All Forum Posts by: Chad Matthews

The uninformed mind always says no ... the inexperienced heart is always cautious ..

And ... in a very practical sense, I have found that "buyers" don't realize that "buying" real estate isn't like "buying" a car or a hamburger or a new coat. When a "buyer" buys most items, the money is gone and the item is consumed. "Buying" real estate is simply moving my money from one place into another place (i.e. my bank to a new property) The money isn't gone, it is sitting as equity in the newly purchased property. Provided the mind is informed (due diligence is critical) then inexperience can only be overcome by taking the step toward experience (that often means doing it with somebody who has experience). Remember being a little kid and crossing the street? - It always felt safer to do it with somebody else!

Hi Brandon -

The deal of a lifetime comes along every 15 minutes - so be careful when others are giving you numbers that don't add up. By nature, we all skew numbers in our favor - and wholesalers are no different. I have always used a metric of only paying up to 70% of after repair value. That is, I determine what 70% of the after repair value will be, then I subtract repairs from that number, and offer that number. This has worked in my area for me - and helps to mitigate the unseen things that can pop up. 

These margins allow me to sleep at night, pay for repairs rather than do them myself, and even have a property sit a little longer than I've planned if needed.

Always always always double check numbers and always ask yourself about the motivation of the person who is supplying the numbers.

Good luck.

Hi Hari -

Every situation is different and each investor has different goals. Buy and hold, long term play, cash flow now, etc. If each property costs you $1 per month, then you will eventually run out of money - If each property makes you $1 per month, you will never run out of money. Obviously that is a ridiculous oversimplification but, hopefully you are able to see the point. 

I also live on the West Coast where property values and rents are crazy compared to many other places in the country. For me, I have always been happy and comfortable when I have 25% equity (that way if I have to fire sale I'll still be okay - of course, the equity comes from forced appreciation through rehab or increased rents depending on the property). 

Take a close look at your balance sheet and don't overextend. Break even may be a great strategy if you have a property in an stable area where demographics indicate that rents will be strong over time.

Lastly, I would ask, "what is your risk tolerance" and "why are you buying the property. I now pass up properties that I would have bought in my earlier days when I was more willing to be aggressive and gamble because I knew that I was willing to hustle more to make a deal work. Now I am a bit more conservative. Minimum 25% LTV with "safe" numbers for repairs / capital expenditures. I sleep well at night and don't need to rely on income from my rentals because I live on my W-2 money until I retire in 7 years - by then, inflation will be on my side - my payments will be in 2010 dollars (when I bought properties) and my rents will be in 2026 dollars.

Good luck with your investments in N. CA (I grew up in San Jose, and lived for some time just north of Sacramento)

Hi Harold. I'm not familiar with the tenant laws in NJ. In my state I would document, non renew, and then fix up once the tenants are out. Tenants in my state are always given the benefit of the doubt. Honestly, a savvy tenant would suddenly turn their dog into a therapy animal and you would be stuck with it anyway.

You are likely to be money ahead just riding it out rather than fighting and paying attorneys. A wise property owner once said, "Tenant problems are always temporary" - that phrase sticks with me when dealing with these issues.

Either way, best of luck on your new purchase.

Just getting started is the most important part, Start small and realize that education has a cost in time, money, lessons learned, etc. My very first deal was a foreclosed mobile home for $4,500 that I sold for $20,000 - the best deal I have ever made profit vs. investment.

Consume books, read posts, listen to podcasts. BP didn't exist back when I started so you have a huge advantage over those of us who are more "seasoned". 

You will begin to develop your style, your mindset, and your goals - find people who know more than you do and be willing to work hard and hustle. 

The books will give you some confidence but nothing will beat getting your hands dirty. Remember that every step is a learning step and you won't always hit homeruns.

There is joy in the journey. 

Your post reminds me of the old adage of slow and steady winning the race. I don't know if it is always true but I certainly believe that bad debt, stupid debt, greedy debt, can sink people quickly.

Motivation is a personal matter in every transaction. The deals I like to find are where both seller and buyer and seller find that their needs are met. 

A true example  I came across some time ago was a lady who wanted to sell her inherited property quickly. Her mom had lived in the home for many years, it wasn't updated, and some back taxes were owed on the property. The daughter who inherited the property lived several hours away. Her motivation was to be done with the long distance headache and any money that she realized from the sale was like "bonus" money to her (similar to how folks often view their tax returns as "free" or "bonus" money). Nonetheless, she wanted cash quickly and wanted out. 

Wholesaling can make the process quick and simple and the former owner walks away with less cash but also less hassle. People trade money for less hassle all of the time - like paying for a porter to carry luggage!

I personally couldn't every see myself selling wholesale, but I love buying wholesale!

If you have 1 tree and it grows you have some shade. If you can plant a second and third tree you have a grove. Add a 5th or 6th tree you end up with a park and many many trees lead to a forest. I like planting trees rather than cutting down my trees as they are maturing. Unless of course I find better soil with better conditions where my trees will grow faster and stay healthier or somebody wants to sell me trees that they have planted for a discount. (Please forgive my tree analogy ... I'm a true Oregonian at heart)

Hi Jorge. Nice job getting in the game. Your post tells me that you are well on your way because you are able to delay gratification, set goals, and patiently pursue strong financial positions. 15 yr loans will always cost you more monthly but less overall. Of course, consider the value of money that would stay in your pocket with 30 year loans and consider what you may be able to do with that additional cash. For simplicity sake, if you can afford 1 property on 15 yr loan or 2 properties with 30 yr mortgages you double your growth potential (and loss potential) with 2 properties (last year I bought 2 properties with 30 yr fixed loans - both have cash flowed and gained more than 50K in equity. Because I went 30 year I was able to afford more. Both properties cover the mortgage and then some and I've had the bonus of doubling appreciation and buying down 2 mortgages vs 1 and realizing the depreciation benefit of both properties)- for me the question is the end goal and your risk tolerance. As we use to say on the farm "there is more than one way to skin a cat" (yes ... that is a disturbing phrase and no ... we never skinned cats!). Best of luck with your journey.

Hi Josiah - I have had great tenants but nobody cares about your investment like you do. If the tenant wants to hire a plumber then the solution is easy. You draw up the document that requires the tenant to reimburse you for the upgrade. Use a licensed plumber for warranty purposes of course. Good luck.