All Forum Posts by: Aaron Moore

Hey @Bryan Wilson I think this is a good discussion, and one that is definitely beneficial to new investors who ask me this question pretty regularly.  As a full-time agent and an investor who has worked through the crazy market swings of the last 10 years, here are my thoughts.  

There are multiple layers to answer your question, but the short answer would be that I agree with those that say you should just get your license if you want to take the "100's of offers" approach.  If you want to make fewer higher percentage offers, find an experienced investor agent, tighten your analysis and approach to offers, listen to their advice, and let them do the hard work.  

In Colorado, you can get licensed and up and running for around $1500, and the cost to maintain your license would be less than $1K/year for what you want to do.  You can hang your license at a discount brokerage that just charges a couple hundred bucks per transaction, and they really don't care what you do beyond that, so you don't have to worry about any time commitment that would take you away from your other pursuits.  You also can leverage your buying-side commission for discounts, or take the commission and apply it towards your costs, which would offset the cost of getting and maintaining your license pretty quickly.  You can definitely work through the listing agents, which will work for a little while, but this town is smaller than you think and they will pretty quickly stop working with you on that front because it is a time waste.  It could be a good bridge until you get your own license though.  

The bigger question is how effective the "spray and pray" approach to offers is...answer: it's somewhat market dependent, but for the most part it's a waste of yours and everyone else's time.  I will go out on a limb and say that almost every experienced full-time investor will tell you that vetting a large number of properties and making strong, targeted, high percentage offers on the top prospects will net you far more quality properties in the long run (and the short run too, come to think of it).  I agree 100% that, as you said, you should not compromise on your numbers, which is why vetting 100 properties, then making strong (ie, not a prayerful lowball) offers on the top 4 or 5 will be much more effective.

In a down market, the spray and pray approach can be somewhat effective because you have a large crop of desperate or motivated sellers.  In the current Colorado market climate (insanely hot) it will be totally ineffective because there is too much clutter and competition, and for open market properties with any potential at all there is fierce competition.  Any potentially investable open-market property here will have 3-10 offers within the first 48 hours.  

Sellers and selling agents look for two main things when choosing an offer: Who has the strongest offer (not necessarily the highest) and who is most likely to close easily and with the least amount of hassle along the way.  A good agent will sell you and your offer to the listing agent effectively, and most good investor agents are known as such by the listing agents, and carry a lot of weight that things will get done smoothly and professionally.  For many of the deals I get, we are not the highest offer...often not even in the top two, but skill and relational equity bridge the gap.  In the Colorado market, knowing how to structure and sell an offer for maximum impact is really the difference between success and failure.

This is something you will never have with a green agent who has the time and willingness to write 100's of 1% offers...hence, both your time and theirs is completely wasted.

I know this doesn't answer your question about how to convince an agent to do all that work for you with little chance of return on their time, but hopefully it gives a little more context to all the answers above that say in one way or another, it's probably not the best route for you to take anyway.

Congrats Holly Scott , it's looking great!

Hi David Long , You are correct that a 1% ratio is doable for small multi-family in COS. Cap rates in that range are 8-10%, depending on the property, and cash on cash return is better than that if you're financing...usually a little less on duplexes, and can be better on fourplexes. Multi-unit residential is really tight inventory though, so anything in decent shape that falls in those ranges are typically gone within 24-48 hours so you have to just watch and then jump quickly. Property condition/capital investment has a big impact on those numbers, so make sure to factor that in. As for neighborhoods, you will see that multi-unit properties are in pretty defined areas, so you don't have a huge variety of choices. Especially with 3-4 unit properties your tenant pool is pretty similar across the board.

I'm interested in more info Jacob Ziegler . Shoot me a text when you have a minute 719-287-8881. Thanks!

Thanks for the clarification Chris!

Hey Chris Nelson , the mid-low $200's is a great price point in Colorado Springs right now, as inventory is still really low. Depending on the part of town and property condition, it should move pretty easily, and values are staying strong. Just to clarify, I assume the 9% cap is at the price you paid, and not the projected $235K sale price? If that's at $235k, I have several buyers that would jump on it. If it's at your earlier purchase price the buyer will likely be owner-occupant. If you want the most relevant and up to date comps I can pull those for you if you like.

Or just text me at the number in my signature

hey @Canneton Howard PM me your cell # and I'all text you the numbers 

Hey Ed C. I will text you a couple good guys

Hey Nicole, I generally look at exit strategy when making these kinds of decisions. A few things I would consider if I was in your shoes. -if your long-term plan for the forever condo is to pay it off, a refi would set you back on that plan. If you plan to keep it leveraged, a refi doesn't make much of a difference. Keep in mind that a refi will also cost you 1-2% though -if you are looking for primarily cash flow properties with a longer-term strategy, and want to minimize your cash out of pocket, refi the VA house and get all your eligibility back. Keep in mind that the VA funding fee is increased a good bit on your subsequent purchases (after the first one). -If there's a good chance you will sell the CO Springs house in 2-3 years, I would definitely go conventional. The primary benefit of VA is obviously the zero down, because the increased funding fee eliminates the cost benefit of the lower interest rate over the next 3-5 years at least. With a zero down loan (also add the funding fee to the purchase price), your break-even is extended to 3-5 years minimum, unless you are looking for a fixer, which I'm assuming is not really the case since you will be living in the house. Our market here is appreciating strongly, which offsets some of the risk, but you can't bank on that, so I would lean towards finding something that's well-priced, and give yourself some additional margin with the down payment and lower cost of a conventional loan. -if you are definitely going to keep the CO house as a longer-term rental, appreciation over time will absorb the additional costs (including financing the full purchase price) associated with VA. Another factor to consider is the price point and location of the property. The Colorado Springs market is very different from SoCal (definitely less volatile from what I've heard) and price point and location have a pretty strong affect on appreciation. If you want to talk through that a little more, we can grab coffee or lunch when you get to town. On a side note, I read your profile, and I have a tax attorney here in town that has put together a package for SD IRA, and I can connect you guys if you would like. Good luck!