MLS Access .....now what?

Question

So, I have mls access from a real estate rental agent. She only rents, so she doesnt know anything along the lines of using mls to my advantage, and quite frankly, I dont either. I know it gives homes for sale in the area, but where are the real deals coming from? I can only find homes listed for fmv. How many deals do you guys actually find from mls?

Also, I dont think she uses it very often, because she knows nothing about it. She just came over, and we got on the mls website. Shes my neighbor.

Im looking to wholesale, so what good is mls for that?

Is the real advantage knowing about the homes that are soon to be listed on mls, therefore being able to put in offers before everyone else?

Thanks!
Anthony

Anthony Sulecki · Answer

Why would you rant on me?

Sorry, I  mistook "illegal" with "need a license", both are not true compared to other posts on this forum, which was my original point to begin with. Foreclosures do not need a license, according to others on this forum.

Im not scouting the site for abnormalities, had I been doing that, Id comment on more posts.  Im looking for individuals who know what they are talking about, and thats all.

Also, please dont talk to me like you know me. As far as Im concerned, you are just another guy running his mouth on a forum.

Ryan Webber · Answer

The beauty of the mls access is that you can pull your own comps or CMA rather than calling a realtor.  I find very few of my deals through the mls (about 5%), but my research using the mls directly benefits me EVERY time I make an offer.  I can personally determine an accurate ARV for any property I am looking at directly from sales comps that I research.  I like being the one determining comps and not a realtor.  In my experience, most realtors seem to overestimate ARV more so than not.

Ljay Jones · Answer

Ok, if you feel that you can do a foreclosure in the state of Maryland the same way you can in another state you'll be in for a surprise. But since you feel you know more about foreclosures in Maryland than me be my guest rookie, I have experience in that avenue in RE you don't. The funny part about your whole post is do you even live in Maryland why do you even feel that conversation involved you?

Ljay Jones · Answer

What you first must understand is that RE has MANY streets and avenues in it. Meaning that I deal in pre foreclosures (an avenue in RE) and that is what I do and am good at. Some other avenues are a little foreign to me.   Secondly I never said pre foreclosures are illegal in Maryland, I said you need to have a license. You need a license to drive however if you don’t have one you will go to jail, therefore not making driving illegal but doing it with the proper license can land you in the big house. Now for further clarification it's not a license per se but like I stated in that post there are strict guidelines. For doing pre foreclosures in the state of Maryland.

So in summary Yunghova knows pre foreclosures (and there is a difference between a pre foreclosures and a foreclosure) RE is a very wide industry there are investor who know lots about stuff like lease options/rehab/notes but know nothing about things like sub2's and wholesaling. That does not mean they cannot give advice on what they DO know.

Now for my rant on TonyS you have been a member of this forum since July and like you said yourself you are new and still getting info on RE, like some said on a post in this board anything past a month of studying your stuck and may never get the ball rolling. I understand you maybe frustrated because things aren’t going you way but scouting the site for abnormalities won't get you anywhere in RE, you time will be better used looking for deals not on what you feel are inconsistencies in post.

Ryan Webber · Answer

I would say it is like everyday life.  You meet quite a few people who act like or talk like they are or know something that they are not or do not know.  Or maybe they heard something from someone and are now passing it on as fact.  Most people don't study the actual source, so they only know and speak from hearsay.  I don't have a problem with someone communicating what they have "heard" or "thought" as long as they qualify it as such, but when someone states it as absolute fact or as the "law", it troubles me.  Reminds me of the Salem Witch Trials.

For example, if I were the one posting on the Maryland preforeclosure issue, I would have said, "I have seen on the Internet and different forums that there are some laws in Maryland around contacting preforeclosures.  I don't think it is illegal, but I think you now have to have some kind of license or something, and you have to follow specific procedures.  I AM IGNORANT of the exact law, and I would recommend contacting a qualified attorney in the matter."

It's just is so much less confrontational, and less destructive to just qualify what you know and how you know it.  The issue is that you may be WRONG, and you don't even know it.

The issue with the forum is the same as in life.  Sometimes you have to filter through the mounds of garbage to find the morsel of truth, and the only tool you have to do it with is your own judgment.

Anthony Sulecki · Answer

So, wait a second. Yunghova is new, yet hes telling individuals in another post that pre-foreclosures are illegal in maryland, and taking on the role of  an individual who is "learned" on the subject.

http://forums.biggerpockets.com//viewtopic.php?t=3125
That post is from June also.

With such a sensitive subject as real estate at hand, and so many newbies (such as myself) reading, how can one even accept that what is written in any given post is true? Most posts are argued over, and regurgitated many times, with so much different input one has no idea what to believe.

I love this place, I really do. Being new, I need all the info I can get on the subject, but its a daunting task trying to weed through truth, and whatever else is said in a post, on a forum.

I mean no harm/offense/negative to anyone here, but shouldnt posts in a forum be treated as if we were speaking in everyday life?  We should have to back those posts up.....

Ryan Webber · Answer

Dawave, your exit strategy is always the most important aspect of a deal.  Before you buy, have a thorough plan of what you are going to do with that property, and how it fits into your investment strategy.  I would also recommend having a back up plan if your first one falls apart, and a back up to your back up plan.  Eventually something will go very differently on a deal than you are expecting, and its good to have some ideas of what you will do when it does.

In reference to my personal "magic" formula for rentals, it is 2% of sales price should be the monthly rents, or taking it from the other side, I am looking for a monthly Gross Rent Multiplier (GRM) of 50, or more commonly expressed as an annual GRM of 4.2.  A GRM is an appraisal tool that is found by taking the price divided by the annual income.  I use a monthly GRM to quickly determine if a rental deal makes sense.  I take the monthly rents minus utilities multiplied by 50, and that should be the most I am buying it for.  If it hits my initial monthly GRM calculation then I will take the numbers and crunch them through an actual income/expense statement.

Now whether a monthly GRM of 50 is feasible in your market or not is a whole different issue.  In some markets it just isn't feasible, and in some markets initially it seems unfeasible but the deals really are there for someone hungry enough to find them (as in my market).  Either way using a GRM to prequalify rental deals is a quick and effective way of being efficient in looking for deals.

Now as one of your "take aways" accurately stated, if your primary exit strategy is long term rentals then reaching your rental numbers is definitely more of a priority than buying at a discount.  Not that buying at a discount is a bad thing at all, but it should shift on your priorities list.  And if your rental numbers are aggressive enough, you will naturally be buying at a discount when something hits your numbers.  Everytime I have bought something at my rental numbers, it has been bought at a strong discount from fair market value.

Exit strategies for beginners?  Well, that would depend on a couple different factors.  Starting capital, future capital, time capabilities, financing capabilities, risk tolerance, and investment goals.  If you wanted to go into some of those factors more for your personal situation, then I could probably help focus your strategies more.

As for how I got started and grew.  Starting out my business partner and I had under $10,000 to start with, but we had some capabilities to carry construction costs (via my partner’s small construction company).  I had little future capital capabilities, but I could just about commit 100% of my time.  I had fairly good credit, but didn't have the capital to do conventional financing for many deals.  My initial goals centered around developing my passive income to a point that I could live comfortably ($4,000 per month) without having to work much (less than 40 hours a week) and without having to work for someone else.  My partner and I decided to focus on rehabs to build capital to fund rentals.  We focused my deals through hard money lenders because of our low capital.  We bought a duplex for rental purposes with about a $1,000 out of pocket, and then we started doing rehabs (fix up and resell) to build up capital to fund more rentals.

We sucked at rehabs initially and didn't make much money at all on them, but we learned and began buying more rentals in the meantime.  After a handful of deals (four rehabs and 6 rental units) and about 18 months, we came across an opportunity to buy a 16 unit apartment rehab project.  Initially our exit strategy for the apartment building was to fix it up and hold for rental income.  In the meantime of buying it, I was stumbling into wholesaling houses.  We ended up funding 90% of the apartment rehab with wholesaling houses.  By the time we had completed the apartment project I found out that it was worth twice what we bought it for.  We sold it, and bought 3 more apartment buildings, all the while taking the wholesaling business to a whole new level.  We are now shifting our portfolio towards carrying notes and hard money lending, and we continue to wholesale and rehab houses.

Yunghova, in reference to your question about 80% ARV, depending on your exit strategy, buying at 80% of ARV is normally very risky.  I would recommend buying at 70% of ARV minus repairs unless you have a low-equity exit strategy such as lease optioning, carrying the note, or long term rental.

Dick Green · Answer

The big money is in learning how to minipulate and extract information from the reports off the beaten track....i.e Back on the market or Price Change list.  Here's an example from one of my searches.
http://harlistings.marketlinx.com/SearchDetail/Scripts/PrtBuyFul/PrtBuyFul.asp?prp=mls&AgentId=DCGREEN&EmailKey=15469721

Scroll down to MLS#3648875 (Lake Conroe), and take a look at that property.

Then find the same MLS# on the report (Lake Conroe), in the link below, that I compile a couple of times a month  and notice the original sale price of over 800gs compared to it's current price of $539,000

http://www.houstonhotdeals.com/privatenotes.htm

Ljay Jones · Answer

Ryan Webbern are you saying 80 ARV is bad or impossible? (im new)

N/A N/A · Answer

Apologies to TonyS... didnt mean to hijack your post... I've been meaning to ask this question for a while.

Thanks for the insight, Ryan.  This is my first venture into less than decent (war zone) housing.  To be honest, my first two purchases were closer to guesses than science.  I had no exit strategy in mind and paid asking price for both.  Cashflow is slightly positive ($150/mo x2) and I've learned my lesson to do better next time.  I'm eager to do a better deal.

My take aways from your very helpful post... 
[list]--I had no exit strategy (unless you count buy/hold/pray).
--Because my interest is to buy and hold my focus should be on ROI/cashflow versus simply purchasing at a discount.
--Dont touch war zone properties with a 10ft pole because they're illiquid and draw poor tenants.[/list:u]

My first offer on this these properties was $22k per house, again only because it was my best guess.  I know it depends on market, but how did you come up with $22k for $450/mo?  Is it as simple of 2% of purchase price?  Some funky ROI computation?  Too bad I dont live near your market... I'd be your full-time car washer so I could pick your brains and learn more about this business!

Do you mind discussing exit strategies for a beginner?  I have 9 more yrs before I retire from the military and then hope to do this full time.  My risk tolerance is most suited to buy and hold (I think).  How did you start and grow?

Thanks again.
-dh