All Forum Posts by: Blaine Alger

You want to buy at a HIGH cap rate because a cap rate is essentially telling you the return that you will derive from that property and you want a high return. However, when selling, you want to sell at a LOW cap rate because that means a higher sales price. Cap rates are more common talk in commercial deals because they are traded based upon market cap rates but it is a good measure for investment properties as well. The only thing you have to keep in mind is that cap rates don't determine the value of a residential property like they do on commercial deals because SFH are valued based on comparable sells.

Check out this article and go watch one of the webinars BP offers. They will usually give you a run down of a deal analysis and give you some practice with cap rates.

https://www.biggerpockets.com/...

Shoot me a message if you got any other questions. I am always glad to chat!

-BA

I hear seller carry back mentioned more in big commercial deals when dealing with larger capital contributions and the more creative financing structures but i haven't really heard it brought up much in the residential investment space since bank financing is fairly easy to come by.

I pitch a lot of owner finance to seller and I would imagine it is a long the same conversation lines as a seller carry back. The bigger hurtle is just getting people open to the idea. Most people don't have any patience and want their money now opposed to later. To make this attractive to someone, you would most likely offer a interest that is above market and have a fairly short payoff ( a year or so).

I hope this helps. Shoot me a message if you got any other questions. I would be glad to share my experience with the owner finance conversations.

-BA

@Alexander Wehrmann

I would love to see some data on what is actually available in terms of the small multifamily. I do know they are out there, you just have to know where to look. I doubt you would have any luck on the MLS (unless you have the right agent and are moving fast) but I have had some luck with some off-market.

Part of your problem might just be your market. There is a lot of competition in Dallas and it can be hard to compete with those big guys. Like @Mason Moreland said, check out those smaller, mid tier markets. That is where I like to focus my time.

-BA

Yee Haw Firen, welcome back to Texas.

I am located in the Central Texas (Waco) market and this is where i focus all of my marketing efforts. I really like the mid tier market and they still present plenty of opportunities to meet the 1% rule. I also like the fact that there is less competition compared to the big cities, especially in the off-market space.

Honestly, I don't think you could go wrong with any area in Texas right now. It would help though if you at least had some type of familiarity or connection with the area, so Dallas  would be a good choice.

Feel free to reach out if you wanna chat some more!

-BA

This is something I see investors struggle with all of the time, even the more experienced ones.

The best advice I can give you is to go to Lowe's  or Home Depot at 6am with some doughnuts and hang out in the parking lot. This is where you will find the guys who are serious about their work and get up early to get after it. 

I have heard this multiple times on the BP podcast and thought it was a great tip. I hope you are an early riser.

Best if luck!

-BA

I would say go for it. 

Don't try to talk yourself out of the deal. If the numbers make sense and there is some cashflow, pull the trigger. The probability of failing is very high but if you never fail then you won't learn.

Obstacles to overcome:

1. Financing

To get a mortgage from a bank might be tricky given your age but with your part time job, you might be able to fins some money or you could get a parent to cosign. Without bank financing your other option would be to convince the owners to owner finance the property to you which is very probable given your relationship with them. My best advice would be to go talk to several lenders in your area and just see what is possible, they will have a better idea of what you are capable of.

2. Converting back to a duplex

You will need to check with local zoning restrictions to make sure that the property hasn't been rezoned since it was converted. Then you will need to find a GC you trust  and that is capable of the work. I think finding a GC is the hardest part of the RE investing puzzle and many experienced investors continue to struggle with it.

3. The pool

You already had a sense that the pool would be a liability. Personally, I would probably keep it there while I would be living there (if my insurance allowed) and then once I moved out, I would fill it in. I would having a harder time sleeping at night having the pool there while I was not on site. Additionally, the pool just presents added maintenance expense and cuts into your cash flow. 

Best of luck to you and feel free to reach out with any other questions. I am always glad to help.

-BA

Congrats on taking the first steps by posting in the forums to seek out more information. There are so many people who will just sit on the sideline and never take the action to learn what they don't know.

I would encourage you to continue to build your knowledge through all of the podcast, blog and other resources that Bigger Pockets offers while seeking out individuals who are doing what you want to do and try to learn from them. You might not think you have much to offer, but if you have the hustle and the drive, there are a number of investors out there who would love to have your help.

Feel free to send me a dm, I am always happy to talk some Real Estate.

-BA

Joe, 

If you have the resources and the ability to jump into RE now, I would encourage you to go for it. You will learn 10x more by actually doing compared with getting sucked into the education vortex. Don't get me wrong, education is key and very important to building the fundamentals but there are many people who use it as an excuse not to take action. 

Now the tricky part to your situation, given your age, is that banks are not going to be that excited to lend money to a 20- something year old. If you have keep a consistent job throughout college or have a parent who is willing to co-sign on a mortgage it might be a little easier but without a job no bank will be lend you the money. Once you are employed, this will be a different story.

In regards to the boutique v. large firm: In depends what you are looking for. At a large firm, you will most likely get paid more but at a smaller boutique firm you will have more flexible to pursue your own investing. Personally, I would rather go with the smaller firm,  less BS to put up with and more freedom.

Best of luck to you and feel free to reach out. I always enjoy chatting with like minded individuals.

-BA

Brandon,

Congrats on deciding to make the jump to RE, I seems you have a great start.

I would suggest before you get started doing anything is to go and talk with some lenders to see what your financing options look like. Obviously, FHA is the way you want to go but you need to see how much the bank will allow you to spend.

When looking at cashflow for a house hack, I would make the argument that it is not a big concern if the cashflow isn't there. For a house hack, your main objective is to reduce living expenses. So if you have shell out $150/month to cover the mortgage when it would cost you  $800/month in rent, you could consider that a win. 

There are definitely others out there who would disagree with me and they aren't wrong. There are deals out there where you could potential cashflow  $500/month on a house hack but you could be on the look out for a couple months. 

Moral of the story: It is more important to take the leap and buy the house hack with -$50/month cashflow then it is to spend months looking for the perfect deal. The learning will be more valuable than the missed cashflow. Once you get your first house hack under your belt, you can get more picky, haha.

-BA

Congratulations on becoming debt free! 

I think the first step is just having the courage to reach out to others to start the conversation. As a beginner,  it can feel very daunting reaching out to someone who is operating at a higher level. I would encourage you to push through this fear and start to seek out individuals who are doing what you want to do.  It will feel uncomfortable at first but the more the more people you meet with, the more knowledge you will gain and then these conversations will feel like second nature.

In terms of where to find these people; bigger pockets is a great place to start as well as social media. There are a lot of groups out there who are doing virtual meet ups and masterminds.

Keep up the hustling!

-BA