All Forum Posts by: Conrado Balicusto

@Ryan Daulton

We use it for private lending - because the tax benefits are lost with real estate

When lending usually it’s taxed at ordinary income rates if using your own cash so using a sdira I prefer for lending and my w2 income savings for real estate to maximize tax efficiency

There are no wrong things to do except doing nothing. Market to long term landlords, market to distressed owners, market to divorced people, estates. Go to local meetings where there are other investors. Meet and get to know others in the business.

Just being around others is great to get to know more parameters that are involved with investing.

@Conrado Balicusto 

Recommend you first figure out the property Class you want to invest in, then figure out the corresponding location to invest in.

If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

So, when investing, investors should research the different property Class submarkets.

Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation. ABout 1-3 years for positive cashflow.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560 (almost 30% probability of default), little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

PM us if you’d like to discuss this logical approach in greater detail!

@Conrado Balicusto

We utilize RentecDirect.com as a tenant facing portal to collect our rent, deposit it to our bank account, market our properties, screen our tenants, handle our accounting and more.  The platform also lets our tenants report maintenance issues, and see their rental account payment history at any time.  So using a CRM program like that really helps automate processes.  It costs about $3-5 per month per door… one of our favorite landlord tools by far.  Finding systems that optimize your time and efficiency with your rentals makes a big difference.  

We tell our tenants that texting us is the fastest way to reach us.  We manage 37 units currently and we seldom if ever get late night phone calls … or phone calls in general at all.  Everyone texts, so there really isn’t a lot of things that interrupt a work day that couldn’t be handled taking a 5 minute break or during a lunch break.  

Having 1-2 go-to vendors for the highest frequency problems… plumbing, A/C, septic, electrical, and roofing, I can pretty much make a 2-3 minute phone call and pass the problem to someone who will solve it with little more input required from me.  That is a big key to efficiency… and the more units / calls you have, the more these vendors take care of you because they know how much business you give them.  I literally get a Christmas card from my Plumber - which tells me we are one of their bigger customers. 

Randy

@Conrado Balicusto

My thoughts for you…

Long term holds are much less labor intensive than short term rentals.

Cheaper C class rentals will let your investment funds to go further than buying A class properties.  You will make more money dollar for dollar (ie. buying 4 - $100k properties will net you more than one $400,000 property.). Tenant selection is critical though.  Know that children are rough on properties versus older adults with no kids.  

Likewise, leverage (financing) will also let your money go further and let you make more money dollar per invested dollar.  This also works out well for appreciation.

Accepting ‘zero cash flow properties' is really just a compromise on your part that I would suggest you not make. You want both… cash flow and appreciation. Without cash flow you will end up going out of pocket for any repairs and Capex expenses.

You achieve full control and maximum profit by investing locally and self managing your properties.  As soon as you bring on property management your cash flow on a financed property will drop by 1/3 (give or take).  We self-managed 20 properties while working 2 full time corporate jobs pretty easily.  Most solutions to property problems can be solved with a 3 minute phone call (plumbing / AC issues, etc).   Property managers still have to be managed, so they don’t alleviate your interaction with your properties.  Property managers also don’t have any incentive to save you money managing your properties.   I was quoted $800 by a property manager years ago to replace a $150 garage door opener.  We fired the PM the next day and started self managing our properties and haven’t regretted it. 

Hope it helps!

Randy

Welcome to BP @Conrado Balicusto! 

I would connect with some local investor-friendly agents in your market. They will have systems in place for finding off-market deals for you to analyse where the numbers are more attractive.

You can also try the wholesaler list method. Find every wholesaler in your market and try getting on their email list. While 80% of these deals will most likely be terrible, you should be able to find a couple worth walking or offering up on.

The third method, which requires some time and effort, involves learning how to pull property addresses, names, and numbers. With this information, you can reach out to tired landlords who have built up a significant amount of equity and are more likely to be open to dealing with a buyer directly rather than going to an agent, listing it, etc.

It’s my opinion that many investors have the wrong mindset when it comes to real estate investing.  This is evident when they express their goal as “ I want to own enough real estate to provide me a $10,000 per month income to replace my salary”.  While financial independence is a worthy goal, defining it this way leads to investing that’s (1) too restrictive , (2) too heavily emphasized on cash flow and (3) too heavily reliant on only one way to achieve financial independence.

I always stated my goal as “ I want to have an investable net worth of $x in 5 years while utilizing a maximum of 50% leverage.  This allows for a wide variety of ways to achieve the goal thru all aspects of real estate; investing in assets that have great capital gains potential but may not cash flow (options, land, redevelopment, gentrification, etc. ) utilizing “fee income” to build my estate (syndication, brokerage, partials, participations), and “creating” high yielding notes, and “creating” wealth through creative real estate buying, selling and exchanging. 

I’m a firm believer in that before one masters any creative or wealth building strategy in real estate investing, they need to master three things; (1) real estate PRINCIPLES, (2) real estate LAW, (3) real estate FINANCE.  Once the investor understands these three FOUNDATIONAL aspects of real estate investing, they can comprehend the creative and wealth building techniques and strategies and successfully apply them to individual deals.  It is precisely because of mentoring programs that teach strategies and techniques to people who do not have any grasp of the three afore mentioned fundamentals that we have such a mess with “wholesaling” and “subject to” that governmental authorities are figuring ways to heavily regulate or outright ban these activities in the residential real estate field. 

Let us know what you think.  What are or were your goals in real estate? Have you achieved them? Or are you on the path to achieving those goals? 

Hi there,

Welcome to the world of real estate investing! It’s great to hear that you’re looking to diversify your portfolio by adding real estate to the mix. Texas is indeed a competitive market, but with your background in IT and experience with stocks, you’re already well-equipped to analyze deals and make informed decisions.

If you're open to exploring markets outside of Texas, I’d recommend looking into areas like Indianapolis. I specialize in new build duplexes here that offer strong cash flow and long-term growth potential—ideal for diversifying your investments. The market in Indy is less saturated compared to Texas, making it a great option for newcomers looking to build a solid portfolio without facing the intense competition.

Feel free to reach out if you’d like to chat more about strategies, market opportunities, or just exchange ideas. Looking forward to seeing your success in real estate!