All Forum Posts by: Joel Owens

The issue I run into on my listed properties as a broker for my clientsis middleman investors who have no money and are facilitators.

They don't want to put any skin in the game and a paultry earnest money.My REO sellers usually WILL NOT allow assigning.

Basically the buyer investor wants no liability and if they can sell to another buyer for a fee the deal will happen.If not the bank just wasted months of time because the bank won't know the capability of the C buyer when found to close a deal.

I have no problem with investors who want to purchase and close and then resell as long as it's not predicated on finding a C buyer.

There are plenty of direct cash buyers out there or investors buying directly to not have to tie up a property for a bank.

Investing and returns will vary by individual.

It depends on what part of the investing cycle you are in.

Someone who is trying to grow money at an accelerated pace is in the (wealth creation) stage.

Someone who already has size able assets from an inheritance or years of investing in more risky ventures for a higher yield is in the (wealth preservation) mode.

These investors want a strong asset with low risk for good yield maybe 7 to 8 percent.They want tax benefits,make more than yearly inflation and cost of living,and live off the interest.

In this way it's about preserving a lifestyle and way of life. So when I work with investors the first question is where they are at in the investing cycle.

In my area pharmacies offer great stability.

Glad you took a pass.Sounds like to me this contractor bought a bad deal and is now dumping on you or someone else to get out of it.

Foundation repairs can be EXTREMELY expensive. With other repairs you can often exceed the value of the property.

I usually market these types of properties to foundation company owner/investors as they can do the repairs for a fraction of anyone else.So where the numbers wouldn't work for other investors it works for them.

I know one guy that buys these and does about 3 to 4 a year and makes over 100k on each one.The home buyers can't get a loan and most of the investors won't touch them so the bank dumps cheap for cash.

I would venture to say your 15k estimate is on the low side.What most likely happens is the renovations costs more and the months it takes to sell the market slides more. You are then left with a lower ARV value and higher RENO costs and almost zero to maybe a loss in profit.

Now you have a bunch of money sunk into a property you can't sell and have to rent. You only want to hold rentals because of quality and location and not because you made a mistake.

So when rehabbing look at the expected renovation and time to sell and close.Then I would take ARV value today and if market is declining 2% a month and it's 3 months to sell and close I would deduct 6% and then another 2% on top of that for a buffer.

Are you a broker?? Are you an agent??

Please clarify...............

Try to leverage yourself into a bigger deal with your money.

You are running your numbers off of a positive scenario.You could have a nightmare on your hands in unforseen costs and vacancy.

If you have one vacancy with a duplex you are 50% occupied.With a quad you would be 75% occupied etc.

I always run very conservative numbers and then if the best case scenario happens I did better than I thought.

As to the point about C buildings taking years to lease up that doesn't happen if you buy correctly.

Due diligence should be performed in the local area as to what other apartment buildings there are with the age,unit mix,rents,amenities,location,and current occupancy levels.

Sellers and brokers like to paint a picture of our rents for example are 550 a month.

You have to ask the question WHY.Is it because the property doesn't offer amenities? Is it because the property needs a lot of capital improvements? Is it because the market rent they are asking is too high for the area leading to low occupancy rates?

So I usually will look and if other buildings are at 550 a month I want to buy and base my numbers off of 475 to 500 a month.This way I lease up fast and the rest if I get more is cake.Tenants want the nicest place at the cheapest rate most times with a decent location.

I don't want to increase rents where the lease up process is real slow.I want to increase cash flow fast for a little under market rent and then increase later on.

So it's all about buying it right.

A great topic going here.

In my neck of the woods most dirt isn't moving.Projects are being finished up that were started 3 to 4 years ago. Not many are building new in this climate and the cash equity players want to large of a share to inject capital.

The other thing is there are so many fractured projects you can buy from banks and re-purpose for a fraction of replacement costs.

Material costs are stable but labor is cheap right now for construction.

In my area usually they just set up an LLC for the project with a JV equity agreement. Many projects were formed with TIF's to offset developer costs and put more money in their pockets.

The land clearing and political red tape is where the costs get high.Finishing with vertical improvements the costs stay the same unless you are building something really unique.

For the right location a project can still get funding.Your prospective tenants are much more focused on smart controlled growth rather then getting in a space cheap.

I think the JV and private money is the way to go.

Bryan,

The point I am making is sometimes people think since they can do it all then EVERYONE can do it all.

The source for the statistics is data collected for NAR each year from an independent third party.Of course you will most likely say the data isn't worth anything.

You can take numbers and data and position them to bolster your position of course. Last time I checked NAR didn't invent that and every corporation in America massages data for their benefit.

No matter which argument you make one thing rings true.

The BOTTOM LINE is FSBO has been around forever. If it worked that well and there was no need for brokers/agents the industry wouldn't exist.

Attorneys some are good but some will rob you blind.They lure you in with a per hour rate and then try to drag the process out to make more income for themselves.

I have seen attorneys absolutely sink deals for clients and make mistakes.An attorney is a contract negotiator and many know nothing about real estate values or the art of the deal.

If you have time to do everything yourself that is great.Many of my clients don't have time.I handle problems for them and get paid very well for it.

As I was posting this to you I had to remember something. Real estate practices vary by state.In GA we are unusual in that we use a closing attorney instead of a title company to handle documents.

All the attorneys do here is prep documents for closing and be there for the lender. In GA the brokers/agents negotiate real estate contracts.

I know in New York and probably other states they hand over negotiations to attorneys.So my state is different in that respect. I could see maybe if a broker/agent had a much more limited capacity than I do in another state it might be different.

Remember also that unless they are a principal broker/owner like I am that they have to split the money with the head broker.

If you want a sobering statistic about the real estate industry the average income is about 35,000.That averages high producers to the ones that maybe do one sale a year.

Basically if you drew a pie chart and pulled out cost for brokers/agents there would be very little left in some cases.

There are some brokers and other investors that have been saying for the last 10 years that the sky is falling and that brokers/agents will be hourly paid employees.

Hasn't happened. I am one of the types that doesn't get mad at the system.I just look at the current system and use it to maximize returns to my advantage.

Bryan,

I don't think you see the value brokers/agents have as you do many things yourself which is fine.

You said it yourself as all we do "is fill in boxes".

Nothing wrong with that thinking but expecting a majority to agree with that thinking is not realistic.

If all brokers/agents did was "fill in boxes" then FSBO would handle all business in real estate and my industry wouldn't exist.

87% of For Sale By Owners end up listing and selling with a broker/agent.On average a FSBO sells for 16% less than a listed property does.So if you take out a 6% commission you are still 10% ahead of the game and are not doing the work.

These are actual statistics and data.

Nothing personal we just agree to disagree.

All the best and moving on to more topics elsewhere. :)

Has anyone closed a loan with CIII mortgage out of California?

They are asking to hold escrow funds to return at closing in a JV agreement where they collect 25% of monthly net rents and the owner gets 75%.They get 25% equity buyout in year 5.

Thanks for any info........................