All Forum Posts by: Derek Harris

@Ivan Chavez, please provide more information. There are multiple strategies out there. Include what type of property, whether it's local or long distance, financing situation, etc. Will you partner on this deal? How do you plan on finding this deal (direct mail, MLS, etc.)? What is your investment goal? Is it cash flow or appreciation or both?

@Roy Gottesdiener, I prefer buy and hold. Rehab is not as expensive as it is for flips and it can eventually transition to a passive investment. Additionally, taxes are more favorable. I would run the numbers and account for all expenses; rental properties can get expensive (vacancies, maintenance, CAPEX, make-ready costs, prop mgmt). Also, take into account the taxes that will be owed at the end of the year.

@Coty Dolan, thank you for your service and welcome to BP! Rich Dad, Poor Dad was instrumental in my real estate journey too. As far as your question is concerned, having a W-2 job is very beneficial when applying for loans. Is your W-2 job prohibiting you or slowing you down in your REI journey? If it was me, I would take advantage of my W-2 job as much as possible and invest in real estate on the side. After replacing all my expenses with cash flow, I would transition to REI full-time. Alternatively, I am not familiar with the real estate market in your area and it may make more sense to transition to a full-time real estate agent. I'll say this and keep in mind this is me stating my opinion, but the vast majority of real estate agents I have worked with are horrible at their job. Being an exceptional agent does not take much effort. 

@Anthony Perkins, is the $7,000 gross income? Are there NNN leases? Is this an off market deal? If this deal was found on Loopnet and has been sitting for a while, there's a reason why. If this is a great deal, then you will have no issues finding other investors to partner with you on it.

@Kevin P, what are the CAP rates for that area? Lower CAP rates typically signal less risk; higher CAP rates signal more risk. Do you plan on getting bank financing? Is so, have a received a pre-qualification letter from them? Will the cash flow from this deal meet your minimum criteria? What is the stability of the tenant? If they were to vacate, how likely would that space be filled in a timely manner?

Me personally, it's a lot easier to wrap my head around residential/ multi-family, since people always need a place to live. However, in a downturn, businesses go under all the time. As a new investor, I would figure out what my niche is and focus on that. There are several investors out there that love the retail/ office space. Hopefully, one of them will give their perspective.  

@Sean Tyson, that's gonna be a tough one! Having bad credit is a huge red flag to lenders. You may get away with bringing a higher down payment. Honestly, if it was me, I would focus on fixing my credit score and gaining as much knowledge as possible. I would still look for deals and consider partnering with someone. 

The biggest issue many investors run into is not calculating all the numbers correctly. I highly recommend using the BP calculator. Always take into account maintenance, CAPEX, vacancies, make-ready costs and prop mgmt. Also, keep in mind that FHA loans require MIP. Before buying your first investment property, you should know what your investment goal is. If it's cash flow, I would calculate the numbers and see if this property meets your minimum criteria. If you're in a slowly appreciating market, the cash flow should be substantially higher.

What is your end goal? Cash flow or appreciation or both? IMO it doesn't take that much more effort to buy a 2-4 unit property than it does for a SFR. Are you interested in investing locally or are you open to long distance REI? Before spending any capital, I would gain as much knowledge as possible and continue to analyze deals.

Whether a flip or buy and hold is better depends on your long-term objectives. I would run all the numbers and see how much it would actually cash flow. BP's calculators are a great tool for this. Rehab costs will vary considerably depending on if you want to flip it or just rent it out. Just remember that cash out refis are typically capped at 70-75% LTV and typically have higher interest rates.

Me personally, I would do a side-by-side comparison and include all expenses (using conservative numbers). I am in the buy and hold game, but sometimes flips make more sense in order to generate more capital.  

@Henry Lee, my wife visited the property management company in person and looked through their files. The first indication I should have known it was a bad deal was when I was notified the prop mgmt company did not communicate through email or have any digital files. All their files were hand-written. They did, however, have faxing capabilities. And yes, the deal did not go through.