All Forum Posts by: Adam D Rinehart

@Tochi Ajiwe here you go


https://www.redfin.com/city/8903/TX/Houston/filter/viewport=29.70409:29.68101:-95.33984:-95.37773?property_id=29745800

@Adriel Hsu I'm not saying you're wrong but my experiences with wholesalers paint a different picture. I also approach the MLS differently now after having read Never Split The Difference several times. I view the list price as nothing more than an opening offer, no different than a souvenir shop in a Mexican tourist town. There's some good stuff to be had in both but Im not there to pay retail.

My first deal was off the MLS and is teed up for a 108% cash on cash return in the first year. Very similar to my 2nd deal odd the MLS but with a 76% COC return. My 3rd was an off market deal and it's a 30%. I also disagree that I "might have to pay the wholesalers full price the first time" when the ask price is high, the ARV is a fantasy, and the estimated repairs must include 2nd hand materials installed by undocumented labor. That's a hard pass for me.

@Adriel Hsu what wholesalers do you deal with? I’ve come across nothing but hot garbage in the way of individuals calling themselves wholesalers in Houston.

I don't disagree with anything you said there and appreciate the clarifications. I think what I was running into on the 1 year requirement was internal policy or as I like to call it "unwritten rules" to decrease their risk profile on those loans. Knowing now that the rule is only 6 months, if I get the run around on that again for whatever reason I'll know it's a specific company policy, not an underwriting industry standard. The more you know...

Hey Michael! I'm pretty new to this myself but I will add that it would be extremely beneficial to have your exit strategy lender lined up too since you mentioned wanting to pull your equity out through a cash out refi. In my opinion, this is the most risky aspect of the whole process since it's at the end and most of the in-between from purchase to finish is out of your direct control. If you go with hard/private money or use your own cash to fund the deal, time isn't on your side when you need to pay back the high interest loan or recoup your investment. In this game rehabs take longer than scheduled, go over budget, and appraisals come in lower than your target ARV. All 3 happened to me on my first deal. Traditional lenders typically underwrite to Fanny & Freddie criteria and will want a seasoning period around 1 year from purchase to show that the note is performing if you bought it with a mortgage. I've also found that many of them are not keen on the idea of cash out refi's for investment properties, especially for new customers and/or people who are just starting out in real estate investing. The Chase's and Bank of America's of the industry put a ton of hurdles in the application process which would have been a nightmare to deal with when trying to exit. I recommend finding a small/local community bank that will do a commercial portfolio loan.

I've only been play the game for 3 months and personally, I ended up finding a small community bank in Bellville, TX that considers themselves to be a business bank first and a consumer retail (depository) bank second. Once I was under contract on my first property, I printed out my BiggerPockets BRRRR calculator report, rehab estimate and scope of work, a 1 week old copy of my full FICO credit report, and 2 recent pay stubs to a small bank and talked to their commercial lending banker. I didn't have all of the answers but I did my best to show them I was serious, financially responsible, had done my homework before sitting down with them, wasn't crazy and already quit my day job, and aware enough to see the risk I was about to undertake and mitigate it by finding the exit funding early. I also tried to make it easy for them to say yes knowing it would be a portfolio loan they kept in house. The first bank I gave my pitch to said yes and I opened up a business checking and savings account before leaving, making good on my unsolicited offer to deposit the cash out refi funds in those accounts once it closed. That helped sell them on the notion that I wasn't looking to take their cash with a one and done deal with them. For what it's worth, that refi closes tomorrow and I bought the house on 10/15/19.

That's my experience and $0.02 as a newbie so take it for what it's worth. The most important thing I took away from that process was the confidence I gained in myself from being able cold call a bank as a walk in, show them my plan and get them to say yes because it validated everything I thought should work. If I was off on my numbers or came off as having no clue to what I was talking about, they would have said no. Saying yes made it real. It was no longer an academic exercise or talking about a concept and how cool it would be to do after listening to podcasts and reading books. I now had a real life deal and it came together by implementing the strategies I learned from my virtual real estate education, almost entirely gained from BiggerPockets.

Houston isn't a popular vacation spot, but it does have a huge market as a weekend destination spot for niche markets. Two of those markets are medical and sports related which happen to be right next to each other (Reliant Area and Medical Center). Buying a condo or a couple of townhomes that share a party (common) wall in that area of town could give you the "second home" you mention while also providing good exposure to year round rental demand from medical center workers and short term rental demand from sporting events (Texans home games, College Bowl Games, Super Bowl, NCAA Final Four, etc..). Reliant also gets a lot of venue use during Rodeo Season and people do travel in for that if there is a concert they want to see. The catch is that this information isn't a secret and a lot of competition is already there. There's also a somewhat significant barrier to entry due to the price point of available properties in that market. I can see a strategy like that working for someone, but it would be up to you decide if you're that someone.

@Tushar Prasad it will be good for the developer, who for all intents and purposes is the investor since it’s a syndicate of private money. However, instead of using the fund purely for a commercial multi family development, they went mixed use commercial to incorporate retail, parks and rec, and luxury multi family housing to increase their density in the hopes of commanding a premium price to the end users either through commercial leases or pad lot sales. They also added an extra layer of complexity to the deal by creating a Management District whereby they will be able to levy ad-valorem taxes (property taxes) within their boundary for the purposes of reimbursing their capital improvement (i.e. infrastructure and public spaces) and ongoing maintenance costs based of the appraised value that their development creates.

@Trevis Kelley a few things jumped out at me in your post about your current living situation. Acreage and farm. Do you have enough equity in your house for a HELOC? If so, are you in a location where putting up a pre-fab metal building and making it "barndominum" to rent out would make sense? Would it be viable as an air BnB eco-tourist rental? I know there's a niche market for that stuff, but that's the extent of my knowledge of it. Not sure if that's too outside of the box for you as an option but I'm a huge believer in working with what you've got to find creative solutions.

@Tri Le I grew up just outside of Sugar Land and I don’t think I’ve ever heard of Section 8 out there. There’s so much money in that area that it just isn’t common and has limited public transportation opportunities. Low income housing typically isn’t synonymous suburb commuting that requires reliable personal transportation. Know your market before putting someone else’s model into place there.

The list price is always the opening offer in negotiating the purchase of real estate. Unless you accept their price or go higher your offer is a counter offer.