All Forum Posts by: Ammon Brimhall

I'm going to second, third, and fourth all the WELL DONE'S others have shared -- WELL DONE!! You've taken a step forward and reached out for support -- two VERY good steps.

First, really helping you in detail with contracts is really a big task for a post like this, but here are a couple of tips:

     1. Make sure your earnest money does NOT go to the seller but to your title attorney

     2. Make sure you give yourself a good inspection period with clear instructions that if the inspection fails you get out of the contract and get your earnest money back. Stating that the inspection is based on the "buyers sole discretion" gives YOU the veto power - i.e. it means that YOU get to say the inspection didn't pass. 

     3. Make the inspection period as long as you can

     4. I've had better luck by making sure my contracts include a clause the openly states that "This contract may be assigned at the sole discretion of the buyer" to make it very clear that I may assign it. Also, finding tactful ways to make sure the seller is aware of my intentions can help them be prepared to accept the fact that I'm making money on their house. In other words -- sellers know how much you make in an assignment and if you didn't prepare them to see your wholesaling profits sometimes they can get upset. If you need any tips on this let us know and we'll all help you out!

5. When you assign the contract here are a couple of tips: a) often the buyers will not pay your full assignment fee until closing -- HOWEVER, it can be helpful to get a non-refundable deposit from a buyer just in case the flake out (the amount of the deposit will be subtracted from the amount they will owe you at closing) b) Make your assignment contract such that your buyer has to close before the end of your P&S with the seller -- this way, if your buyer flakes out you will have an opportunity to find another buyer and/or raise the money yourself.

Now -- two other tips that I think you need:

      1. STOP waiting for deals to build our team!!!! Start NOW to get ALL rehabbers and landlords in your area on your contact list so you aren't scrambling for buyers. Get on the phone, meet people, get referrals, go to club meetings and talk to EVERYONE!!! By getting a deal first it's almost like you ran into the battlefield butt naked and then screamed to your buddies to get you a gun and bullet proof vest.

I'm being dramatic, but I hope you get the point -- build your team NOW!!

2. Get a copy of several P&S Agreements as well as assignment agreements and read them all several times. Then take your questions about them to your team. In a word - STUD Y them now so you are better prepared for the next one.

Again, GREAT WORK!

Way to not give into the fear and to face forward!! You ROCK!

The idea of wholesaling a deal is spot on! It let's you find a deal, but lets everyone else take the risk. Tell your emotions to take a chill pill, and they can get all scared again when you decide to actually do the buying yourself. Until then they'll have to sit a few games out! :)

Now that your emotions are taken care of (wouldn't it be nice if it were that easy!) - let's talk about finding buyers. That's actually really easy -- go to investment clubs, find them here on BP, go to foreclosure auctions, and call all the rehabber you can find on Craigslist (they always have "newly remodeled" or "newly renovated" properties for sale. Let them know you are in bird-dogging wholesale mode and wanting to know if they want deals and if so -- what kind of deals.

Don't try to impress them with what you know -- just let them know you are hard working and out to help them grow their business if they'll help you grow yours by taking deals that you work hard to find. You can even admit that your first lead or two may need some work, but that you're a fast learner and if they're patient you'll make it worth their while.

Moving on to the sellers is a bit more challenging as it takes some negotiation skills to find deals. Most deals don't show up in Christmas paper and a bow. You have to get sellers to relax and tell you their problems and then you have to help them see that you have a solution. As a result, they will allow you to make offers WAY below their asking price. It's a hard psychology to learn -- the psychology of getting people to reveal what they will REALLY take for a property vs what was they asked in their listing.

As for finding sellers to practice on -- they are all over. You can knock on foreclosure doors, call Craigslist ads, search the internet, call realtors, get in the paper, send direct mail pieces to probate and out of state owners, etc. 

That's a lot of broad information, but I hope it gives you some direction!

To your success!

Aloha Michael

A sincere thank you for your service!

As for your question -- there are a million things I want to say assuming that you are just beginning because your strategy out of the gates is so important. Are you buying for cash flow or appreciation? Do you know how to calculate ALL the costs of a rental? Do you know how long most single family home rentals (SFH) take to start to cash flow? How well do you understand the financing? How many properties do you want in how many years? How YOU answer those questions would better help ME to give you some ideas.

That said, the "where to start looking" is easy once you know your strategy and focus. In fact, there are no secret places to begin searching your strategy is solid. Here are a few suggestions:

1)BP Marketplace - although I'm new here and don't know how good the deals are there.

2) Call realtors and ask them to start sending you what they find that fits your parameters.

3) Realtor.com

4) Zillow.com

5) Trulia.com

6) Craigslist

7) Hudhomestore.com

8) Property management companies

9) Contacting wholesalers in the area (be careful, some wholesalers will sell you junk)

Again, there are no secrets, just lots of cool websites. I think those are some of the most common. There are also some auction websites, but those are slightly more tricky and you would want to make sure you understood the rules before bidding as sometimes there might not be inspection periods and there are additional fees to purchasing. Thus warned -- two of the most common auction sites are auction.com and hubzu.com

As for networking --- THAT would be a best first step so that you are well connected and get a lot of good advice about strategy, location, and goals before you purchase. To network you can:

1) BP of course, which you are already doing! Great work!

2) Call property management companies and ask them about areas of town and strategies that work in the area

3) Attend reia meetings -- you can find them on creonline.com and reaiclub.com and meetup.com.

4) Find landlord associations by googling them or asking your property managers or calling the organizers of the clubs I just mentioned.

5) Find the number one or two eviction attorneys in town and ask them for good connections.

There are a million things I could have said and there is a lot of clarification I could have added to things I did say. However, I hope I gave you what you asked for while encouraging you to make sure you've answered some key questions before you make your purchases (if you haven't already asked them)

I hope it helps!

To your success

It really is crazy how much there is to learn!! I'm excited that you're taking the bull by the horns and making it happen though. You're asking good questions and taking action so I know you'll get it figured out and nail it!

As for a general rule, there is what we call the 1% rule when it comes to a rental. It says that if you can get 1% of the value of the home in rent then the house should cash flow. For example, your house is worth 55-60k after it's fixed and gets about $600/mo in rent. As $600 is 1% of 60,000 your rental would fit the bill.

My word of caution is to understand that single family homes are really good investments as rentals so long as you don't count on the cash flow (in most cases -- NOT ALL!!) in the first 10 years. Most of your money will go to vacancies, management (even if you manage it yourself you still need to pay yourself!), repairs, maintenance, etc. After 10 years, your rents have gone up and you've normally made enough repairs to the building where you can really start pulling out 250-500/mo.

What happens to many beginners is they don't understand that long term nature of rentals and think they'll buy 3 or 4 and be well on their way to retiring in 6 months. Because of the cash flow misunderstand I very briefly lined out before and because of loan issues that pop up after about 5 homes -- it takes a lot of work and time to get the cash flow to really think about retiring.

It's not impossible, but you have to know that you want to do it and get strategic about it. There are ways to speed it up too (lease options, taking over payments, etc) but the FASTEST way I've seen to get cash flow from rentals is to flip like a maniac and then take 200-300k for a down payment on a 20+ unit apartment building.

I hope that wasn't overwhelming! I also hope I didn't scare you away from rentals as I love them -- but I wish someone would have helped me see the challenges so I didn't waste my first 12 months in the game thinking that 3 rentals would have me 25% of the way retired. :)

Finally, if what I said makes you pause, you could wholesale the deal to a dedicated landlord and walk away with a couple grand (landlords always pay for than rehabbers for properties that can be used as rentals-- GREAT TIP!!).

Very Best!

Hello Christopher

If you bought the second and the first completed their foreclosure then you would indeed be wiped out. However, if you bought the second and could take over payments on the first by bringing it current, you may have something there -- so long as the numbers work and there is time to reinstate the first.

I hope that helps!

I was 22 when I started and made the mistake of dropping the job and going for it. It doesn't mean others haven't succeeded that way, but I caused myself a lot more pain than I needed to. I'm doing great now (12 years later) and LOVE making killer money in real estate, but like Steve vaughan said -- "slow down and focus -- there are no fires here."

That said -- I think I'll add tow more things:

1) On the focus thing -- it's REALLY easy to chase every strategy and money making opportunity. Don't do it, pick a focus and learn it well before you jump ship -- or if you jump ship do it for good reasons. If you find yourself in a new opportunity every couple of months you're likely not going to get very far.

2) You can actually choose jobs that will help you succeed as an investor. Finance jobs would be one of those -- sales jobs would be another -- working in title, as a realtor, or an appraissor could be useful too. In other words , if you are strategic about it, your jobs can give you paid training in skills you'll use to succeed as an investor.

To your success!

Hello Christian

Way to get in the game early!! I got in when I was 22 and boy am I glad I did. Stick with it, be consistent and treat it like a marathon and suddenly you'll be 10 years down the road and AMAZED at where you are financially. It's a great ride! (There are risks too, but stay sharp and keep asking questions and I think you'll find a way to success)

As for your question -- there are a lot of answers depending on what you are trying to do and how fast you are trying to do it. Here are a couple of numbers I use -- and many other investors too -- although others may prefer to tweak the percentages a bit for their style or individual market.

Flips or rehabs -- Take the After Repair Value of the home (ARV) and multiply it by 70% and then subtract the rehab. The after repair value of the home is simply what a home is worth AFTER you've done all the rehab to it. This number is a ball park (not exact number) for the most you would want to offer if you are going to flip a home. 

Summary -- (ARV x 70%) - rehab = MAO (Maximum Allowable offer) for a flip opportunity.

There are a million things I could share about comps or exception to the rule or why we chose the 70%, but that would take all night to explain so I'll leave it there. You have a good rule, and with time you'll get all the nuances.

Wholesaling -- Take the MAO calculation above and subtract your wholesaling fee. I won't tell you what a "good" wholesaling fee is because it really is all over the map for each person, but as a beginner you tend to get less and as you gain more experience and learn how to tell good deals from the bad you get more. Don't be afraid to bird dog a deal for a few hundred dollars if it will increase your experience and prepare you for the next deal. In other words, don't let greed get in the way of growth.

Rentals -- Again, this is a general rule and subject to a lot of exception but it's called the 1% rule. It says that if you can get 1% of the value of the home (some people say you should use purchase price, not value of the home) then you should have a positive cash flow. For example -- a house worth $80,000 needs to get $800/mo to be a positive cash flow.

Again -- there is SO much more I could tell you, but won't here. Just know that while rentals ROCK, beginners often think there is more cash flow than there really is, so do you homework!

I hope that helps!

Donald 

I've owned duplex for about 10 years now and I'm really thinking about a 1031 exchange to a larger building myself. I don't have a story of my own, but if you haven't searched them already there are a lot of posts about 1031 exchanges that could be helpful to you!

To your success!

Great questions Heather!!

I would say that one of my best jobs ever was sales! I was a framer for a bit, but I don't enjoy construction and have always hired contractors to guide me in that area -- but SALES has made a huge impact on my whole life.

The skills I learned in sales helped me talk with sellers and be more persuasive, raise money, prepare and sell my homes, manage tenants and to listen to others.

That said -- sales can be a tough racket and sometimes can lead to disaster, so if I could go back to my sales experience I would live by 3 rules: 1) Sell something I really believe in 2) Find a company that has my ethics and integrity and 3) Find a company with a GREAT marketing department so that my prospects already have a great relationship with my product before I arrive.

Find those 3 components and take the time to learn sales you can earn some GREAT money while enjoying some flexibility in your schedule (the right sales jobs let you take time off when you need so long as you are making sales). The best part is the job will make you a better investor in all the ways I mentioned above.

To your success!

Welcome Derek!

Real estate investing is a great world with a lot of opportunity and you've found a great place to connect and learn!