All Forum Posts by: Marcus Auerbach

Luck favors the prepared! Congratulations Krista!

Very broad question, not sure if I can give you the answer you are loking for. Typically not without collateral, like your home. If you have equity in your home you can get a hone equity line of credit (HELOC) you can use as a down payment. If that's not an option you can ask family or friends to partner or lend to you.

Craigslist used to be my number one place to market and also do research, but when you get into higher rents postlets.com seems to work better. Postlets.com get pushed out on many platforms i.e. zillow

I think it should be called the "mostofthetimethirtytoseventypercentkindarule".

@Skip Gilliam I sense a potentially dangerous combination of circumstances: you have quite a bit of accessible funds, a lot of motivation to get into RE, but not very much lexperience. Ironically having money when you start out in RE is certainly helpful, but also a little bit dangerous, because it allows you to overpay. I have seen many people do that and to some extend it happened to me as well. Having money to invest allows you to use money to overcome obstacles. Money fixes almost everything in real estate. It fixes a bad deal, a leaking roof and foundation repairs you did not really account for, it fixes bad tenants and it allows you to out-spend your competition in a compatitive market instead of outsmarting them. It is very tempting when you start out to use money to compensate for skills you still have to aquire.

One of the golden rules is: you make money when you buy. When you look at the different ways of how you can make money in real estate (basically collecting rent, rehabbing, selling) non of them come close to the potential of buying right. To put this in perspective on an average single family you can make maybe $4000 annually in rent, you can invest 30k to fix it up and maybe increase the value by 40k (if you know what you are doing, typically renovations have a slightly negative return on investment). If you stage the property right maybe you can get $3000 more than fair market value. Those are all relativley small numbers compared to buying a property at a 25% discount - $25.000 in equity on a $100.000 property.

My first property was a duplex and I thought I was getting a good deal, because it was a short sale. When I look at the numbers today I would say I paid almost full retail (so I missed out on 25% equity). Despite the fact that my planning for renovations did not go much further than making it rent ready for the first tenants (in the meantime I have replaced the entire plumbing system and redid all bathrooms in the house, kitchens will be at the end of their life soon) It has still proven to be a solid investment in terms of cash flow. The one thing that I did right was to buy in a solid neighborhood.

If you expect to make 90k a year in RE I would probably expect a little more than 2 years. Most small multi family investors will tell you they make about $200 monthly a door after expenses and reserves. So you will need about 38 doors to reach your goal. If you want to do this in two years you would have to buy a puplex about every 5 weeks. Typically your growth curve will look much like a hockey stick. You will buy one or two properties in the first year and then maybe double the amount in every following year.

Hope this helps a little bit with your planning. It can be done, but it will take quite a bit of work and dedication. Good luck and let me know if you have any questions.

Looks skinny at best. Expenses are always debatable, but what about property condition, remaining life expectation of major components and after repair value? It's only a deal if you buy equity.

@Michael Brunner I think you will find plenty good deals in Madison, but you will have to invest some time and energy to find them. It's the nature of a good deal not being available for a long time. If it's truly a good deal it will be gone fast. I focus on a very small farm area close to where I live and I know every street in there. I was recently able to buy a house of MLS that was listed for less than a day without pictures of the property. I just knew the adress, because I own two other properties within 100 yards on that street and made a very strong offer within hours. Frankly, most hot deals from MLS I loose to competition. They are either faster or they offer more. And you know what - thats a good thing, because when you loose deals you know that you are most likly not overpaying.

There is fundamental wisdom in the old Kiosaky quote: look at 100 houses, offer on 10, get 3 accepted and buy 1. You can take those numbers literally. If you have not looked at 100 (and analysed the numbers) you are not ready to write offers, because you will not know a good deal from a bad one. If you dont get 70% of your offers declined you are offering too much! If you dont turn down accepted offers after detailed inspection you buy too many money pits. (sidenote: being fast is not the only strategy, you can also make offers below asking price on properties that have been sitting for a long time, sometimes deals have to mature before they are ripe).

Finally, I am not sure if you should focus on a portfolio deal. Buying a group of properties requires a lot of ressources in place. Not only money. For example you need a full set of different trades on speed dial (handyman, plumber, electrician, carpenter, window guy, painter, carpet guy etc) to go through and quickly take care of things that need to be done. If you have to get three estimates for every thing you need done on 8 units plan on taking some vacation. I think a portfolio deal is a little much for getting started. You might be biting off more than you can chew. I'd suggest to buy one single family or one duplex and go through the whole cycle of buying, rehabbing (a good deal always needs some sort of work) renting out and then managing before you buy the next one. Believe me you will have your hands full with one property and you will be less stressed out and do a better and more profitable job overall.

Without going much into expenses and vacancies this does not look like much of a deal at over 110k per unit. At least not for the buyer. That's almost twice of what is usually paid arround here. Check some comps.

Hi @Dan C. the first thing to check is if there is any abandonned duct work in the walls. If you dont find any, perhaps because the second floor was added later, your best option is probably electric heat. Menards and HD have a nice selection of different systems. The upper usually takes a little less heat anyway, because heat rises from the lower.

If you would want to ad forced air heat you need an empty building, find a central wall that you can run warm air ducts and clod air returns and then drywall arround them. Normally you would use the floor joist spaces to distribute heat. Thats an option but makes for a lot of drywall work in the lower. Plan B would be the attic, but you have to insulate very well. Either way probably cost prohibitive, I'd go with electric.

@Pari Thiagasundaram you can use the same ad you normally use, but metion Rent to Own in the headline and explain further in the ad. You advertise the home as a rental in the apropritae section. I am seeing better quality aplicants lately with postlets than craigslist. If you need a template just browese ads until you find one that you like best or combine from different ads. I think people like bullet points - they are scanning lots of homes and you want to make they key facts easy to spot: number of BR, bathrooms, garage space, square footage and location.

We use two seperate contracts: a regular rental agreement and a simple option to purchase agreement. They dont reference each other. Thats the concept, but there is a lot more to it than I can put in a quick post. There are several good books on the subject of lease options, money well spent.  Wendy Patton is great, also Peter Conti.