All Forum Posts by: Chris Jackson

(this comment is more related to MF commercial)

The only problem guys is 5 years resets on commercial loans.  Buy today, proformas, even conservative must reconcile the possibility with interest rate hikes in 5 years plus a down-turn.  In commercial world that 5 year reset is a full day of reckoning forced upon many investors.

That's why I like less MF deals right now but love ones with longer fixed rate periods with even a higher rate.  I can look an investor in the eye and say, we can ride this storm out if it shows up because of this debt structure. Pre pay penalties are huge as well.  

I love me a 20 year am 10 year fixed rate with no prepay penatlies.  Hard to make some deals work with financing like that but 5 years of principal paydown with a no reset in 5 years makes you look like a freaking genius if there is a downturn.

Now having said that I look like a goat if the MF flippers value-add something I think is silly right now and win big by selling 2 years from now on the ride that lasted that long.

Think back to 2005, you know you were sitting with your spouse like "how did they afford that 500k house?" they looked like they were winning for 2 years! 2 years is long time when you are in it but its nothing on a 10 year time line.  Then market tanks 2007ish 8ish and then is lose time.

I'm a more long term guy so yeah hot markets are frustrating but you have to freaking relax and have 3 proformas.  What you think it will do and probably can outperform but you don't show anybody the optimistic-realist proforma, then the realistic-realist proforma that you show investors because its conservative and you want to outperform, and then the doomesday proforma.  

I just want to put something out there that we have all heard before, "Home prices will keep going up"

What are we hearing now "rents will always go up".  **** I get it, demographic studies , blah blah blah.

Im just pointing out the similarity in the pattern. PS Im still bullish on MF , in contract on 60 unit but the financing is so sweet. Assumable loan love it.

Stay alert, stay cautious, increase the deal funnel for the more super sweets, win

@Greg H. and @Julie L.  kick *** responses.   Thanks.  I can widdle these down to probably 6 that I would offer on and then keep an eye in my follow up system for the ones that start to cross into 4 months-no-takers land.

@Jason Hirko 

Awesome! can you point me to a a few threads you recommend? I did some searching but it was more poke and hope.  

Yeah finding the slight pattern will help with the efficacy of the effort instead of just spraying offers.

Hi All I am about to hit the homestore. I am curious if anybody can tell me the liklihood if HUD homstore takes under asking? Also what is experience with how much % under asking.

We are cash buyers so I am not worried about POFs or the like.

I have about 15 HUDs I would put offers on that are about 15%-20% under asking.

We are experienced house buyers and have purchased through fannie mae REOs homepath etc so we know the deal but have not purchased through homestore before.

Thank you 

@Matthew Jones  I agree with @Tommy F. 

Nobody wants to hear that advice.  The notion of having enough to pay the bills from real estate investing within a 30-90 day timeline as a salary to pay bills for a family is from a snake oil sale's message. 

Also keep in mind you said you were going to house hack and then the refi but with FHA? In order to get the FHA loan the property needs to be in good condition so where is this new higher value coming from that you will refi and get a nice bump from the new value? FHA is pretty much going to set a value, then you would just be really crossing your fingers that is 2004 to 2005 again and get an artificial valuation increase withing a year.

There are 2 things you should do on this journey. 3 actually.

1) Yes get a job.  A job will get you financial stability and credit worthyness to get those loans that will be needed.  Also hopefully it will give a little bit of a reserve/emergency account that are always needed in real estate.  Always

2) Continue to further your real estate education and find deals for people.  Everybody misses this part.  If you are Mr Deal finder you will make money.  Let me repeat that. If you are Mr Deal finder and find actual deals you will make money.  So now you have a job and make money for people until you have your own money to invest in deals.  Making money for other people is the mindset you must adopt.  

3) Be patient. This is going to take longer than you thought, its going to be harder than you though but its going to more amazing that you thought in time if you stick to it.  

I view REI like I do when people ask me about what its like to be a Dad. When someone without kids wants to know whats it like to become a dad or about to become a dad. I say this wont make any sense to you but "its going to be the absolutely hardest thing in your life and the most amazingly awesome wonderful thing in your life, equally, sometimes in the same day hour and in same minute it can fluctuate"

Press on. Patience. Persistence. Relentless pursuit of your goal. Win

@J Frank cole (cant tag you for some reason)

Thank you agreed.   I will continue to outwork my competitors to keep this dream for myself and my family.  It's worth fighting for.

@John Leake  I think its great that you have a friend that trusts you, believes in you and is willing to front some money for you to get you involved.  I would caution getting into a partnership without any experience at all, especially with the arrangement you described with you managing the property.

The property manager is basically the key to the success of the property and you just described that the PM on this deal had no experience, you.  Why not search out deals where the income makes sense with a professional PM?

Is your goal to become a PM?  If so why not just have your friend hire you for a similar fee that he would pay a professional PM? This way you could get experience as a PM and he can fire you if you are terrible ;). Also, PS many times to be a true PM you do need a license to negotiate leases etc. You need to look into your local and state laws. Double check that.

Are you handy ?A good plumber?  A good electrician?  A jack-of-all-trades? Your partner is not?  Do you have connections to tradesman that can get things done and know how to manage them vs your partner who does not?

Partnerships are about 1 + 1 = 3. Always.  If you are not filling the void of each other's weaknesses and enhancing each other strengths the partnership will be stressed over time.

Is your partner just the money guy and does not want to do any work and is very interested in getting involved with real estate but is really just wanting passive income from the benefits of REI, thats fine too but know that he is really a money partner, which is also important but that would mean a different type of partnership and different expectation of you.

Sit together and really discuss what you want from each other.  Ask the really hard questions.  

Sorry I don't have a crystal clear answer but I would view your relationship with your friend as a real positive.  You have someone that believes in you and is willing to work with you. That's a really great first step.  

@Patsy Waldron

One could also buy 2 duplexes and a single SFR all with renters and package them up as commercial portfolio to the next investor when you are ready to sell. Just keep that in mind. Having options is critical. The beauty of creative thinking in REI.

Maybe on your sale of the portfolio of 5 you would rather have an appraiser apply more weight to the income approach because you were a rockstar and go the total NOI to a place that exceeds what the value would be on more of a comparable sale approach.

What I would do is just look for deals. Do you see a 5 unit ready to go that you know you achieve X NOI and thus beats out the opportunities you are seeing in duplexes? Do you see a duplex that you know you can buy at a discount, get the rents up and cash flow nicely? If yes then do that and buy another 1 after. Now you are starting to build track record.

Do you have the dream of moving right into bigger mutlifams? 10 20 30 50 100 200 units? If yes you can still buy duplexes but just know buying 5 units and up is a bit of a different paradigmn in brokers you are talking to, the banks you are talking to, the PMs(sometimes). It just a different lingo. One gets really obsessed with cap rates, NOI, above the line, below the line, I/O, prepay penalties, amort timelines.

Don't go too nuts on "i want this first deal to be perfect so that is set ups everything from this point on the right way. I dont want to lose time"  Like I said if you see a duplex that rocks and fits your criteria go buy the thing. 

@Dwayne Jones 

I decided I wanted to be a real estate investor when I was 22 right out of college. I bought a Carlton Sheets informercial package.  I read it cover to cover and did........ NOTHING

I spent the next probably 3 years day dreaming about REI but not knowing what to really do next. Not knowing how to put it all together.

At 27 I started to really research foreclosures and once again really did........... NOTHING

At early 30s I started to research wholesaling.  My understanding of lists and marketing had increased so I did try a few times to send out mailers.  I did get calls and it was WORKING but I didn't get a deal.  I became frustrated.

At 33 I decided I was going to get a deal and I landed on buy and hold.  I found a mentor. It took me a year to find a deal. Bought a 5 unit , then an 8 unit 6 months later.  The rest is history.

I am 41 now....  I have truly been a real estate investor for  8 years but I have wanted to be a real estate investor since I was 22 years old.  Patience, persistence, hard work, relentless pursuit of your goal, win.

I agree with @Anthony Gayden 's points. I don't necessarily disagree with you @Jon Q. but the all is lost for W2 tonality is not giving a large percentage of W2s their due. In fact I would say that the chips are stacked FOR you if you are solid W2 earner.

Being a W2 with awareness of the access to the wealth buildings vehicles such as multifamily, single fam rentals, flips what-have-you is really unprecedented and quite powerful in a very profound way in this day and age.

My wife is a W2.  I own another business in tech industry.  Back when I got my first commercial loan, I had a prior blip on my tax returns for 2 prior years prior to the year I was applying for the loan. (think 2008 and 2009).  Personal guarantees were required and my past blip wouldn't get over the hump even with the income of the property on my own. 2010 was not a fun year to try get a commercial loan, way different than today. My point is, my wife had to sign on the dotted line and with her 6 year W2 history at same company the loan was approved. W2 saved the day.

Since that time I have a different view of W2. Even though yeah I know the maxims and agree with the whole "your source of stability is your own"  but if you have a good job that has stability, even has perceived stability, not blind stability, there is power to the W2 earner.

The W2 earner does not need to be an accredited investor to take part in all opportunities.  Accredited investor status is required for certain PPM designations.  

I believe your point was more about if you are a W2 and expect retirement savings if you are lucky with your 401k to get you to where you want to be when you retire then yea, that is taking a gamble given the access to wealth building vehicles that are possible in today's world.