Notes from today’s David Green Long Distance REI Webinar

[Ernesto Hernandez]

Not edited, expect from typos. Enjoy. 

David Greene

Hard to save 30 to 40k each house so he started to BRRRR

Instead of 2-3 houses a year, he was doing about 10. He thinks BRRR plus out of state works wonders. Learn while you invest and don't run out of money.

2 deals in 2017. One went good but not the other.

How he chooses markets:

No such thing as the BEST market.

They is knowing how to build a good team.

He looks for a target rich environment. Looks for:

1. Can add equity
2. Cash Flow
3. No headaches. Good areas.

Avoid war zones. Everyone on his team should know that.

For flipping, stay away from Cleveland. Need high demand and high prices. Texas, Portland.

The other spectrum is Cash Flow. He wants a good price to rent ratio. The Midwest is a good place. 1% properties at minimum.

The quickest and easiest way is to look at an area, look at average house cost and then look at rentomater and see if you are in a 1% market, not an area for buy and hold.

The coasts are better for flipping, buy and hold would be in the Midwest and parts of the South.

Tacoma, WA getting close to 1% but not yet.

The more expensive a property gets, the less you can stick to the 1% rule. Apartments might cash flow really good and not be at 1%. You start looking at cap rates and COC.

1% also doesn’t guarantee that it’s a good deal because if taxes are super high, it will hurt your cash flow.

When looking for a Market, this is a general rule.

Usually people with large portfolios have them in the Midwest. Big flips happen on the coast.

Core 4:

Others tell you to be an expert yourself, he suggests you leverage the knowledge other people are already experts at.

1. Deal Finder
2. Lender
3. Property Manager
4. Contractor

These 4 will help you find the other people you may need like a plumber or roofer.

He looks for people that are already investing or are working with experts already. Relationships.

Questions: If looking at a cash flow area, whats the best way to narrow down possible neighborhoods. Has a competitive advantage section in the book.

Does the 1% rule take into account the all in price? For Cash Flow, what you care about is how much of your money you put in. Still consider highest and best use for that property.

How accurate is Rentometer? He finds it to be extremely accurate. Property Manager will ultimately be the best person.

Start with your price range, reach out to brokers, who will put you in touch with an agent and see how good of a network they have. If you expect professionalism, make sure you display it in return and don’t be a tire kicker.

Deal 1:

He had a lender in Jacksonville so he called Keller WIlliams in Jacksonville and asked to speak to a top producer.

There's a REA in Northern Fla named Tracie who has a ton of access to REO's. He bought a house from her and paid a little more just to get in her good graces. Bought a second and still paid a little more. Made it clear to her that he was doing so because he wanted to form a relationship. What he saved on the 3rd one made up more than what he overpaid on first 2.

Got a good house in a great neighborhood but it needed a lot of work.

Paid 76k. 3/1. For SFH you want at least 3/2. If you find 2/1, look into how you can add one of each. Possible with 1200 sq feet or above.

He was getting pics and videos from his contractors.

This house had enough space to add another bathroom, just a shower but that’s ok.

Shows a very thorough walk through of the house. His goal was to add a bed and bath. Appraised at 135. Appraisers can be a little more conservative with numbers for rental properties. That was his ARV.

He requires contractors itemize every single job and how much each task will take. You can then decide if you want something done, or if you want to make changes. His contractor takes a picture of each task before and why he suggests a specific update.

The electrical panel needed to be replaced, but it was an advantage to him because he could pay cash for a house others can’t finance.

His bid was $30. So now he’s at 106k all in. Appraisal came in at 135 because he made it a 4/2.

Got 75% LTV, so he can finance 101. He left $4750 in the house.

Rent is 1195 a month. Cash flows almost $600 a month.

His ROI is 134%. All the cash he couldn't get back, he will recover in under a year.

Added a bathroom for just 3k.

the contractor is an investor also, easier to understand each other.

In the end he basically got a free house. Cash flow is $530 a month.

Questions: Did David bring the contractor before or after? He protects his people. Got him involved until he had it under contract. Once it’s under contract, get a write up. If you have a really good relationship, might get them to go out before you close, but you’re risking wasting their time.

Have to ask yourself how you could be doing better.

This house took longer than normal because the bathroom, 2 month rehab, 30 days before he refi’d because of the appraisal, 14 day escrow. 3.5 months total.

Used laminate type flooring, a step down, hard vinyl. Allure brand.

Don’t assume all colors are popular, check some recent rehab listings and see what is selling.

His cash flow of $530 does not include money for reserves. He’s got a decent back up now so he worries less. Suggests 6 month reserve for each property. If the house needs a new roof, do it before the appraisal so it’s included and you get 75% of that back.

You get more money in full rehabs and you also avoid CapEx for a while.

Bought the house with his own money. Suggest you avoid hard money, get private money. Lower expectations on returns.

6-9% will be a good deal if the bank gives them half a percent.

Be able to articulate that investment and you’ll convince private lenders.

Deal triangle. Hustle, knowledge, money. You need to have 2, and you need to find. The 3rd.

Most banks want 6 month seasoning, others will do 4 and you need to ask them ahead of time.

Becomes less of an issue with portfolio and commercial.

Deal 2:

Agent found HIM on BP because of how active he was.

2/1. Bought it for 35k. Almost 2%.

Rents for $800, expenses $539. Cash flow $256, $3072. Needed $11,600 in work.

He got the bank to replace the roof. House had sat for over 100 days.

Can’t get a loan under 50k period.

Was going to offer 30k, but waited for them to commit to the roof and paid 35k. Once rehabbed, it appraised for 85k. Was all in at about 46k.

Upgrade Hacking, adding upgrades that add more value than they cost. He likes rainfall shower heads if it’s easy and probably not for a rental.

Costs $250 and makes it look amazing.

A small house with beautiful floors might be worth it if it’s only 1000 sq ft, 3000 sq ft not so much.

All in for $46,600. Appraised at 85k.

63.75 k loan. Pulled out $17k more than what he paid all in.

Renting for $800.

This is why you have to learn to work with contractors, and take on big jobs.

The more you buy, the better your rep, the easier it gets, the faster you build wealth.

Look for houses that have something wrong with them.

3 types of distress:

Market

Personal

Physical

He has an LLC for each state. After a certain amount of properties he may set up others.

His first 7 houses were from wholesalers in Florida.

Train yourself to be able to explain what value you bring to a team. I can do A, B and C really good and will do it for you.

[David Greene]

@Jay Hinrichs

I do buy 30k properties in Jax.

but their ARV is 85k.

What you spend on a property is not what makes it a bad property. The area it's in makes it a bad property. While most 30k houses are typically in the "hood", I wouldn't consider this a 30k property. I'd consider this an 85k property, which is not probably closer to a 95k property.

i also did buy 7 houses in my first year in that area. i bought about 10 the next year, giving me 17 houses as a "sample size". But I'm not just using my own experience. i also coach people who buy there and know many other investors doing the same thing. Nobody is pretending to be an expert after buying 7 homes. It sounds like you're basing your arguments off comments made by people who attended the webinar, not based on something that was actually said. At least so far.

Regarding getting "top agents" to work with "one off buyers", i address that in the book too.

One of my best strategies is to find the new buyer's agents on a top agents team, who WILL work with "one off" investors. Not only are you usually guaranteed to get a talented, top notch worker, but you also get access to the big agent's resources as his or her buyers agent is likely to have access to the big agent. It's a way of getting the best of both worlds.

And, for anybody who would love to work with a top producing agent, even if their a "one off" buyer, please let me know and i'll introduce you to some.

Low end OOS is a big risk. So is low end local. Low end ANYWHERE is a big risk. Not one point in the big do I ever recommend or endorse going into low end areas you don't understand, and i actually advice against this when I discuss factoring in the "headache" factor.

During the webinar I mentioned by three basic criteria for buying a property, at the most basic level.

1. It has equity in the deal

2. It cash flows

3. It's not in a war zone.