All Forum Posts by: Christopher Phillips

@Marque San Juan

Okay.

Cap rates are for commercial properties. 5+ units or retail spaces.

1-4 family properties look at cash flow and cash on cash returns.

On a side note, NOI doesn't include debt service or reserves. NOI is about looking at operating income less operating expenses, so debt service doesn't come into play.

@Marque San Juan

What are you buying?

@Benjamin Mann

You have to call each local utility company.

Electric will cost you to run wire to the house and install meter.

Gas will cost you to run line to the house and install meter.

Water and sewer will also need to be run unless you're digging a well and putting in septic.

@Devlin Melvin

HELOC are for primary residences. Banks won't do them for investment properties in an LLC.

LLCs are corporation. If you have a property in a corporation, you'll have to get a commercial loan with 25% to 30% down.

Some people will get a multi family property in their name with traditional financing and eventually transfer it to an LLC. But that will prevent you from getting a HELOC down the road.

LLCs don't protect assets. They only protect your personal assets from creditors if the business fails. It doesn't protect you from lawsuits. That's what insurance is for.

@James Kirby

Everything is done electronically now with docusign or dotloop. Not only is it quicker, it's also saved electronically for your records.

I'm sure you'll have skills for the job. But it's not about skills. It's purely about time. If you don't have time to generate leads, it will really prevent you from getting your business going. Don't get me wrong, there is a lot of time wasting in real estate like waiting between appointment

Pure stats: 50% of the agents didn't do a single transaction last year. Has nothing to do with skills. People that sign up as part timers rarely get going because they are working their day jobs. Most of the business is done by a handful of agents that work full time. Part timers fade out within 90 days. Once you hang your license, if you never show up at the office again no one will notice.

Also, you decide where you want to hang your license. You interview brokers based on where you want to operate. You'll be an independent contractor. So, generating business is up to you. If you don't have time to generate business, you won't have clients. It's purely about time.

A productive agent will spend 2-3 hours each morning generating leads through phone prospecting. Then afternoons and evenings on appointments. Yes, you could generate leads while on your off hours, but I rarely see part timers doing that. They usually fall into the trap of buying leads and wasting money. You can easily burn through paid leads and never convert them. Zillow, which is expensive, has a 1% conversion rate, so you have to talk to 100 people to get 1 good lead. It's not a skills thing, people tend to not be qualified or just looking.

And, having a partner means you have to generate twice as many transactions for the same amount of income. As an example, you get a $1,500 monthly rental client looking for an apartment (most city agents do rentals). You'll split some portion with the office. Just for math purposes, 1/3. Then you split with your partner. So, you'll end up with $500, which you have to pay taxes on. If you closed one rental transaction per week, which would make you a top agent in your office, you would gross $26,000 per year.

It depends on how much time you have. Agents are independent contractors. There really isn't a part time vs. full time unless you're on a salary like at an apartment building. Splits are the same if you show up every day or don't show at all. You only get paid if you have a transaction like a rental or a sale. Brokers don't give you leads, you have to generate them yourself. If you just want to be a buyer's agent, the broker will split most of it in his/her favor because they are generating the leads or paying for them. If you put very few hours into generating business, you'll have very little business. I tell people it's like having a shoe store that is only open 4 hours on Saturday morning. Buyers and sellers like to work around their schedule, not the agent's schedule.

A productive agent's day is spending most of the morning generating leads and then going on appointments the rest of the day. If you only have a few hours a day to conduct business, it's not impossible, but you're going to spend more money on licensing and training than you'll generate in business. You'll have $700-$800 dollars per year just to be a member of the Board of Realtors. Monthly tech fees from your broker. Continuing education costs. Monthly data costs or online lead costs (Realtor.com, Zillow, Homes.com, FaceBook, etc.).

 Your bank would order an appraisal during the finance stage. You don’t need to order one on your own.

An inspection is good to find some unknown issues. Are the power and water turned on?

Unless your agent is a contractor and going to do the work, find a contractor to give you estimates for the repairs.

Your agent should give you a full CMA, not just some comps. You also need to know the after repair value as well.

 Then it really comes down to paying above list and the fact you have to make repairs before closing. That’s generally a bad move, especially on REOs. Those fall apart all the time already, and you’ll have zero recourse on your repairs if the deal go south...

@Jessica Baca

Well, if you sell it on the market, you get the net proceeds after the closing costs to use elsewhere, potentially with some tax consequences.

If you do a deal with the investors, you'll continue to build equity over time while they pay down your mortgage.

I'm assuming that they'll get the title.

Seller financing is usually with a free and clear property. What you're doing is a Subject To and comes with some risks. You are essentially selling your home but still hold the note. For them, you might not pay your mortgage even though they are keeping up their end of the deal. It only works if both parties stick to the deal and the bank doesn't call the loan due.