All Forum Posts by: Adam Gollatz

@Wayne Brown welcome. Sorry to hear about the passing. 

You say its renting in a not so great area (appraised for 65k and 1100 rent seem to confirm this), which makes me think that long term you dont want to invest in areas like that. 

If thats true and there is no conflict with the family keeping it, I would just hold it for the time being. Get a feel for what its like to be a landlord. Its probably not going to appreciate much, and if it does and you bought your family out now, it could be a point of contention. If they get tired of it, I would probably sell it and get my portion of the equity out to invest in real estate that fits my REI strategy.

You'll always find someone out there that will recommend one area over another, but just because it works for them, doesn't mean it'll work for you. 

Without knowing your situation, if the strategy you want to pursue is buy and hold for cash flow, I would look into areas close enough that you can self manage for a few years. Easier to cash flow when you dont have a PM taking 10% and you'll learn what the PM's do which will help you identify good and bad ones.

Estate planning lawyer, maybe? Good chance someone would emerge to challenge her mental state if you bought it. I would think she has a will of some sort and theres someone listed in it, even if its a friend.

You could probably do it, but you want to start looking now. Most of them require some sort of inspection, appraisal, asset verification, or proven track record.

A better question would be how do you plan to get out of your hard money loan? If you've never used HML my advice is don't get in without an exit strategy.

Could be a variety of factors but most likely he's in denial or cant wrap his head around selling the house, moving, and whatever financial burden put him in that situation. Theres also the very likely scenario that he cant. It costs about 6-10% to sell a house. If he only put down 3.5% or timed the market wrong, chances are he doesn't have the equity. He would need to short sale. I saw a house today listed (not selling) for the same exact price it sold for 10 yrs ago.

Thats why some people say primary residences arent investments and dont rely on appreciation.

@Mo Sylla my specifics are the same everyone else is using. I take the purchase, rehab, closing costs from the purchase, carrying costs, and the closing costs from the exit. What allows me to go to 75% is my confidence in the numbers. This also works because I go after purchase+rehab jobs in the 200k range which leaves the ARV of around 265 (265 x 75%=200).

@Joe Villeneuve said it best when he said look at the dollars as a number, and not as a percent. With a purchase and rehab of 200k, I'll make on average 10-12% of the overall ARV or 26-30k. Its streamlined for me and I just coordinate, so at the end of the day Im basically asking myself if I want to spend 40hrs of my time sending emails and making phone calls over the course of 6-9mo to make 26k? Its an easy answer.

There are 2 issues I see with a lot of wholesalers in my market, so this may not apply to you.

1. They are drudging up the worst of the worst bottom of the barrel properties, which tend to to be really low end properties. With these low end properties, you still have the same fixed costs to cover, but that 25% of ARV isnt going as far since its a low value property. Imagine you have a 100k ARV property, with 70% rule, you need the purchase and rehab to come out to 70k. Now I have 30k left over to pay for my costs AND make a profit and appraisals and inspectors dont care, that 3/2 for 100k and 3/2 for 265k cost the same to appraise, inspect, etc. So when its all said and done, even though I started with a bigger percentage (30 vs 25) I'll make the same 10-12% which is in the grand scheme of things is less.

2. They never get the numbers right. The 40k purchase with 25k rehab and an arv of 109,900 (how they zeroed in on that extra 900, idk) looks real good from a percentage standpoint. Until you find out that all of those newly rehabbed comps are really like 105k. And that 25k rehab is an estimate from someone with no contracting experience or a fly by night "contractor" with no license or reputation. 

It takes a lot of time and skill to price a distressed property accurately, your essentially trying to do a real estate agents job and a contractors job all at once. The best ones Ive seen are real estate agents, contractors, or they are teamed up with one. As you do, remember why a lot of wholesalers get into the business: They want to do rehab type investing, but dont have the financing or risk level acceptance to get started. So run the numbers as if you were going to do the whole deal yourself. If it makes sense to you, it'll help you find and sell your wholesales easier.

Keep me in mind for any good ones you get ;)

The short answer to your question is that right around 1% is when a deal starts to cashflow with the standard expense assumptions (15%capex/repairs, 10%management, 5% vacancy, etc) when you are looking at a 200k purchase and 5% interest rate and 20% down. It shifts towards 2% with lower value homes and down toward .7% in higher market homes.

I have an google spreadsheet I set up, I can put in rents, purchase price, and taxes and it will spit out a cap rate and cash flow estimate. Theres an app to get sheets on your phone so its just as simple as punching in the rents/purchase to calculate the '2% rule'. 

@Alex Lupo I was just talking to a guy this morning about this. Look into house hacking a 4 family. Living in the house gives you the advantage of lower down payment 30 yr mortgages and the added benefit that you are there to  learn its quirks and be able to save on maintenance/management fees. Not to mention, the best tenant you'll ever have is yourself.

It is very market specific and it depends on your situation, ie doing some rehab yourself, cash buying, etc and how certain you are of your numbers. I created a calculator in excel with my specifics and analyze deals based on that. Ive found that Im comfortable doing a flip where the purchase and rehab costs are 75% of the ARV. The more you refine your technique and process the more competitive youll be against other investors and youll be able to get more deals and higher quality deals.

It comes down to do you want a large piece of bad pie or a lot of small pieces of good pie. I settle for the latter.

Too broad of an question, you have to give us something to work with. What are your goals and interests, financial situation, risk level, and skills?

I like multi family residential and Im starting to do flips. PM me if you want to talk more.