All Forum Posts by: Bart H.

 The fees sound appropriate.  guessing the house is $100-200k.

$100 option fee is usually written to the seller.  Did you get a 10 day option?  you can pull out of the deal for any reason if you cancel the contract before the option period is over.

However the escrow fee should go to the Title company in the name of the title company.  NOT to the seller or the sellers agent.

Be a little careful, there have been some scam artists working in Dallas that will list properties well below value and "sell" properties that they don't own.  Going thru a legitimate title company will protect you from those issues.

As far as wholesaling vs putting it on the MLS. It might be a case where the property is in bad enough shape that getting financing could be a problem. Also sometimes you get individuals who are embarrassed about their house or their living condition and don't want individuals coming in to look at the house.

Most of the wholesalers I see in Dallas are asking for $5,000 earnest that goes hard from day one with no option period, and are expecting all cash offers to play.  They are also using their own title company.

I am a little confused about what the realtor is trying to accomplish, maybe to avoid paying a broker? (which isn't ethical)

Here is the thing at a higher level, if you are uncomfortable with the ethics of the seller or the real estate agent, isn't that enough of a red flag to walk away?  Here is the thing for us, our goal is to build slowly and ethically.  IF we don't feel comfortable with an agent, or a seller or a transaction, we will just walk away. 

There isnt a deal on the planet we would do with someone who we felt was unethical, real estate is a long game, almost no one gets rich on one deal.  I don't want to be associated with people who are unethical and the risk reward of dealing with someone who doesn't seem on the up and up isnt worth it imo.

Originally posted by @Brad Bellstedt:

Investment Info:

Single-family residence buy & hold investment in North Las Vegas.

Purchase price: $94,000
Cash invested: $20,000

My wife and her mother purchased a small 3 bedroom for $94,000 back in 2009 and when we got married in 2017, I moved in with the two of them and we became 3 way owners. Fast forward to today and we've saved a good amount of money and have opened escrow on our new home. I've listed this property for rent and have my first showing tomorrow. (9/1/19) I believe I can get $,1450/month and the mortgage payment is $715/month.

What made you interested in investing in this type of deal?

I like the security and long term returns of buy and hold investing.

How did you find this deal and how did you negotiate it?

I fell in love with and then married the owner. It's a real long-term play. Costly, but the ROI in invaluable ; )

I am assuming this isn't a repeatable strategy, I mean it would be tough to get 2 houses this way, let alone 15 or 20, am I correct?  :)

Sounds like a great plan.  Its kinda how my wife and I began, we bought a place, lived in it, and then rented it behind us.  We have done that 4 times now. After a while it gets old moving.  But imo its the easiest way to start in real estate.

Thats what we did, our first "real rental" was a duplex, and we lived in one side in order to get it. I dont know your situation, but buying a property, say a duplex or a quad, or even just a regular SFH that you can rent out after living in it for a year or so is a great way to get started.

I definitely would focus on a nice solid rental. Something that needs minimal rehab.  Maybe a paint job or at the most paint and some new flooring to get it rent ready.  Dont worry about super big returns etc.  Just find a nice easy good solid property that will go up in value and rent over time and get used to how to be a rental.

Unless you have very deep pockets, or have real meaningful construction experience, I would stay away from trying to do major rehab on your first property.  Its usually going to be twice as expensive and take twice as long as you expect.

THEN in subsequent houses you can try to progressively do more and more rehab, and push for bigger returns.



THEN in subsequent houses you can try to progressively do more and more rehab, and push for bigger returns.

Welcome!!!

 A few things:

1) Be fair but firm.  Some tenants will try and pay late, or in installments.  Don't let them.  And charge the permissible late fee if they try. 

2) It usually takes 12-24 months for us to get a new property stabilized to the point where it starts to return cash.  I don't care how clean the inspection is, or how nice the property looks, it always seems like a newly purchased property is going to take a few thousand to get rent ready.  AND its going to take a turn or two to get a handle on what the market expects for rent.  And when the best time to have your property come due.  In our DFW properties we find leasing in the spring brings an 8-10% premium in rent vs finding a tenant other times of the year.

3) Turns between tenants will cost you a lot more than you expect.  Ours are $1,000-$2,000.  Seems like a property magically has an appliance die when you get a new tenant.

4) Keep reserves, see 3, a grand on new paint, and there is always something else.  On our last turn we redid a driveway, (planned) $3K, $1K on insulation and clean up,  new tenant moves in, and low and behold we had a leak.  Time to replace a roof.....$5K we didn't expect...

5) IF you choose to give a discount, make it in the last month.  Sometimes a tenant will say, will you knock off $100/M?  IF we choose to offer a discount, we would not give it $100/M, we would do 11 months at our asking price and 1 month of $1,200 off in the last month of the lease, provided the full term of the lease is completed and all payments are made on time.  Those who don't accept those terms are unable to afford the rent in the first place and you don't want them as tenants.

6) Be patient when looking for a new tenant.  THE worst tenant mistakes are those where you "settle" for a sub par tenant and find out that you ended up with a headache.  Have enough reserves so that you are willing to take a month or two of vacancy.  Trust me that vacancy will be the best money you ever spent.

7) Make sure all tenants apply and pass your criteria.  Have had several boyfriend/girlfriend combos where one applies and their credit is fine, the other half of the couple has a 500 credit score.  We pull credit, no evictions, no criminal record, and 3x's the rent in salary are our minimums.

8) Actually call and verify employment and rental history.  Call the landlord before the current landlord.  The current landlord might give a glowing recommendation just to get rid of a crappy tenant.  The landlord prior has no such incentive.

9) I don't know what world we live in today, I cant imagine having done this when I was younger, but tenants, especially young ones have no issues breaking leases.  Its tempting to want to hold a tenants feet to the fire when it comes to their word and a signed contract, but you know what?  Sometimes you are a LOT better off cutting ties to a tenant who wants to leave.  We will keep the deposit, and usually negotiate a deal for the tenant to move out.  Its not worth keeping someone in the property who cant or wont pay.  pull the band-aid off quickly.

I know it wasn't one thing, but I Hope these help, best of luck to you!!!

starting with the end in mind is a great idea. I don't know what your net worth is, but if you are just getting started, a couple things. 1) its going to be nearly impossible for a new LLC to get a bank loan. 2) I believe you live in Texas, if so your personal homestead can not be taken in a lawsuit. retirement funds 401K's and the like are not subject being taken either.

So if you buy a new property, you probably wont have that much equity, at least at first.  At least not enough to have a bullseye from the next ambulance chasing lawyer.

Plus if you screw up and don't keep the LLC separate from your personal finances, and you get sued, its possible that the LLC gets pierced anyhow.

At some point it becomes worthwhile to no longer own in your own name, but I think there is a level in there where you are better off buying in your name to get the loans, and having an umbrella policy as initial protection until your real estate business becomes sizeable enough.

The yield curve is a graph of the interest rates for each US bond.  So if the yield on the 3 month us treasury was 1.5%, and the year was 1.6%, and the 2 year was  1.65%, and the 5 year was 1.75%, and the 10year was 1.85%, and the 30 year was 2.0%, then the yield curve would NOT be inverted.

IF however the yield curve looked like:

 3 month us treasury was 1.5%, and the year was 1.6%, and the 2 year was 2.5%, and the 5 year was 1.75%, and the 10year was 1.85%, and the 30 year was 2.0%, then the yield curve would would be inverted.

Because the rate of return you are getting on the 2 year is 2.5%, and the rate of the return on the 10 year is 1.85%.  Ie the 10 year pays less than the 2 year, its inverted.

Typically the yield curve is thought of as a potential leading indicator of an upcoming recession.  Now history tells us that an inverted yield curve happens 12-24 months before a recession.  BUT its not uncommon for the yield curve to invert and there not be a recession.  

And we can discuss the merits of how much influence the global central banks have on the market dynamics.  For example the Germans just sold negative interest rate 10 year bonds (maybe it was 30 year notes), so there is some thought that bond buyers are flocking to US bonds because they pay more. (which lowers our long rates, while the short term rates are heavily influenced by fed policy.

So yes the yield curve is inverted, and yes it might be a signal of a recession ,but it doesnt automatically mean we are headed to a recession, nor do we know how bad a recession would end up being.

 2 consecutive quarters of negative GDP growth.  

I think one has to consider refinancing risk.  I think you are in good shape in a downturn with most modestly leveraged properties.  The problem is if you have to refinance in the middle of a recession.  what do you do?  I would not want to be sitting on loans that had to be refinanced in the next 3-5 years. 

 Who knows if banks will be lending on multi family properties that are under water in a recession?  and if they do what if the rates go way up?  will those multi family deals still do ok? (honestly I think you can rinse and repeat for really any asset class)

I Think having reserves, long term financing, and cash flow is the best way to make it thru if not even prosper in the next recession.

 Houston is a lot more stable than Chicago.  Illinois is a hot mess.