All Forum Posts by: Cory Boren

Welcome @Jeff Dougherty

What area of town and what price range are you looking for?

I am thinking about starting a direct mail campaign and was wanting some advice.  I have been investing for over 14 years and have done only a few deals per year by word of mouth and deals that have fallen in front of me.  I have driven for dollars in the past and that seems to work pretty well but I think sending out mass flyers will work better.  These are my numbers:  Letters .13 Stamps .49 Envelopes .17 

On average of 2 hours = 17 leads .25 tank of gas and 30 miles = .56 *numbers based on V8 truck, gas and depreciation

total of $1.35 per lead and 4 hours spent 

my conversion rate is 1 buy

Can someone share their numbers so I can compare. 

Welcome Paul @paul Johnson

I suggest you set parameters on what kind of SFR you want to purchase. Do you go for lower demand higher cash flow or higher demand lower cash flow properties. Personally I don't like to speculate so I go for higher cash flow properties. That will basically help narrow down which areas as well.

The next question is how to acquire them. You can do the marketing and research yourself to find them, hopefully around 70% but that is difficult at the moment, or you can get on a wholesalers list. This is great if you have a full time job because you receive multiple properties per week and literally have to do nothing. Most wholesale deals are around 80% at the moment. That or their ARV is overvalued and the rehab estimate is very conservative.

If you go for the lower demand homes you should have enough to purchase and rehab for 100k and refi cash out into a 30 year fixed rate at 65% of ARV after six months. If You use hard money to purchase and rehab at 70% of ARV, you can then refi into a long term 30 year immediately after you rehab.

The last choice would be to hire a property manager or do it yourself.  It is very easy to rent out your home in Houston by putting a sign in the yard but a property manager can save you a huge headache from not having to deal with tenants.  

I like to purchase my rentals subject 2 because of the ease and small capital outlay but there are several liabilities you much be aware of. 

Always use purchase price and the cost to put the asset in use. I always convert the monthly return to an annual capitalization rate. This allows you to compare to other investments.  The lower demand markets, ie older homes or less desirable areas, should produce a higher return. The opposite of the spectrum is high demand areas and they produce lower returns so adjust accordingly. The question is would you rather have greater returns now or speculate on appreciation in the future. 

@James Miller

If you have a large net worth spend the money and make sure you are protected. Better yet, get a trust attorney to seperate each property in individual land trusts. If you plan to wholesale and purchase a few rental properties, an individual is more than capable of forming it themselves. Forming a sole member LLC is more like putting a band aid on a cut not heart surgery. I feel it is unprofessional to specifically bash someone else's comment or talk about prostitution on an open forum such as this.

 Of course a lawyer will tell you that you need a lawyer.  Rock solid docs so if you have a dispute between yourself you can refer back to your articles of formation.  I think it's bad advise to assume people are incapable of doing such a simple task. 

If you are the only member there is no need for a lawyer. Go to the Texas Secretary of State. $300 filing fee. 

If you accelerate or balloon in 6 months he has to pay or you can foreclose.  Seems very risky though. The possible return must be very good in order for me to do a deal that way.  

Two transactions are taking place.

1. Subject 2 purchase from a seller. They sign a warranty deed to you. The fact that an existing lien is attached to the property created the subject to ownership. You can get title insurance even though the loan is in the previous sellers name unless it's FHA or VA. If it is, due diligence in emparitive. There are other risks acceleration clause...

2.  Leasing after you have taken ownership or owner finance, lease option, or whatever you call it, is the next step.  Remember you must pay the previous owners liens or they can foreclose on you. I like the right to refusal option as that keeps you from having to comply with the Dod Frank BS.  I have never done that so great post whoever it was. I get 2 contracts a purchase agreement and a lease agreement which if is defaulted terminates the purchase agreement. I haven't been to court on this so I'm not sure how solid this is. If you ask an attorney they will say all the reasons why not to do either one. That is why we are the investors.  

If he has capital you can put a subject 2 deal together, split the profits while having very little liability.