All Forum Posts by: Chad Carson

Welcome @Valerie Davis! You're in the right place.  

If you've been in any type of sales career, it will serve you very well in real estate. I wrote an article on BP earlier this year about  7 ways to get started in real estate investing (other than wholesaling), and with your sales skills several of them could be a good fit.

I would recommend focusing your study and education. There is too much information on BP and in other books. Create a plan for learning, just like you would for anything else. And then set out to acquire the knowledge you need.

@Craig Bowen  - thanks for sharing the YouTube video. Glad it's been helpful!

Zach,

I agree with both previous posts. I wouldn't put that much capital into a deal I don't own. It's just asking for trouble. 

So I'd see if I could negotiate a deal with the seller for owner financing. If the terms are similar to the lease option, there probably wouldn't be a whole lot of push back. 

I live and invest in Clemson. Send me a message if you want to discuss it more.

Best of luck.

I look forward to the chat! Thanks for organizing, Mindy!

Hey @Garrett Crain. 

Welcome to BP. This is the right place to be to learn. 

I recommend a few places to start:

1. The Ultimate Begginer's Guide

2. The BP Blog (I post article there, too. Here is a list of my articles)

3. The forums.  Type questions you have, follow topics you're interested in, and ask people (like me) questions by typing my name. I have an alert that notifies me when that happens. This is a really great resource that can answer just about any issues you have (for free).

Best of luck!

Chad 

Hey @Blair Boan

I'm in Clemson and have invested in Greenville, so I'm pretty familiar with the market. If nothing else, this exercise is worthwhile to do so that you can figure out the pieces of what really makes a good deal.

The bottom line question you need to ask yourself is "How do I plan to profit on this deal?"

For me, it should fall into one of 2 categories:

1. Current income from the rent

2. Future equity from resale.

It's best to have the deal work just from #1. Your deal doesn't have great income numbers. In fact, I'm willing to bet it'll be very negative.  

$1,300 x 50% (likely expenses) = $650/month net operating income.

If you bought the property for $190,000 and put $38,000 down (20%) and borrowed $152,000 at 4%, your payment would be $725/month. 

$650 - $725 = $-75/month or $-900/year. Ouch. And that's before paying interest on your HELOC for the down payment.

So we know #1 - current income won't work unless you get it a lot cheaper.  But what about #2 - future equity?

Lots are selling for $112,000. So we can't tear down your house and make any money at $190,000.

What about adding on? If your house is 1,200 sqft, can you add on 1,000 sqft wing?  At $100/sqft cost, you'd add $100,000 to your $190,000 purchase, plus carrying and closing cost + remodel cost of the existing house. So you'd be well over $300,000 cost, maybe $350,000 or so, with a 2,200 sqft remodeled house.  If you can resell for 200/sqft that could work ($440,000 value), but is that possible? I'd be a little nervous. 

That's about all the possibilities I can think of.  It doesn't seem like a great deal, and unless you have the capital to do a big add-on remodel and unless the market will support it, I'd pass.

The good news is that there are always more deals. keep hunting! Best of luck.

Hey Ben,

Aside from all of the subject-to issues brought up by prior posters @Brian Gibbons and @Bill Gulley, does this deal make economic sense?

Let's say rent is $800/month. I'll guess at some expenses for the sake of an example.

$800 = Gross Income

- $40 - vacancy reserve 

$760 = Gross effective income

- $76 - 10% management fee

- 75  - maintenance and turnover costs

- 50 - cap ex reserves (this number could vary wildly, so this may be low)

$560 = Net Rent before PITI payment

- $494 = PITI payment

$64/month positive cash flow x 12 = $768/year

So you're buying a deal with:

• ZERO equity
• potential subject to issues
• $5-10,000 cash required up front
• only earning $768/year. 

Personally, I'd pass and look for something better.

But that decision comes down to your own goals and criteria.

@Christian Beyer,

Congrats on hiring a  property manager. It's a big step, and there will certainly be a lot of lessons along the way - including how to account for it in Quickbooks.

I'm a little confused in your case how you're using your property manager. Are you still collecting the rent? Or is the property manager?

The property manager typically collects the rent, pays maintenance expenses, and then cuts a check to you for the balance.  Here's the process I follow:

1. Receive net check from property manager along with a report detailing all income and expenses that produced this net check.

2. Deposit to my checking account using the account "Petty Cash"

3. Create a general journal entry (go to "Chart of Accounts," right click, "create general journal entry")

4. On the right side of the journal entry (Credit) will be a break down of entries like Income: Rent. On the left side (Debit) will be entries like Expense: Property Management and Expense: Repairs/Maintenance.  The final line on this journal entry will be a debit (left side) to Petty Cash in the same amount as the original deposit.  This will zero-out your original petty cash deposit. 

5. On the journal entry I also break down each line by property by giving each property a separate class (this is important for later Profit and Loss reports).  

Here is a screen shot of what the end result of this journal entry looks like:

 Keith,

Congrats on starting your process here on BP.

Short sales are sometimes on the market with realtors anyway, and some banks require you to list the property even if you do find it before it is on market.

But in either case, one thing thst may help your chances is a faster source of financing. Traditional financing with 20% down is slow compared with your own cash from a line of credit, from a private lender, or from hard money. The best deals often require moving fast, and waiting for final approvals, appraisals, etc can hurt you.

Best of luck!

Chad

@Cornelius Charles that is awesome! What a success story!! 

I can't speak for others on BP, but hearing about people like you who go and apply what you learn keeps me coming back. It's what they call a virtuous circle;)

I do hope you share some details, lessons learned, and future plans. 

Best of luck with your 4 flip goal in 2016. Reinvesting profits into marketing is a wise first step.

Chad 

Hey @Alex Sanfilippo. Thanks for digging into the articles and asking questions here on the forum so that everyone can benefit.

#1 and #2, I don't have anything to add to @Steve G.'s good answers. 

#3 - Yes, I was suggesting a short-term shadowing session. I was suggesting that you pay, because you've got to break through the clutter with a busy, successful person.  If you're really sincere and show you're prepared, you may catch them on a good day and can just ride around with them.  If you also find someone to be your listing agent (#5), you may also be able to get this for free if they know you're serious.

The point is that you want to pick the brain of people who eat, breathe, and daily hustle in the arena where you want to fix and flip properties. You'll learn more in that 1-2 hour shadow session than any book or article can teach you.  And that knowledge will help you when you go to buy properties and make offers.

#4 - You will need a license to refer listings and earn a referral-commission.  That was one of the reasons I suggested getting your license. In this case, I advocated getting your license for the education, the connections, and the back-up income (referrals), but then not becoming a traditional agent. You're in the game to buy-sell.

#5 - You don't need to have a license in order to hire a top-notch listing agent. What I'm suggesting here is to hire someone with expertise in getting properties liquidated at retail price. This person, will then be able to help you during the entire process - from purchase to rehab to staging to listing. Especially early on, you will need this expert help, and it's a fairly cheap price at perhaps 6% since you'll likely have to pay money anyway to get it on the MLS.

Best of luck! I look forward to staying connected.

Chad