding

9. Portfolio lenders

10. Specialty lenders

 Having a lot of cash can help you close deals faster and depending on the situation of the seller, you can negotiate a bigger discount when you're buying all cash. However, if you want to have "too many deals", having cash is not enough.

To beef up or supplement your cash, you can get a BUSINESS LINE OF CREDIT. You have to have an entity set up (an LLC, or a Corp). To qualify, you need to have GREAT credit (720 and above for one BLOC provider I work with). You can get BLOCs that are credit-card based (easier to qualify but costlier to cash) or check-based (meaning, you write checks). To get the latter, it's better you start a relationship with a local bank. I will talk more about funding in my subsequent posts but what about you:

What FUNDING source(s) do you find most helpful in today's market to get "too many deals"?

Brock, 

There are "many ways to skin a cat" and so there are many ways to do direct mail. You can target different lists of people. You have out of state landlords, expired listings, probate lists, preforeclosure lists, code violations, etc. Listen to some of the podcasts here on BP about real estate investors who are big proponents of direct mail. You can use the search button above and you will get tons of direct mail resources.

Or since your budget is limited, you can go to a community which is older (houses built in 1980s or earlier) and just do driving for dollars. Look for a dilapidated house in the neighborhood. Then search the public records on who the owner is and send them a yellow handwritten letter. 

With direct mail, you need to send them 7 (or more) letters per list and it's a numbers game. If you don't have a budget to send out 1,000 letters - sent 7 times to the same list (meaning, you have to have the budget to send out 7,000 letters or 7000 postcards), I don't recommend it. The typical response rate for most real estate related direct mail lists is 1-3%. So if you send out 1,000 letters, you will get 10-30 people who will respond. Depending on how well you negotiate, you will typically put under contract 1-2 deals out of those responses. 

 Hosanna,

(1) You can outsource it to bookkeeper only company for $65/month.

(2) You can hire a local /bookkeeper at $20+ per hour

(3) You can hire a full time accountant at $40K+/year

or you can outsource it to (4) a full service accounting firm at $2K/month+

I've done 1-3 and will also do 4. Given you have 22 tenants and 4 properties, 1 or 2 might work for you.

I do a lot of lease options. We have 9 that we're closing this month or until the first week of August. Just to clarify - because as @Brian Gibbons will say: there are many ways/ variations of lease options. Are you talking about (1) "sandwhich lease options", or are you (2) assigning your lease option contract or are you (3) actually buying the property and selling them on a rent to own basis.

I've done all 3 but focus mainly on #3. In fact, we have 9 properties we're buying and closing in the next 30 days. If you're in Chicago, I will do #3 with you but not at a 50-50 split because finding the deal does not justify me giving up 50% of the profits. However, if it's 1 and 2 you're after, I can help you out and do 50-50.

Let me know.

David, why not have BOTH - lending and investing in properties?

I do BOTH.

Why?

Investing in real estate (MFs and SFRs) is good for cashflow, depreciation, appreciation and loan paydown. Downside with real estate is you have to actively manage it, you need to get a loan on it (hence more liability) and there are more hassles (you have to deal with contractors, tenants, etc). 

Private lending on the other hand is more passive and the YIELD is (generally) higher than real estate investing. Taxes can be reduced to zero if you have a Self Directed Roth IRA but you can only get the money when you're retirement age.

You can invest passively in real estate by having an active partner or you can invest in turnkey but the returns will be even less than private lending.

If you can do both - do both. You get higher income as a result of lending and you get appreciation and equity build up over time through buying & renting properties.

At the end of the day, only YOU can decide for yourself. You need to answer questions like:

- how much time can you devote?
- do you want to actively participate or just be passive?
- what's your investing horizon?
- what's your risk tolerance?
- is your credit, income and debt to income good enough to get loans/mortgages?

If you like real estate investing, which exit strategy do you like?

Wholesaling? Rehabbing? Landlording?

Which part of the real estate investing process do you value more or gives you more excitement? Is it acquisition or the process of buying a house? is it the rehabbing or improving a property? is it the sales process? is it property management?

Also, what's an ideal day for you?

How do you think you can get to that ideal day?

Based on answers to these questions, you can define what motivates you more.

The old adage is true: money is good but it does not buy you happiness and I will add that it does buy you fulfillment either. I am not saying you don't need money to be happy - you definitely do. But, there's more to life than money and if money is your only motivator, you got to dig deeper because the really awesome accomplishments throughout human history is driven not just by money.

SIGNIFICANCE...

Doing something cool through creativity and invention...

Building something greater than yourself...

Helping others...

Leaving a LEGACY...

These are some of those motivators.

If you don't have any budget for direct mail, there are many ways to find deals without spending any money. Here's a powerful way that most newbies overlook and all the gurus don't talk about because it requires WORK that most people don't want to do: TALK TO "REAL ESTATE PEOPLE". What do I mean by this? Talk to people who are already in the business of real estate about what you do and what you're looking for.

For example, you can talk to eviction attorneys. You can ask him if he has clients who are considering selling their properties they are evicting the tenants on. If he has, he can refer you to his clients as someone who will buy their properties. You can speak with probate attorneys, foreclosure defense attorneys and real estate attorneys. These attorneys are already in the field and will have access to off-market properties.

You can also speak with landlords. Here's a good website - GOSection8.com. It contains properties being marketed for rent for section 8 tenants. You can call and speak to section 8 landlords and ask them if they are open to selling their properties. Some will, some won't, so what...someone's waiting. Out of 50 landlords you speak, 5 might be willing to sell because they're sick and tired of dealing with section 8 tenants. 

If you don't have any money for marketing, you got to do some work. You got to HUSTLE.

What the gurus promise of getting results with no work or no money (other than the money you pay them) is fools gold and does not exist.

Then why not partner with someone with high net worth? What I teach newbie investors during our JV & Funding Summit is whatever you lack, someone else has it. If you don't have the cash, someone else has the cash so JV with that person. If you don't have good credit, you can still borrow money from a bank by doing a JV with one who has great credit. If you don't have a good deal, someone else has it. etc.