Making some progress! Tell me how to improve

[Julius Dixon]

Now don’t get me wrong – I’m not under even the slightest impression that anyone here is keeping tabs, or frankly even cares about my progress. That in mind, it’s still helpful for me to jot down my thoughts as I begin investing, and hopefully by sharing where I am, others will be able to add their input and offer some guidance based off of their experiences. You’ll probably get to the end of these paragraphs and think to yourself – “HA! Didn’t ask..” – on the other hand, you might be able to direct my efforts. That’s what I’m looking for here.

My short term goals are to have my first investment property under management by August of 2017 (medium term is to have 1,000 units managed by 2023, but we'll get to that one soon haha). I can't say that I'm totally sure of what I'm looking for, but I think that some of my criteria are becoming more clear as I spend more time working on REI every day. As I've mentioned in previous threads, I'm currently located in NYC in a job that requires me to be physically in my office from ~9:30am – roughly 1am every day. There's down time during the day, but it's usually about 15minutes here and there that I'm able to spend reading REI books or listening to podcasts, but I'm extremely limited as far as being able to schedule property visits and things that require me to be physically away from my desk.

At first I thought I’d try to get a moderate, 4 unit rental property, but I wasn’t sure of the location I wanted to invest in. I considered the outer boroughs of New York, San Diego where I have a friend who is interested investing, and Chicago where my family lives. After a lot of thought, I decided on Chicago where I grew up and where I’m pretty intimately familiar with the different neighborhoods and how they’ve changed over time. I thought about it for a while and while I think a 4 unit is playing at my level as an inexperienced investor, I think I can take on something bigger. If I found a deal, I think I can handle a 20+ units, but time will tell on this one.

I want to find an off market property by sending mailers to out of state property owners. A huge bottleneck in me sending mailers was that it took me so long to decide that I absolutely, without exception, want to invest in Chicago. I didn’t want to start sending mailers to people where I wasn’t going to invest. This weekend though, I bought a list on listsource which was supposed to be out of state property owners. I screwed it up! The settings I put in were

Property type: Apartment, Duplex, Triplex, SFR – Note that duplex and triplex returned no results but I still left them in there. Also, I don't think I want to get a SFR if I'm trying to get a multi unit property, but there were really no search criteria for what I was looking for

Location: I put in 60612 + 2 miles – I’ve seen on bigger pockets that people say put in the full city, but I don’t know if this piece of advice applies to huge cities like Chicago. Also, if anyone is local I’d love some input on where I selected. This zip code has some EXTREMELY rough spots, but there are also other parts which have gone through very rapid gentrification.

Equity: I did 35-100% - Should I have done higher equity?

Owner type: Non owner occupied – This was where I seriously SCREWED UP because I didn’t select “out of state” owner occupied, so I just got a bunch of addresses of people who live literally down the block and seem to have a second property. Dumb. So I think this mistake probably caused me to waste the $55 I spent on the list, as these people will clearly be less motivated to sell than out of state owners

All in all, this list returned 211 addresses. I was using Google Earth to get my bearings on where each was and what they looked like, and not many were really that great to be honest. Some in the rough neighborhoods, most were not the multi units that I was looking for, etc etc etc. I bet of this list I have about 30 actual usable addresses tops, and of those there will probably be no motivated sellers, and I saw literally none that were 10+ unit buildings.

Financing

I got advice from a family member to reach out to a bank and see what number they would “pre-qualify” me for on a loan. She’s super knowledgeable but not necessarily a property investor. Would this have been the first step that you guys would have taken as far as securing funds? I think they’re going to come back to me and either give me a number that will be way too low, or say that I am unqualified because my credit history is new as I just graduated from college in June and got my first credit card then (I had a completely blank credit history). I’ve been doing everything I can to keep the credit history clean, but I don’t know how to accelerate building credit in any way besides not investing which I am not fond of. I actually work in banking, so I have an appointment to speak with a mortgage lender within the commercial side of our bank over the phone tomorrow (they said they had deals for employees lol), but I’m not optimistic. I also honestly think that if I find a deal I’ll be able to get funding from within my network (maybe I'm overestimating myself but I actually think I could swing like $2m or so through family and friends - is this crazy??? I have no idea what people do...) if I can offer an attractive enough investment, but I think I’ll have to figure out a better pipeline than the crappy list from above.

Negotiation

Because I posted on this site once before, I connected with @joseflores who super generously offered me his script for what to say when you’re in person with a seller and how to get them to close. It’s really cool that someone I’d never met read my post and offered me a resource like that without me asking, and I seriously appreciate it! If anyone else has some other alternate scripts, that’d be helpful too. For example, maybe some important things to put on my voicemail to get sellers to give me the information I will need. Another script for what to say when I have someone on the phone. Will need another script for when I am in person that is more detailed insofar as all of the due diligence items that I will need to collect. Also, if anyone has any resources that they can share for estimating necessary repairs, that would be tiiiiight. I’m obviously putting all of this info together myself, but if anyone already has access to the work, that would save me time. Just thinking a bit in advance, what professional people (i.e. lawyers, contractors, blah blah) should I have already reached out to before I start making offers? Say hypothetically I made an offer - does anyone have a contract template that would work? What if I find an amazing deal but actually can't secure financing but the deal shouldn't be passed up on - is this a situation when you'd put a subject to clause in a contract and try to wholesale the deal to a friend who is better positioned to act?

Also, I’m trying to be diligent in analyzing the data about my mailer's responses. I have a spreadsheet that will list a couple things, and I want to vary it up to see what combination will produce the most optimal results. Some things include

- Letter type – handwritten letter in the mail (“Hey, I’m Julius and I want to buy your property, please call me at [number]”; more formal, typed letter, any other variations people think I should include

- Address of property

- Address of owner

- Date sent (anybody know how often I should send?)

- Response

- Contact info of response

- Any other criteria??

Anybody know of any good combinations that work for them, or does anybody have any resources that I can read about effective direct mail marketing?

I tried to set up a google voice to take the calls and get a message but I seriously failed at that. I couldn’t change my greeting and online instructions didn’t match what was present on my computer screen. Very frustrating.

To conclude, I have a few shout-outs to some of the cool people I’ve met on BP – thanks so much to @brianjordan for offering to help me out with building my list from listsource, thanks again to @joseflores for sending over the initial negotiation script, and thanks to @abelcuriel for reaching out and trying to get me on the phone; I haven't forgotten, work has just been busy and we'll be in touch soon!

I'm seriously enjoying this site and the resource it's provided to me. Thanks to all on here, and I hope to soon be able to pay forward the kindness people have already shown me