All Forum Posts by: Alex Owens

What's going on Jacob! 

It is really going to depend on what strategy you are looking for. If you are looking for flips, Edmond is a fantastic area as well as some areas in midtown (Paseo, Mesta Park, possibly Tenn-Pen,) and Lincoln Terrace is a hot area right now. 

If you are looking for rentals, I have found deals all over the OKC metro. The south side is going to be lower-end rentals but the cash flow can be great. Conversely, rentals in areas of north OKC and Edmond will tend to attract a little higher rent and higher qualify tenant - however your cash flow may suffer. 

I would love to discuss specific areas further with you, lets meet up for lunch or coffee sometime! 

@Jon Passow The LLC route may not be as hard as I made it sound. To be completely honest with you, I have found that it is easier to qualify on the commercial side of a bank than it is to qualify on the residential side. If you are wanting to do the BRRRR strategy, you should not face the "due on sale" clause because you will be pulling out a new note with your LLC on title during the refinance. You will only run into the "due on sale" clause if you do a quiet transfer of deed to your LLC while retaining the initial residential financing.

My personal advice would be to go to a commercial lender and get their opinion on your personal current financial health. They will be able to tell you real quick whether or not they would even considering loaning to you. If they come back and say you are years away from qualifying, find someone to partner with who will be able to qualify. Building bank relationships is one of the most important things in this industry, and it is crucial to build as many contacts in the banking world as possible. All banks are different and have different underwriting requirements and guidelines. 

As far as which bank you should start at, my advice would be to try and talk to as many as possible. You will most likely have the greatest success with smaller, local portfolio lenders. These tend to be your local credit unions and neighborhood banks. You probably want to look for a lender who services all of their loans in-house. This means they do not sell of their loans on the secondary market and it will allow them to be more creative with their guidelines and lending terms. 

Additionally, if the BRRRR strategy is what you want to focus on you may consider using hard money or private lenders to act as a bridge loan until you get the property rehabbed and stabilized. This is, of course, if you cannot qualify for bank financing to start. Once the property is rehabilitated with a history of stable rent, a bank may factor in the strength of the deal and the cash flow more than they will look at your personal finances. Typically the bank will need you to "season" the property which basically means showing them that you have stabilized this property over at least 12 months. If all goes as planned, they should give you 70-85% LTV and you should be able to pull all of your cash out. At that point, you know what comes next: rinse and repeat!

Everything that has been said on this thread so far is correct. However, there can be some complexity to purchasing and financing through an LLC. First, you are obviously going to want to make sure your LLC has been filed correctly through the Secretary of State and that you have obtained an EIN number from the IRS. You should have an articles of incorporation, and LLC Certificate, and an EIN number to identify your LLC. Additionally, you will likely need an Operating Agreement that spells out the function of the LLC and lists you as the owner and manager of the LLC. (I am in Oklahoma and this is the procedure for this state, I make no guarantees that this is the same across all states - additional documentation may be required)

My company has 240 LLCs because we set up and purchase each property in an individual LLC that is wholly owned by our umbrella LLC. I won't go too far into the reasons behind this, but this structure is the best route to go if you are looking for maximum liability protection.

Additionally, to @Nghi Le's point, banks will not give you a conventional loan with an LLC on title. You would have to go through and qualify through a bank's commercial loan department. If you are new to real estate investing and this is your first LLC, there will be no credit history for the LLC and your loan qualification will almost entirely be based on your personal financial health and credit history. Once you become a big player with dozens of transactions under your belt, banks will begin to look at your overall business, business credit history, and business cash flow to determine credit worthiness.

The last thing I will address is @Scott Michael's comment. I believe what he was referring to is submitting a contract with your personal name and qualifying for a conventional loan like a normal home buyer would. Then, the idea is to quit-claim deed the title over from your personal name to your LLC - thus securing conventional financing on what is actually a commercial transaction. This is certainly an option, but a quite risky option at that. This will trigger the "due on sale" clause that 99% of loans have these days. If your bank never finds out that you transferred the deed to your LLC, it should not be an issue. However, if the bank does find out that the title has been transferred to an LLC and your personal name - which is on their loan - is no longer on title for the property, they have every legal right to call the loan due immediately. The chance of a bank actually calling the loan due is very unlikely if you are current on payments, but it is certainly an option that the bank could exercise and leave you in a terrible position. I would certainly recommend avoiding this strategy at all costs!

Just quick disclosure: I am not a lawyer nor do I convey my comments as legal advise. I am just giving you my experience with LLC in hopes that you are able to use that information to best position yourself legally and ethically in your own real estate business.

Hope this helped, good luck! 

Ron, I think the answer you are looking for is going to depend on what your overall strategy is. If you are new to real estate investing and you need a place to live, I think house-hacking a small multi family property is the best thing you could do. Since you haven't racked up a bunch of conventional loans, you will be able to take advantage of owner-occupied financing for 1-4 units. This will give you a tremendous advantage because your cash flow will be a lot better than a non owner-occupied investor purchasing the same property on a 15 year am at 5+% interest rate. Also, you will be able to live for free as the other units should ideally cover your mortgage payment. 

Alternatively, if you do not need a new place to live then perhaps you should be looking at single family rentals. Especially if you live in an area where single family properties experience high appreciation, accumulating multiple single family properties may be the best overall strategy. For me, in Oklahoma, we do not experience high appreciation rates and for that reason I have chosen to leave the single family rental game in my past and begin to focus exclusively on multi family deals. When it is all said and done, it takes as much work (I actually think it takes less work) to purchase a 24-unit apartment deal than to accumulate 24 individual single family rental properties. Additionally, a package of 24 single family properties will more than likely be scattered all over the city and county and the time and effort it takes to manage that portfolio could be extensively more involved than an apartment complex where all 24-units are in one location. 

If this is your first deal ever, I would recommend staying in the 1-4 unit range and working your way up to the big boys. The analysis of large multi-family properties is completely different than a single family rental. Large multi family properties are considered a business and the valuation is based entirely on the income that is produced and not other "comps" in the area like single family properties. 

My recommendation would be to start with a single family rental or a 2-4 unit multi family to gain some experience. With that being said, I am one of those people with massive goals and I would hate for anyone to tell me to start small or that I am not ready for a bigger deal. If you want to go ahead and shoot for the big boys, I would just recommend partnering with someone who has experience with those larger deals. Hope this helps, good luck! 

What's going on Joel!

I am not a licensed realtor in Oklahoma, but I am an active investor and wholesaler in Oklahoma City. Send me a message and let me know what you are looking for and I can send some deals your way!

Additionally, I would recommend Landon Whitt with First Metro Realty. He works incredibly well with investors and is the best realtor I have met out here - really knows his stuff! I can send you his contact info as well. 

Lukas,

I have always wondered the same questions - how many people out there are actually sending mail.. 

Personally, I send about 1,000 pieces a month right now but plan to ramp it up to 2,000 by summer. The biggest thing I have noticed is that you HAVE to be consistent. Direct Mail is all about hitting a motivated seller at the exact right time in their life that they want to sell. 

Additionally, Direct Mail can be incredibly frustrating because it is a large up-front investment and it is difficult to directly track the return on investment. For example, I sent only one round of mail to a particular list back in July and I have gotten more calls from that list in December than I did July-November. If I close on one of those deals in January, it will have been 6 months after my initial investment in July before I see any return on that investment. This is why consistency is so key. 

The way you approach direct mail can vary drastically as well. @Rocky Griffin mentioned he uses Yellowletter.com to send out his mail. Yellowletters.com is a fantastic service that a lot of real estate investors use to send mail because the company with print "hand written" letters, stuff envelopes, and actually mail them out for you. The problem that I have found is that it is too overused these days and a seller could end up getting multiple pieces of mail that look the exact same. Additionally, Yellowletters.com is more expensive than if you did it yourself - not incredibly more expensive but it adds up if you are sending thousands of pieces of mail. I believe Yellowletters.com is around $0.79-$0.95 per letter and I am currently averaging about $0.55 per letter. Again, not a huge difference but for 1,000 pieces of mail I could potentially end up saving $400 if I did it myself. The downside is the time that it takes; it takes me about 10 hours to get 1,000 pieces of mail printed, sealed, and sent. Therefore, it becomes a balance between your time and your cash. I am 22 years old, not married, and have no kids so it is not a big deal for me to sit on my sofa all day on a Sunday watching NFL football and stuffing envelopes. 

The last thing I will say is that I think you really have to make your letter stand out from the herd. If you are mailing to the same list that everyone else is mailing to then the seller has probably already received several pieces of mail before receiving yours. Why would they call you instead of one of the other 5 investors? This is where I really love to add a personal touch and cater my letter to the season/location/demographic/etc. of the individual. I would love to share some tips and secrets in this area but I have to keep my competitive advantage some how ;) 

Hope this helped! 

What's going on BP! 

I want to get some feedback on a strategy I have used in the past. I have searched the internet for answers and have not been able to pin down a concrete answer.

The strategy is using a seller credit to get cash back at closing. Let me run you through an old transaction I used this on: I purchased a home that was for sale for $105k  (it ended up appraising at $155k). I offered the seller $130k with seller-paid closing costs and an additional $26k credit at closing. I still had to bring $26k to closing in order to cover the down-payment, but I left closing with a $26k check from the seller to essential end up with no money out of pocket (in reality, I used the $26k to make repairs on the property).

I know there are certain limitations on particular loan products that limit the maximum amount of seller credits allowed (6% for FHA, 4% for VA, etc.); however, I am using a commercial line of credit that does not have a limit on seller credits. The $26k seller credit was written in the "additional provisions" section on the original contract and was approved by the bank, seller, and title company. 

I have a friend who has tried to use this strategy and was told by a realtor that seller credits are illegal at closing. Like I said previously, I have done quite a bit of research on this topic and have not been able to find a concrete answer to support her claim, but I wanted to get some feedback from the BP community. 

I would think that if all parties involved are informed and agree upon the seller credit, it should not be an issue. The property appraised much higher than the raised purchase price so the bank was not over-funding the asset. I know the rules are different for residential financing and commercial financing so perhaps that is the only reason my friend was not able to do the seller credit. If anyone has any insight/experience in this area I would love to hear some feedback! 

To piggy-back on what @Rocky Griffin said, use the crime statistics on a website like Trulia to help distinguish good and bad neighborhoods. Even call the local police department and ask them what they think of the neighborhood. For example, Lincoln Terrace - which is a neighborhood you mentioned - is a highly desirable neighborhood right now for flips, but immediately to the east of that is a crime and gang ridden area that you would probably want to avoid. I am not from Oklahoma City and when I moved here this summer I bought a 10-speed bike to ride around and look at particular areas I thought I would be interested in. There is no way to tell what a neighborhood is really like by looking at it online, the best way to know an area is to get on foot/bike/car and actually go to that spot. Another tip I have picked up along the way is to always look at a neighborhood at least three times - once in the morning, in the afternoon, and at night. Neighborhoods that seem fine during the day may be a completely different atmosphere at night. 

p.s. I have a 4-plex in a great area in OKC I could send you to look at if you are interested! @Joe Miller

Hello BP! I am looking to send out a few thousand pieces of direct mail this week before the holiday season. I am wanting my letter to stand out from other letters the seller may have already received, so I was thinking about making my letter holiday themed. Anyone have thoughts on this idea? 

I want my letter to be unique, but I also do not want to offend anyone by sending out a letter that says "need more cash for Christmas"? I think the risk/reward is worth it, but I wanted to see if anyone has had any experience or opinions on this strategy. Let me know below! 

Dear BP Community, 

I just sent out my first round of DM marketing! I am wanting to compile a list of additional expenses a seller would have to pay if they decided to list their property on the market instead of selling it directly to me. I figure the best way to get a great deal is to show the seller why the numbers make sense. I plan on walking them through the pain and struggle (and expenses) of listing a house for sale on the market with an agent. Below is the beginning of my expense list for listing a property, please add in any additional expenses you can think of that the seller may have to pay or any additonal heartache they may have to go through! Thank you all!

- 6% real estate agent comission

- Cost to repair home to get it market-ready

- Constantly having strangers walk through your house for showings

- Having to vacate the house during showings