HOW DO YOU GUYS DO IT ? IS IT A TRADE SECRET OR WHAT ?

Question

I have been looking around for a duplex or single family resident that has + cash flow in Orange County or L.A County but I cant seem to find anything..When I'm lucky I can find one that the rent comes close to mortgage payment with impounded taxes...Once you add the 50 percent rule for expensed then forget it its very negative..We look through the MLS and we cant find anything...Is it time to consider auctions at the county court house ? Do you use bird dogs ? Put down huge down payments? Any suggestions ?

Has anyone had any luck with the "will buy your home " signs ?

Rick

Has anyone had any luck with the "will buy your home " signs ?

Rick

RICARDO RUIZ · Answer

Thanks for the good advise...

morentsee:

I'll start doing more checking in those areas

Michael Rossi · Answer

For the purposes of calculating the cash flow, the mortgage payment is only principal and interest.  Taxes and insurance are part of the operating expenses.

Mike

Christian Morency · Answer

Theruizfamily,  Your right most realitors would buy a great deal for theirselves but not all. The problem is most of them are after the listings and comission. They will get that by listing and sellingat the highest possible value.  There are a few realtors that want to work with investors, understand what we look for and can spot a deal.

Networking is great. Talk to your hirdresser, cashier, neighbors etc.  I have found that almost everyone knows someone who wants to sell, is getting transfered, is sick of tenants etc. You never know who of these is a motivated seller before hand.  Try it, tell everyone your are looking to buy a house, duplex etc, It costs you nothing to be friendly but can net you some great results. Give them your number and see what happens.

Have you checked the Corona, Norco area etc. Orange County has always been high. Best deals might be in Garden Grove and Santa Ana.

Account Closed · Answer

Mike is right. I used to market (and still do) for non listed deals, but the best ones come to me via referral or just talking to people.

Mike, need a loan for that 30k?  Ha....

Andrew B. · Answer

I just look at it as

Split your gross rents in half and thats what you have to pay the mortgage, the rest is cashflow

RICARDO RUIZ · Answer

Yesssss,

That's the way to go..It looks like it's about networking and always being open and ready to ponce on a deal.  I guess that makes alot of sense if its a great deal the real estate agent who put it on the MLS would buy the property...

Just to confirm

mortgage(payment+interest+taxes) - expenses(using the 50 % rule )= cash flow

Kimberly Anway-Morency · Answer

Way to go Mike!  Thats also how we find most of are deals.

Scott Ficek · Answer

Mike you are amazing!  I want a $30k 6-plex!

Scott Ficek · Answer

How are you calculating your cash flow numbers?

Michael Rossi · Answer

Rick,

Properties that cash flow are hard to find in EVERY market.  It is almost certainly harder in the previous bubble areas (like a lot of California).  Almost all the deals you will find on the MLS are retail deals and will not cash flow.

There are many ways to find great deals.  You named a couple of them.  Foreclosure auctions and using birddogs are two methods.  Estate auctions, putting an ad in the newspaper, handing out business cards, placing bandit signs, etc. also can be effective.  I find most of my deals by simply talking to people.

A good example is what happened to me yesterday.  One of my buildings is a 6-unit apartment building.  I was at the building picking up a couple of rents and fixing a light.  One section of my building needs to have the shingles replaced and I will be using a contractor to do that job (due to the height of the roof).  I thought I had a contractor lined up, but he has suddenly disappeared.  As I was leaving my building, there was a roofing contractor working on the house next door.  I went over to talk to the contractor about my roof and the homeowner was also there.  We began talking about tenants because the contractor also had a rental.  I made a comment about the building across the street that has had some terrible tenants in it recently.  As it turns out, the homeowner knew the owner of that building and she said that he tried to sell the building to her for $30,000.  THIS IS A SIX UNIT BUILDING and should have rents of about $2,300 per month!

When I got home, I called the owner and he does want to sell it for $30,000.  He has had a string of TERRIBLE tenants.  His daughter got involved in drugs and he spent a bunch of money trying to help her get straight.  He is depressed about the whole situation and just wants to get rid of it.

He will show it to me at the beginning of the week and I will probably buy it on the spot!  The retail value of this building is about $220,000!  A great deal would be $100,000.  For $30,000 IT IS A STEAL!

This is how I get most of my deals - by getting out of the house and talking to people.  I buy a lot of properties from disgruntled landlords.  Unless you meet a lot of landlords, you'll never even hear about these deals.  A good place to start is your local REIA.  Join your REIA (real estate investors association) and meet the other investors in your area.  Talk to birddogs, wholesalers, and let everyone know that you are buying property at the right price.

Good Luck,

Mike