All Forum Posts by: Wendell De Guzman

I agree with @Chris Clothier as well.

Educate yourself first.

Don't listen to the sales pitches. To add to what Chris said...

1. Learn @Brandon Turner's House Hacking strategies and definitely read his book on Investing with Little to No Money Down

2. Learn BRRRR strategy (Buy- Renovate-Rent-Refinance-Repeat). By doing this, with limited capital such as $50,000, you can, with the right deals and good lenders, buy 50 properties!

3. Learn how to find GOOD DEALS. I wrote a 6-part series here on BP called "The Science of Finding Deals". Finding good deals is the ONE skill that you need to learn because the process (and therefore the profit) starts with a good deal.

4. Learn about FINANCING or where to get the money to supplement your limited capital. If you have great credit and good W2 income, you can get a business line of credit (usually $50K-$100K) to add to your limited capital. You can then combine that with getting a hard money loan so you need access to a good hard money lender. 

5. Learn RENT TO OWN. It's a way to further grow your capital base. Where can you find a strategy where you can make $50K profit on a $150K (ARV) house? In today's market, you usually don't make that profit on a fix-n-flip (for a comparable house). You do that a few times, and you convert your $50K to $100K in a year or two.

Not sure whether your strategy is really BRRRR (Buy-Renovate-Rent-Refinance-Repeat)

If it is, you will create equity when you buy and renovate the property. 

E.g., buy & fix a house worth $200K for only $120K. Let's say you put down $40K and finance $80K

Then you Rent it and Refinance it at 70% LTV allowing you to pull out your cash (original $40K) and get more cash (say $15K more cash by the time you pay all the closing costs).

By doing this, you now have more cash to buy your next deal (Repeat). In theory, you will not run out of cash to buy deals. In practice, some banks require seasoning (6 months usually) so you have to wait to purchase your next deal or raise more cash so you can do BRRRR with new cash.

If the issue is you can't refinance even while you create the equity, then the issue is you don't have the right lender. Find a portfolio lender to help you. They don't care too much about debt to income as much as conventional lenders do. There's also no limit to how many loans you can get as a result.

 I understand what you mean - I don't tell my tenants I am the owner. It's for privacy, asset protection and in some instances, good for your safety and your family's safety as well.

Telling the tenants you work for the "owner" IS NOT necessarily lying if the "owner" of the property is an LLC or Corporation that you own. You have legal basis for saying you're not the owner.

Having said all of that, just hire a property management company so you don't have to deal with tenants. Life is too short to deal with tenants. The money is in finding good deals and getting a good PM to make money for you.

@Laura Costello, I love rent to own. For single family homes, rent to own is the most profitable strategy specially for beginners.

Pitfalls:

- you need to prescreen the tenant/buyer as you normally would

- you need to have the right contracts (Lease separate from the Option contract)

- you should not give rent credit due to Dodd Frank (you can if you want but if you do enough of these things you need a RMLO - Registered Mortgage Loan Originator)

- you need a tenant/buyer with substantial downpayment ($10K or more) so your house could be vacant longer than a typical house for rent (but you get a better tenant)

Thanks @Dumitru Anton for the mention.

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Have you considered selling it rent to own? You get a lot more buyers and they tend to be not as picky as retail buyers.

 It depends on how your lease is written. In my lease all the tenants are responsible jointly and individually. So if the husband wants out of the lease, he will have to wait until the month is over. He could be out of the house but he is still not out of the lease until the month is over (since you have a M2M). I did this with one of my tenants - the boyfriend left her and when the BF does not pay and the lady can't pay since she relied on the BF for the other half of the lease payment, I had no choice but to get the lady to leave. She was very cooperative and so I didn't have to evict. I could and should have filed an eviction with the BF but decided not to since I had the house rented 2 weeks later.

 The 70% Rule only works in price range of $70K to $200K. Below $70K, you got to use more like 60%. Above $200K, use 75% or even 80%.

The 70% Rule is too aggressive in a down market and too conservative in a rising market. It's a rule regurgitated by one guru after another and being touted in seminars as THE RULE when buying. But, you got to use a spreadsheet like below: (instead of listening to the gurus)

 This is very smart advice.

Joel is a very smart dude. Listen to him.

 Great! Which part of Ohio is this? I hope you did not buy this in a war zone (what I call "F" area). If you did, even if it's "cheap", it could still be an expensive acquisition. My building in a "war zone" experience was an expensive lesson for me. 

I thought the building was so cheap there was no way I could lose money on it. 

Also, I'm an engineer by background so I ran the numbers - several ways and I was very conservative in my projections. I thought I will make money with the deal but sadly, I LOST money!

Here's the lesson: You can turn around an ugly dilapidated building but it's hard, if not impossible to turn around a terrible location/ area.

Here's another lesson: if you have an investment in a war zone, you can make money with it but you got to be super hands on and you almost have to live there or pretty close by. You cannot manage it from a distance and you got to watch that property everyday.

All my lessons are in my podcast interview:

http://Biggerpockets.com/show65