All Forum Posts by: Daniel Akerman

I agree that marketing will be important. You need to find the deals BEFORE they have gone to auction. Even before they are in foreclosure. But you can do a lot without the full expense of building a full website and paying for outsourced marketing. Target people in Lis Pendens or “pre-foreclosure” and send them direct mail pieces. Set up a 1-800 number for them to call, and set up a simple “Landing Page” with a lead capture form, rather than a full blown website. (1-800 numbers dont allow the caller to hide your caller ID, which means you can capture their phone number, and the Do Not Call rules allow you to call them for a period of 90 days.) The expense will be in the direct mail, because you’ll need to send a lot. The landing page and 800 service (Landvoice is popular with Realtors) will cost about $100/month combined. To get the leads, see if you can establish a relationship with an agent who can provide you a weekly list of all the new Lis Pendens properties. Tell the agent you’ll give them the exclusive listing on any flip you get from the leads they provide. Better yet, voluntarily provide them a contract that says this, so they know you aren’t just saying something to get something out of them. Each Lis Pendens lead you get, you mail them a letter each week for four weeks. And each week you’ll be adding the new Lis Pendens for the week. After the fourth week, the first batch will drop off, but you have a new batch taking its place. It’s a lot of mail. But you’ll get calls. Once you get those calls, fast and persistent follow-up is essential. Call them back within five minutes if possible. Hammer them with follow-up. Get the face to face meeting and present them with your proposal.

Originally posted by @Jay Hinrichs:

Originally posted by @Daniel Akerman:

@Terry Lao you seem to be the one not paying attention to the OP or the things being posted here. @Vivian O. clearly stated in her 3rd post on this thread, she IS PRE-APPROVED for a loan. I'm not sure why you keep harping on the pre-approval, since she mentioned at least once, if not more, that she is already pre-approved. And you keep mentioning FHA when the nature of her loan has almost zero impact in the particular situation she's having a challenge with. Additionally, she's working with a Realtor, and any Realtor worth their salt is going to make sure their client is qualified to buy -- so clearly she is qualified.

Vivian, I suspect that whether you go FHA or Traditional won't make much or any difference with your particular issue. Your issue seems to be where you're looking for your deals, and how much competition you have. So, as others have mentioned, you need to look at how you can avoid that competition.

If you are buying this property purely as an investor for cash flow, then I doubt any personal letters will make an impact. I'm not a big believer in the whole personal letter thing, anyway. You don't write a personal letter when you haggle over a used car do you? You don't write a personal letter when you buy something at an auction either -- which is pretty similar to buying a home in a competitive market like yours. If I'm a seller's agent, I kind of laugh at the personal letters and counsel my client to ignore the letters and focus on the STRONGEST BUYER. A distressed seller, in particular, won't give a damn about how sweet you are or how much you love the house -- they're in trouble and need as much money as possible as quickly as possible and that's all they care about.

I think the key issue is how/where you're finding these properties. The MLS is going to have the widest possible exposure and the most buyers to compete against you. If everyone desperate to buy a home sees the same deal, it's only natural that you're going to be in a situation with 30 bids -- and you'll lose every time because an end user will almost ALWAYS beat out an investor.

You need to be finding off-market properties and FSBOs that not many people will be looking at. 

You might consider changing agents and working with a LISTING AGENT who focuses on listing short sales, pre-foreclosures, REO and foreclosure properties. An agent who does that already will have the mechanisms in place for finding off market properties, so you don't have to spend the time and money to do it. Now, you'd be working direct, which opens you up to some risk because you'd be working with the listing agent, or possibly in a dual-agency situation. But if you're aware of that and comfortable with it, you may have more luck finding a property you can afford without having to battle against 30-40 other buyers.

depends on the Market the personal letters really work in the portland market.. the sellers are not so hard nosed and tend to be very caring if they are older owners that have lived in portlandia for any number of years.. just watch the TV show Portlandia its reality I know its a comedy but it is the way it is in that market.

I can see in NY it being different as there is a thought process that new yorkers are more matter of fact.. 

I could see this working in Minneapolis as well.. given the demeanor of that population. 

Of course if its non owner occ much less effect but if its owner occ to owner occ those letters do have an impact

 I think, for the most part, these personal letters work as "tie-breakers" not game changers. You have more experience with them in your market than I do in mine, but I can see a letter coming into play when a seller is considering two roughly equal offers from prospective home-owners, as sort of the final little push that gets one offer ahead of the other. In a battle between an investor with a weaker offer, and an end user with a stronger offer, I can't see that a letter would somehow change the game and entice the seller to forego both the stronger offer AND the fact it comes from an end user. Letters appeal to those who want someone to steward and enjoy the property the same way they did. An investor won't be that. Of course, this may not always be the case, but I have a hard time seeing a seller go for a substantially weaker offer based on a personal appeal or personal letter -- especially if that seller is a distressed buyer in need of a quick resolution to a pressing problem.

We're all going in circles here, though. I think the basic problem Vivian has is fundamentally too much competition, which means she needs to adjust either her criteria or her search method. The rest -- letters, FHA vs Conventional, terms/contingencies -- I think will be comparatively less important at this point.

Originally posted by @Drew Y.:

@Bill F. I totally agree with you Bill , and yes I have read the Intelligent investor, Security Analysis and a number of other financial and tools and resources. I am a value investor at heart, hence the perceived thought of keeping these properties and continuing to re-investing the "rents"/dividends into other properties. Hence the time horizon of forever. Not sure if  I should sell my "Coca Colas" for some "Tesla and Nivida"  

To answer your question:  

The business is performing, the units are self managed (hopefully awesome ) , and the alternatives are risker and frankly less appealing. I basically make take check the properties once annually to make sure the tenants and house is in good standing. 

My concern is that my opportunity cost of deploying the equity in the buildings might not out weighing the low returns on equity I am receiving. But if I deploy to assets to a large complex or out of state and more units my "head ache" cost would increase. 

 Don't discount out of state or long distance real estate investing. Done correctly, it's really not that different from investing locally. @David Greene is a great resource for learning about how to do this, and his book is available here on Bigger Pockets.

I'm in NYC and originally from SF. I know how challenging it can be to find good returns in those areas. If you have assets with significant equity, and you use that equity to purchase in areas further afield with much higher return rates, it could be huge for you. What is necessary is good research on the front end, and a good team to delegate the day-to-day to. It can be done and IS done by many people every day, without any significant increase in "headache factor." Consider it.

@Drew Y. The short answer is YES.

However, the quote you provided doesn't really describe Warren Buffett's approach. It only describes his holding term. 

Warren Buffett's approach is more accurately stated by saying he is a value-based investor. In other words, he looks at the underlying fundamental value of the asset, independent of external factors and market directions, and weighs that against the price to purchase the asset. If the price is far enough below the underlying value, there is "margin" or "equity" there. That means, the minute he buys, he's already made money because he knows he can sell at a higher price. 

This is PRECISELY what a good real estate investor does. They look for properties that are underpriced enough against the underlying value that they can be re-sold (perhaps after some improvements) at a higher price, for a profit, once all expenses are accounted for. A good investor makes their money when they BUY. A purchaser, whether in securities or real estate, who is looking only at future appreciation, is not truly an investor -- they are a speculator.

Questions of 1031 exchanges and so forth are, I think, a little besides the point. So are questions of return on equity. The fundamental guiding principle, which guides the initial purchase and all subsequent purchases is what has made Warren Buffett so successful and what you can use in real estate as a basic foundation to your analyses and purchasing strategy. Whether you hold it forever or use other strategies to have higher return on equity is almost besides the point, because you have to make the smart purchase to begin with, and that is what Warren Buffett has done so well.

My own personal guideline: run the numbers enough that I can feel confident teaching it to someone else. 

But that's just for gaining technical proficiency. 

Just as important as "running" the numbers is GETTING good numbers -- from your buying agent, from online data sources, from property managers, from contractors. "Running" the numbers in a theoretical way is one thing. Doing the research on a community or asset class to the point you feel confident on the data is arguably the more difficult and more important task. 

Equally important: being sure about your criteria, which are another set of numbers. Matching your criteria to an area where you can find the right deals is the real challenge of real estate investing.

I can easily calculate income, expenses, debt service, net operating income, capitalization rates, etc etc given any set of numbers, because it's just an equation. What's more important is understanding what you need out of the property and what you need those numbers to be in order to achieve your goals. Once you've done that, it's simply a matter of finding the deals that fit the numbers (which is simple but not easy). 

@Terry Lao you seem to be the one not paying attention to the OP or the things being posted here. @Vivian O. clearly stated in her 3rd post on this thread, she IS PRE-APPROVED for a loan. I'm not sure why you keep harping on the pre-approval, since she mentioned at least once, if not more, that she is already pre-approved. And you keep mentioning FHA when the nature of her loan has almost zero impact in the particular situation she's having a challenge with. Additionally, she's working with a Realtor, and any Realtor worth their salt is going to make sure their client is qualified to buy -- so clearly she is qualified.

Vivian, I suspect that whether you go FHA or Traditional won't make much or any difference with your particular issue. Your issue seems to be where you're looking for your deals, and how much competition you have. So, as others have mentioned, you need to look at how you can avoid that competition.

If you are buying this property purely as an investor for cash flow, then I doubt any personal letters will make an impact. I'm not a big believer in the whole personal letter thing, anyway. You don't write a personal letter when you haggle over a used car do you? You don't write a personal letter when you buy something at an auction either -- which is pretty similar to buying a home in a competitive market like yours. If I'm a seller's agent, I kind of laugh at the personal letters and counsel my client to ignore the letters and focus on the STRONGEST BUYER. A distressed seller, in particular, won't give a damn about how sweet you are or how much you love the house -- they're in trouble and need as much money as possible as quickly as possible and that's all they care about.

I think the key issue is how/where you're finding these properties. The MLS is going to have the widest possible exposure and the most buyers to compete against you. If everyone desperate to buy a home sees the same deal, it's only natural that you're going to be in a situation with 30 bids -- and you'll lose every time because an end user will almost ALWAYS beat out an investor.

You need to be finding off-market properties and FSBOs that not many people will be looking at. 

You might consider changing agents and working with a LISTING AGENT who focuses on listing short sales, pre-foreclosures, REO and foreclosure properties. An agent who does that already will have the mechanisms in place for finding off market properties, so you don't have to spend the time and money to do it. Now, you'd be working direct, which opens you up to some risk because you'd be working with the listing agent, or possibly in a dual-agency situation. But if you're aware of that and comfortable with it, you may have more luck finding a property you can afford without having to battle against 30-40 other buyers.

@Luke H. Glad to hear you got a tenant. Hope it all goes well. You can't hold it against people for asking about the price. 1) it's smart to confirm details -- wouldn't you do the same thing? 2) sometimes people are calling on multiple properties without the details in front of them. Totally understandable. And don't take it personally that people haggle -- OF COURSE THEY WILL! They are just looking out for their interest the same way you are looking out for yours. If you were in their shoes, you'd be haggling on the price too. It's all part of how this works. Understanding that everyone is out for their best interests -- not to get over on you -- is the best path to successful negotiations.

@Michael Swan Hey, sorry, Michael, but I have to say this is 100% incorrect. Anything that is 2 families or more is multi-family. There is, however, a difference between residential multi-family (aka residential income property) and commercial multi-family (5 units or more). I think what you are getting at is that they are not COMMERCIAL properties. They are considered residential deals, and therefore the lending structure is different. So I think you are conflating two ideas here. A triplex or a quad is certainly a multi-family, but the lending for it and the valuation for it is based off residential real estate criteria, not commercial criteria. 

@Peter Goeller It's not ridiculous at all, and yes they would rent. I live in NYC and work in Manhattan, where rents are among the highest in the nation, and the requirements are just as strict here. In fact, they can often be MORE strict the more expensive the market gets. Remember, if housing costs are high, it's likely that salaries are probably higher as well. Stick to your guns and get qualified tenants, because the alternative is a risky road paved with the money you lose.

@Raymond Y. Thanks Raymond! This is great info, and just the sort of personal story I was looking for. I'll take a look at Allentown! Since we're nearby each other, maybe we could meet up in Manhattan sometime for lunch and share info!