All Forum Posts by: Andrew Johnson

Mark V. From a super high-level it looks like it’s going to appeal to the same sellers that would call bandit signs. But it also looks like they close in days so there’s no funky “out clauses” like you’d see with a wholesaler, they’ll definitely be able to close at their offer, etc. It just looks like their have better confidence in their value algorithm (than, say, we do in Trulia) and instead of offering 70% ARV on a $295K home ($206K) they offer $230K and tack on some fees. So you get to the same “distressed wholesaler price” but you have 100% certainty of closing and it’s 7 days instead of 30 days. If there’s any challenge for them it’s will be branding to those distressed homeowners. How to distinguish themselves from the number on a bandit sign. From an outsiders perspective it looks like “webuyuglyhouses” has done that but I cringe at what they spend just on TV advertising. And I think they’re a franchise business model anyway.

Vincent Plant You’re heading for pain! People that will want your money as a silent partners are mom-and-pop businesses. Nobody with $50 million is going to say “I’m going to make you a silent partner for $50K”. It just doesn’t make intuitive sense. But mom and pop businesses run cars, phones, etc. through the business. It’s legitimate but now you’re in a business where the operator might choose to lease a BMW through the business and you would prefer (for obvious reasons) that they lease a Prius. And that’s just bypassing that many small businesses have something like the wife being the CEO and husband being the CFO. But the CFO isn’t an accountant and the books end up messy. It doesn’t matter when it’s your own business but if you’re now a partner it’s going to matter a lot for you. Now all of this is different than being an LP in a syndication. Or investing in some small scale REIT. Having some asset (like medical offices) “back your investment” is a little different than wanting to be a silent partner in the local dry cleaning or boutique smoothie joint.

@Dawn Oree By the way, I think some of this stuff (i.e. coaching) has a lot to do with you as a person.  Some people love coaching, need coaching, need an accountability partner, and that coaching (taking real estate out of it for a second) helps them be much more successful in anything that they do.  If you thrive on it, you'll find disproportionate value in really any of the programs that are out there.  

However, I think a lot of people see a lot of these programs as either a "quick-fix" or a "quit your day job in 6 months" or a "guaranteed path to success".  I don't think those things really exist in real estate, stock market day trading, or me learning to try and play golf (I'm lousy at golf just to add another sports example).  I could buy all of the training materials in the world, gets tons of coaching, but as @Jay Hinrichs notes it takes more than a course.  

I think what might also be important for you to look at is where you think your gaps are that someone could help with in terms of coaching. You've been on BP since 2010 so I'd imagine that you'd scraped a ton of value of the site. You're a real estate agent so I'm assuming you know ARV, can pull comps, etc. relatively easily. You know the buy-and-sell process, you probably know lenders, etc.

So all of that leads to be to think, wonder, ask:  What's the gap that's left?  Is it that you need someone to help you through rehab projections?  How to manage contractors?  How to come up with an offer price on the courthouse steps?  Or is it that you just need tangible coaching guidance?  

If you look at that *gap* you might be able to figure out if something from Renatus or any of the other 50 large-scale programs out there are right for you.  But that's a materially different process than "I know a guy who has done 500 flips and he's an affiliate marketer for a $20K course, so should I join the course?"

Dawn Oree Time to grab some popcorn, sit back, and wait for the fireworks :) I think the net result is that you have a little of affiliate marketers out there promoting the program. They earn from getting you enrolled so it’s not exactly like they’re unbiased! The crux of the challenge is that education has value but (in my view) it’s only specific education that has measurable economic value. If I were to “coach” anyone I think I’d have moderate value in “commercial multifamily in flyover country” but I’d have ZERO value when it comes to wholesaling, leading a syndication, self storage, and about 50 other REI varieties. Paying $200 to me for self-storage investing coaching would be a worse investment than paying $20K to someone that was incredibly successful at it. So the net result is that I think what you’d get out of any program will be proportional to how your stated goals align with a coach and/or education program. Some of it also has to do with your level of confidence. I feel “confident” I know enough and could learn the knowledge gaps in SFR buy-and-hold. Consequently it’s doubtful that I’d pay for that education. However, I know squat about leading a syndications, there are legalities, and there’s a huge gap in my knowledge and confidence. I’d pay for *that* coaching/education if that’s a road I wanted to go down. So, again, it’s hard to make high-level declaratory statements.

Karla Parraga I’m not a lawyer or a CPA but it’s sounds like a small rationalization for mortgage fraud. You’re only claiming/denoting it as a second home (I’m guessing) to get a lower interest rate. So it’s one of those issues where you kinda know what you’re going to do but it’s impossible to “prove” your intent when you sign the papers. For all we know you’ll love the property and not want to rent it out. So I guess it’s like “impossible to prove mortgage fraud” :)

Alfred Litton I’d say 6-9 months of either gross rent projections or PITI. Take your pick, the latter will be lower. However, I would suggest that some of it is property dependent. If you’re buying a property with a 20+ year old roof or a 12+ year old HVAC system I’d keep more in reserves. It’s hard to guess when those heavy cost items start to fail and when they do you need money then. You can’t “wait 9 months to build a cap-ex holdback” when there’s a leak in the roof 🤷🏻‍♂️

Josh Daniels Some is this (in my opinion) depends on how you operate it now. If you have a PM, they run it, it kick off some cash, it’s paid off, etc. then I’d just let it ride. You’ll be moving, getting a new job, and dealing with a compressed 1031 timeline would be a little bit of a pain. Losing focus at a new job while trying to eek out another 3% return margin (just making up numbers) isn’t a good scenario in my opinion. My initial thought was to just take out a mortgage. Money is cheap but with a $650/month rent I start to question the value of the home, size the loan, etc. and it it’s with the hassle, fees, etc. Anyway, hard to give a super definitive answer.

@Kari D. I wouldn't hang around Mabelvale Pike, but that's just me :-)  As @Hadar Orkibi mentions the western side is really a nice area.  if you Google "Chenal Valley" you'll get a sense for where that area is.  It's also very hard to cash-flow there but I'd posit is where the bulk of LR professionals want to live.  If you could find a fix/flip out there I'd imagine you'd have little trouble selling it, maybe tough to "buy it right" but selling wouldn't be an issue.  I'd guess you'll find the same thing with the whole area around the River Market.  It's a nice area but has already gone through a good deal of gentrification.  You can find older homes but, again, they won't be cheap.  When you hit the suburbs it's really a town-by-town scenario.  Jacksonville is different than Cabot, Cabot is different than Ward, Ward is different that Beebe, etc.  You start to get different mixers of commuters vs. air force vs. people that want a little land, etc.  It's really hard to sum it up too succinctly.

Jamie Brayton I think the time delay tells you all you need to know about the “data quality”. Either it’s really bad and they’re trying to cobble it together...or they’re just making it up. When I’ve asked I usually get a printout from a PM or a PDF from Quickbooks. If I don’t get that it’s typically just information in an email. Sometimes people will withhold info until an LOI or they’ll have you sign an NDA. But they do that when they know they have the data. If it’s coming to you a teeny bit at a time, my advice, just stop asking. It’s likely pointless, you’re just asking for “bad data” at this point and it’s smarter just to start making the estimates yourself. And, as an aside, it’s not at all uncommon for mom and pop multifamily properties. And even then you get screwy things that can be run through the property that you wouldn’t. So, anyway, it likely not doing you much good to keep asking for bad, inaccurate, or incomplete data. 🤷🏻‍♂️

I’m with Carter Melvin in that if you get a good PM you’ll be fine with an SFR, a 5-plex, a 10-plex, or (for me) a 27-unit building. A “bad” PM will hurt with any of the above as well. There is a huge difference in places like California where you’re required to have an on-site manager when you hit a certain threshold (16 units if memory serves). Then you have a cost for someone as a “caretaker” and a PM when a solid PM can handle all of it.