All Forum Posts by: Zach Kidd

Detroit? 

No. 

Just no.

All joking aside, take a look at the big picture. 

32 units is good.  Leveraging your money is excellent.

What can you reasonably do to increase the cash flow?

What can you reasonably do to protect the property long-term?

Who are your prospective tenants? What's the job market? Draw for that area?

What's the likelihood of you getting paid, vs. the potential hassle?

Now, it's local to you, and that's a pretty good thing.

What other deal can you find at or near that price point that has a better return, stability, future potential, etc? 

Would you be better off finding a 10 unit property in Atlanta near transit to a University?

Or a similar vacation rental in Florida? ("Property inspection business trip" = vacation!)

Find alternatives and weigh them. 

If they make your deal look sweeter, great! Pull the trigger.

But if your deal looks a little more sour, put your money elsewhere.

LOL!

@Allen Mock, no, I haven't personally been there. 

I do have an acquaintance - that is his dream almost verbatim, and that was my response.

He's not in real estate, but has his own business, with employees, etc. It could easily go on autopilot. 

He was stressed out, so I asked him the question, 

"What would your 15 year old self smack you for not having done yet in life?"

That was his reply.

Epic. 

@Fiora P.- You're quite welcome! Glad you're getting RDPD - best investment I ever made.

I'll PM you with a different podcast episode that I think you might benefit from. 

Did you know that you can take your retirement savings instruments and use them to buy real estate? This podcast episode covers it really well. 

The tough part is wrapping our brains around the idea of cash flow being the solution. We've all been conditioned otherwise, that's it's a long, tough journey with only the hope of a decent outcome.

Go to college, get a W2 J.O.B., get your 401k, it's the only way. When you retire, that 401k and SS will pay you enough to live.

We never question the "get paid enough to live" portion. That's cash flow, plain and simple. 

If you can develop other means to do that, especially before you hit 83 years old (or whatever it will be), then you are free of all of the other predetermined gyrations.

Best of all, you control your pay. If you want to make more money, buy another property. 

That beats the heck out of lobbying Congress for a better "Cost of Living" raise in Social Security.

Make your money on autopilot, enjoy your life.

Most people have been spoon fed a way of thinking. 

Go to school, get good grades, go to college, get a good job when you graduate, save for retirement, work 40 years for a company, you'll be okay.

You're challenging that.  Not just in conversation, but by your actions too.

Some people are searching for the greater truth. You have to learn to spot them, and engage only them. I have generally found younger people still have their dreams somewhat intact, so they are easier to engage.

Some people despise those that do. They will fight you tooth and nail to prove you are wrong. Avoid them.

I'll talk to anyone who isn't completely stuck.  And I'm not gentle.

My favorite lie to dispel - "Money doesn't grow on trees."  

Of course it does, and I'm going to have you prove it to yourself.  

Have you ever been to a grocery store that had a "Produce" section? Paid for a banana? 

And then I give them a minute to process it. 

I love doing that at the grocery store, to the checkout crew. Minimum wage, generally young, smart, but unsure of life's path. 

Once they get it, it's a simple matter to convert that to "If you want your money to grow on trees too, then buy an orchard. Or rental properties, or create an online business, etc."

Take that income, go to Australia, drink beer, get in a barfight, chase a kangaroo, wrestle a croc. Don't waste your opportunity for life just trying to make a living.

I'm positively evangelical about it, lol!

Yes on all of the above answers.

If you haven't yet (and if not, why haven't you!?!?!), read Rich Dad Poor Dad.  Follow-up with the section of the 4 Hour Work Week where he discusses Dreamlining.

I'll sum up here:  Buy cash-flowing assets, use them to pay for your liabilities. In your case, invest in rental properties, use that cash flow to pay for your home improvements. 

Focus on maximizing your leverage (smaller down payment amounts) and buying as much property as you can for X amount.  

I can't remember the specifics of this example at the moment, but with $100k, you can buy one house outright, get $1000 monthly cash flow. That sounds good, but the vacancy is an all-or-nothing situation. Losing one tenant takes you completely out of any cash flow.

Take that same $100k, split 5 ways, buy 5 $100k properties (leverage). After paying the mortgages (debt service) each unit only produces $300 / month cash flow, but your overall cash flow is $1500 a month.  Losing one tenant out of 5 is manageable.

Then take your cash flow and make your home repairs and improvements. After the improvements, you'll still have that $1500 / month coming in. 

There are other important considerations (minimizing taxes, insulation through a corporation, etc.), but most critical is understanding the overall strategy.

I also want to address using your real estate as a "retirement investment tool, rather than monthly income". 

That sounds like you are a bit stuck in "traditional" thinking, and I want to disrupt that before you throw the baby out with the bath water. 

Retirement means you no longer need to work. That your savings, investments, Social Security, etc., hopefully pay you at least as much as you earned in a W2 job.  

Take my above example, total cash flow of $1500 / month.  

Simply do that ten times.

You will have $15,000 / month income.  Taxed at a much lower rate than W2. 

Could you live comfortably off that? I don't know, but I'm guessing so.

If that scenario is more than your W2 status, guess what?  

You're done. 

You only go to work if you love it or are bored out of your mind. 

You can hire a housekeeper and bounce to Thailand for 6 months and not care.

That's better than any retirement plan I've ever been pitched by a "professional".

@John McCormack- You're quite welcome. Glad you found it even remotely valuable. 

Yes, I'm a Realtor® in Florida. I'm also an experienced Community Association Manager (condo & HOA mgt). Okay, that's out of the way.

Yes, you can do a lot of this yourself. For Sale By Owners (FSBOs) are a good example. 

Like any other industry, though, professionals get paid for a reason. 

For example, how many FSBOs sit on the market over 180 days? Tons.  Represented sales? Substantially under that.  Factor just the carrying costs alone, and my services are more than paid for. 

I like to give examples when I'm talking to people (car repair, legal, etc.), but simply put, a true knowledgeable professional will bring more value to the transaction than you will pay for. Some are great, some aren't quite so stellar. Mileage varies in any industry, right? But a solid professional who understands and works with you is absolutely invaluable.

I have to mention paperwork & research. You may have done a lot of legwork. Good. But if it lands in my lap, rest assured that I have to double-check it. 

I have to do that exact same work regardless.

The specifics can make or break a deal.  And professionals see a lot of paperwork and a wide variety of deals, all of which we can draw on to bring a good scenario to you. 

Imagine if all you knew about were conventional loans? How many options would you be missing out on?

I mentioned that I'm a CAM.  I have seen some absolutely terrifying scenarios, firsthand. 

I recently checked out a house in an HOA. Nice place, really good location, good price point, face value numbers (including monthly assessment amount) it could be a decent investment for cash flow.

Until you dig properly. 

Rentals are limited by percentage (e.g. only 10% of the homes can be rented out at the same time), you must have lived in the house for at least 3 years, minimum rental period is 1 year, and your potential renters must pay a $2500 application fee up front, then be interviewed by the Board of Directors before they can be approved to rent.

That's not for your benefit. Only the HOA's. You would still need to do all of your standard 1st/Last/Sec Dep/tenant screening, etc.

And most people would completely miss it, because they don't know where or how to look for it.

I heard in an episode of different real estate heavy investing podcast (not BP!) where a similar topic was discussed. 

The host recommended not only hiring an agent, but he insisted on paying that agent an extra 1% more commission than the agent intended to charge. The audience was shocked.

He replied that he was making a very valuable connection, and taking great care of that connection. The payoff (for him) was that he knows when that agent comes across the next potential deal, he's going to be at the top of that agent's call list. 

Food for thought. 

Ouch - sorry.

You didn't say which state the property is located in, but I would venture a guess that a contractor could put a lien on the property based on materials delivered and work done. 

If that's the case, as a matter of normal business practice they should have filed it, especially on a $7500 job.

If they haven't done so yet, and with the information you have already provided, I would be very comfortable calling in a lawyer and letting said lawyer off their leash, so-to-speak.

In the meantime, and with your attorney's blessing, get another contractor out there pronto. Personally, I would go with a national brand known for mold remediation (ServPro, etc.). 

Bigger price tag, sure, probably, but worth the peace of mind. Getting a second opinion from a highly reputable national brand can only strengthen your position, even if the situation is exactly as your original contractor stated. 

Kudos for doing the right thing, getting your tenants out ASAP, doing your homework, etc.

Standard disclaimer, I'm not an attorney, certainly not in that (unknown) State, I didn't even stay at a Holiday Inn Express last night, etc.

200+ DOM?!? 

Yes, you can do a breakdown / justification of your offer.  It's logical.

The problem is that it's logical.  Non-investor types (Sellers included) typically aren't logical. 

People are emotional. And generally in residential real estate, you will always have deal with the other person's emotions.  

This is an issue about the emotional bond to the house and the price point.

That's the point at which you are breaking that emotional bond. It takes time for a seller to digest, then they are primed for a different offer. 

They won't take yours, though, because you were the first one to tell them that their baby was ugly.

So, knowing that, you can develop strategies to adapt to the situation.

Simply be the second or third in-line. 

If at all possible, you want two walk-throughs. First one without the owner (standard showing, take your repair notes, etc.). Go do your homework.  

Then a second one. This time, you want the owner present, with the goal of making the "stickable offer" an in-person, on-property, verbal situation, followed immediately with written contract. 

Here's the script, feel free to send me a monthly royalty.

At 200 DOM, you should still be able to wrap it up quickly, and for a price that you can live with.  Best of all, the seller will sing your praises.

First, let's examine your initial post.  Although the deal makes sense financially (theoretically, at least), you clearly aren't comfortable with the situation.  At all.  Re-read what you posted.  95% of it isn't about the money.

Secondly, (I love this technique), forget for a moment any other piece of advice you've seen.  You just got a call from your best friend or family member, and he / she has the exact same deal. 

What would you recommend to them?

More than anything, I think you just need a cooling off period.  Right now, the carrot looks pretty darn good, despite (or even because of) the repeated whips of the stick.  

I think if you take a break and come back to it fresh, you'll figure out for yourself that you don't need to get whipped in order to eat. 

Notice that most of this is about your psychology?  That's what matters here.  

Break it down:

What is the absolute best case scenario? (Done deal, no drama, cash flow of $250 / month?)

On a scale of 1-10, how likely is the best possible scenario?  

What is the absolute worst case scenario? (Tied up in litigation, bunch of public beratement, no property, no cash flow, etc.)

On a scale of 1-10, how likely is the worst possible scenario?

If you got the best possible results, would it be worth the worst case scenario? 

I'm guessing "No". 

And, more importantly, this isn't the only deal in town.  I live here in St. Petersburg, and I'm a Realtor® (insert standard disclaimer about I'm not an attorney, etc.).  

Don't worry about the seller's feelings, situation, or any other drama.  Do what's right for you.

Also, I get the distinct impression that the seller may just be a manipulative person, not necessarily inclined to sell, but she is simply getting her jollies. 

If you can't tell by now, (acting as an investor) I would drop the deal in a cold minute.  I would be unapologetic about it, too.  And I'd sleep like a baby.

And you'd probably be doing all of the agents involved a rather large favor.