All Forum Posts by: Chad Carson

Hey @Kyle Bigger. You're a big man for struggling with this topic and for putting it out to the BP community. Kudos for that.

I think @Brian Burke and others made some good points.

I have been in the business 13 years and have struggled with the same issue at times.

You mentioned that this is a recent phenomenon, but I think it's always true that a seller who cashes out at a discount could do a lot better. No matter the market.

I think short of not doing it anymore (always your prerogative), a practical solution I have come up with is moving towards more full disclosure.  

Why not clearly say to sellers, "you can make a lot more money taking your chances with a realtor or the open market." Why not talk them out of selling to you?  

I've tried this. It's very interesting. 

When you try to talk someone out of it, they start to tell you whether they really need you or not.  It also makes it clearer to you the value you're adding to their life when they tell you why they do need you.

I have a hunch that if what you're saying is true - that other investors will easily pay $10-50,000 more than you, just as fast, for cash, with little or no contingencies, you won't have to worry about this dilemma.  The market will take care of it for you as competition reduces the numbers of deals you can buy anyway.

But if you ARE still getting deals, maybe you are offering something of real value.  Maybe those other people can't do what you can do.  Maybe the certainty you bring to the table really is better than the others. 

If all else fails, before ditching the business, take a break from the super distressed owner occupant type sellers.  Work retiring landlord lists, estates, short sales, bank owned properties, etc.  I don't see anyone feeling sorry for banks:) 

Thanks for bringing up the issue Kyle. It's a good one for the BP community to tackle.

@Alec McCullough Nobody told you above you couldn't double your money in one year. My point was on your first deals, it's better to make sure you have some success than trying to swing for the fences.  It's like the people who sprint out at the beginning of a marathon and then stop and sit down after a mile. What good does that do?  Your financial success is a long haul, and you've done a good job saving $60,000 so early and getting a degree and a good job.

With all that said, I agree that a flip scenario is better right now. You have construction skills, you have cash, and you could probably use a private money loan or a local bank loan (not my preference, too slow unless you find a good one).  

But to my point about not sprinting, make sure you maintain good cash reserves and don't get ahead of yourself. There will be a lot to learn on that first flip.  Once you get a good deal under your belt with $20-30,000 profit, then you do the next one. If you hustle, it's possible you could do two in one year, double your money (not counting taxes), and accelerate from there.

I rarely find motivated sellers with properties that only need $10/sqft in work. I agree with @Joaquin Reyes that you need to get inside and do a better analysis.  Take pictures, use an estimating spreadsheet like the one in J Scott's Estimating Book, and get a better idea, even if it's a rough guess.

Then check out those low and high comps in person to see how similar your house is to the others.  You really need to have a decent idea of this house's potential.

Once you're more confident on the rehab cost and the ARV, then make an offer with a contingency, with enough profit for your end buyer, and with your wholesale profit built in.

I don't know how you did your MAO calculations, but with all of that and a $350k ARV, you'd be a lot lower than $276,000. Probably in the 100-$200k, or down there with your low comp at $96K:)

Share your actual analysis once you get your numbers, and I'm sure a lot of us could help you think about it.

Best of luck.

Flat tax plans are interesting to talk about, but no real chance of happening anytime soon - even if Carson does become president (again doubtful).

But this question isn't without merit.  The 1986 Tax act had a big affect on investment real estate values (negative) and it led to the Savings and Loan Crisis. They took the ability for passive investors to shelter a lot of their income with depreciation. Many of the buyers in the market bought for tax benefit reasons, so values dropped as they offloaded properties and as many lenders suffered.

What did Reagan and the other politicians want to accomplish at that time? 

"simplify the income tax code, broaden the tax base, and eliminate many tax shelters."

Sounds familiar. So, some kind of tax changes like that COULD happen in the future.

The lesson I take from history is don't buy investments counting on tax benefits. Buy based upon solid economics (cash flow, loan amortization) period.

Dylan NA

I am from the deep south in US, so I have no clue what Edmonton is like. But I do have experience getting started living in rental units, so I like the way you're thinking.

Big picture your goal should keep overhead super low, keep good cash reserves (3 months+ personal expenses, 3 months+ rental mortgage payments), acquire properties in the best locations possible that still cash flow well, and lock-in long-term, low interest financing. If you hang with that plan for the next 3-5 years, you'll be in good shape.

I liked your 2nd option of avoiding the big house. If you truly are getting your feet wet, it's good to keep your outgo low. You may be able to handle the big payment on the house now, but if you want to switch careers or if you go through a rough patch, you'll be thankful for that low overhead.

I don't like the idea of half duplexes, but maybe that's more normal in your area. My first choice would be to buy the entire duplex, live in one side with your friend and GF, then rent the other side out to more people. Run the math on that, and I bet it's the best cash flow situation of all.

Best of luck!

@Dylan NAundefined

I wouldn't limit myself to doubling my money in one year.  If you do that great, but I think walking before you run makes sense. Do a good deal, don't take crazy chances, learn a lot, make a profit, and keep moving.  Sometimes trying to double your money leads to losing money.

With all that said, where are you financially? If you're in school, do you have a lot of school debt? Do you have steady income to refinance and get a long-term mortgage? 

Deciding to go down the flip route (aka a business) vs the rental route depends upon answers to those questions and more.

@So Heng thanks for the shout out to the podcast I was in.

@Blanca Wilson I am not in Southern California, but I understand your frustration. I agree with others that have said - figure out your fundamentals and stick to them.  I have chosen to adjust my desired profit margin on deals before (ex: $20,000 instead of $25,000), but never make offers based upon what other people are paying (especially realtors who get paid when things sell, not when you make a profit).  

I would add that it's critical to study your market prices and activity daily, neighborhood by neighborhood, street by street.  When a market is changing rapidly, the most knowledgeable win. You'll also be the first one to notice if that "hot" market begins to cool off and days on market go up, so you can pull back a little bit.

In the end, if you are a buy-sell investor, the only thing that matters is buying low enough so that you can make a profit, cover your transaction costs, and still deliver the property to your buyer at an acceptable price.  

Just keep hustling and trying to make that happen.

Thanks for the mention @Mindy Jensen!

@Erica Davis Driving for dollars has been my favorite source of leads for 13 years. Don't ever stop that. And also be sure to get out of the car and talk to people. That's where the magic happens.

Also keep in mind that this is a lot like fishing. You have to put a LOT of lines in the water before you actually catch a fish. And you never know which line will bring in the next one. So your job is to just load up the bait and keep fishing non-stop with as many lines as you can afford. 

I think your original question was about a mailing list, right? When I first started on a budget I was able to buy a CD with all of the tax records in my county for like $20. Then I got the ones I needed and mailed to them.  It was a little technical, so if that's not your thing you can probably still pay a service $100-200 to get a similar list. Ask around in the local area of BP For providers in Alabama. 

Good luck!

Congrats @Joshua Dorkin and @Brandon Turner! Well deserved kudos.  

I can't wait to see what's next. You guys always keep it interesting. Thanks for the hard work and dedication.