All Forum Posts by: Evan Polaski

@Marcos De la Cruz

Most of my rentals, when I first started buying in 2010, were section 8 through the housing choice voucher system in Cincinnati.  I don't have experience with Dayton, OH, but would imagine it is similar.  

When you say "section 8" tenants, are you looking at low-income housing tax credit type properties, or standard rentals that are in lower income areas and therefore cater to HCV tenants?  

For me, HCV was worth it when I started out.  But it was hands on.  I had fairly good luck with all tenants that I placed while I was self managing.  Because you can assume no Section 8 tenant has good credit, my leasing decisions had more to do with meeting each tenant myself to get a gut feeling based on their communicativeness, timeliness to showing, what questions they asked, whether they looked me in the eyes or avoided eye contact, etc.

The downside of section 8 was the annual, then bi-annual, inspections.  You are effectively turning the unit every year or two, even when the tenant stays in place.  Over the years, these mandatory repairs became more and more expensive, to the point that any rent premiums I was getting through section 8 was more than eaten up by the reinspection repairs. 

Admittedly, my properties were mostly in the path of gentrification, so overtime was moving effectively getting rid of my section 8 tenants and going with better qualified, higher rent paying market rate tenants.  But while I had my properties in section 8 it was generally fine.

Like any, if you show respect to the property and tenants, they will typically show respect to you and the property.  If you don't take care of issues, don't take care of the property, and don't keep things in good repair, you will have tenants that don't respect the property either.

@Chris Magistrado, I am going to echo Rick: without checking the math, it seems close to accurate, in the theoretical sense that A*B=C.

Take what I have to say with a grain of salt because I am not a "full-time" flipper.  I flip with cash, not loans, mainly because there are not enough deals out there that meet my highly selective acquisition criteria, so no need to pay interest on cash otherwise sitting in a money market account.  And, because flips are already risky enough I don't want to add more risk.

So, again, while the numbers are theoretically true, if you are doing that kind of volume, you are by nature becoming less selective.  Being less selective means that some of those ten will lose money, some will sit for months on the market, some will return 40%+.  Some will have snags with permitting, some will have contractors you need to fire and then pay more for a new crew to come in and fix the job.  

I will add my anecdotes: flipping has been good to me and my family, but we do it one the side, when we find a good deal.  Typically, this means about one house per year, but we went almost an entire year between flips from mid-'23 (sold one) to mid-24 (bought next).

I no longer have any "full time flipper" friends.  I knew several that tried it, and were able to make decent money in 2021 and 2022, but none were able to scale into 10 houses a year and making enough money to make it worth their while.  Or, they flip homes, they are agents, they offer client remodel work, etc, so not specifically flippers but dabble in a lot of real estate related areas.

Or, the full timers that started as flippers have since moved into new construction work more than flipping.  They will still do the occasional flip, but mostly when a deal presents itself AND they may be between new construction starts so need to keep their teams busy.

@Robert Kline, I would start by talking with your local building department.  From what I have heard, primarily through these forums, it can be tough to do just about anything yourself.  Building departments, typically, are very helpful.  They will let you know what you can and can't do without a permit and what you are able to do yourself within the scopes of those permits.

My concern is because this is a rental, if you do anything that is not to code and the tenant reports it, you will likely have some much bigger issues to deal with.

Given you note this is major rehab, I tend to lean to hire most, if not all, out.  As others noted, you are likely limited in what you can legally do anyways, so you won't be saving a ton, and depending on how you value your time, it will likely be cheaper to higher professionals to do it anyways.

@Allan Guerra, at least in Ohio, you cannot receive a commission based on the purchase price of a property without being a licensed real estate agent.  

That being said, and this is not for a sourcing homes for sale, but to source accredited investors in my line of work, the average marketing agency is looking at about $30-50/accredited investor lead setting up a call.  In solar sales (door to door) the setters typically make about this same range.

Most companies in the house flipping world seem to buy lists online or run basic skip traces of areas and send lists to VAs to setup calls with the owner of the company.   So, just know you are competing with these types of companies.

@Hemed Tov, like most posters here, I am not a Birmingham expert.  Things that would be helpful to know: how much are your holding costs?  Do you have capital to float that if you did decide to hold?

At the end of the day, losing $10k is really not a lot in the grand scheme of real estate investing, and given the seeming high volatility of this market ($275k to $220k, presumably in a matter of months), and the generally high monthly cost of HML, I would get out quickly and think of the loss as the cost of education.

At least in my area (Cincinnati, OH) I don't see the market dramatically improving even as we get into the spring buying season, and, honestly, I only see mortgage rates continuing to climb for the foreseeable future, taking more and more buyers out of the market.

@Robert Brock, I guess my advice is not really any different than I would say to someone wanting to be a residential wholesaler: you need to add value to the transaction.

Often times, having the deal tied up is the value, but more often then not, in my limited experience with commercial wholesalers and residential, the wholesaler has no idea what someone will actually pay, so they tie up a deal at too high a price and then add their fee that turns a bad investment into a horrible investment.  Or they bring a deal that professional acquisitions teams already know about.

@David Kendall Jr, for deals that I am managing myself, I want a minimum $50k profit potential, and shoot for about a 15-20% profit margin, whichever is greater.

At the end of the day, percentages alone don't work for me, because my time has a value to it. Granted this primarily filters out the small deals or the highly leveraged deals, neither of which I do, but making 20% on a ARV 150k house is $30k. That house likely would take just as much time and effort as a $500k house, where i could make $100k at the same margin. Or even $75k at a 15% margin. For my work and time, I would rather have $75k than $30k.

As noted, it really comes down more to your underlying goals.  If the goal is to become a full-time flipper/contractor, then doing tighter jobs can help build momentum for a business, that will pay dividends well beyond just the specific house, itself.  

But of the options you note, the only one that really makes sense to me is the CoC option. The other two don't take into account the time your money is tied up. 15% of ARV is great, if your flips take 3 months. But not so great if your flips tie up your money for 18 months.

@Jonathan S., I know I already shared my input to your proposed structure.  But to the point of this thread, no one can offer a "this is a good return" without knowing the structure and the potential risks involved.

I think Jaycee hits on the general returns available in the market.  Without sharing greater detail of your proposed investment, no one can offer anything of value in terms of what types of returns they would want to see to compensate for that risk.

@Stone Safaie, like Chris notes:

1. No.  There are some groups, like Chris, that are on these forums, but generally I would say the sentiment towards syndication on these forums has soured, and therefore the syndicators themselves have stayed away.  Passive Pockets, Meta (FB/IG) ads, local meetups are good places to find groups.

2. Brian Burke's Hands Off Investor is a pretty good starting resource.  Remember syndicators are marketers first and operators (sometimes) a distant second.  Best way to vet would be talk to a lot of them before you commit capital.  And also, know everything about operating real estate, if you really want to know the risks: business plan, financing structures, ability to execute, market research to vet their underwriting assumptions, how fees can influence investment decisions...

3. Yes.  As Stuart noted, I would call these less red flags and more things to understand.  Just on these forums, we have heard of groups having a convertible note structure in their syndications.  You have groups that overtly hide performance of past deals.  One group is now offering a pref equity investment to rescue their deals, while they still actively market how they have never had a capital call (technically, accurate, but in spirit very deceptive).  Many groups buy cash flow negative deals and overraise to pay distributions right away.  You will likely run into a lot of late-20's/early 30s guys doing this, who have a lot of confidence but not a lot of experience.

Overall, I think the biggest thing is finding a group that generally has the same outlook as you.  If you want to swing for the fences, that 3 yr, value-add deal with floating rate debt may be the right fit.  If you just want consistent distributions over the long-haul, you may want a more stable deal with a longer horizon, even though that may mean giving up the 20% return possibility.

@Jade Frank, I am going to echo V.G.  If you plan on living there, I would pick the place you want to live, then start investing.  

Personally, I would never live in PHX, but that is all personal biases (I prefer seasons and greenery), and clearly lots of people choose to live in PHX.

At the end of the day, I would argue market selection almost only comes into play when you are talking assets that cater to institutional buyers that have to get investment committee sign off. I am guessing you are buying SFR and small multi's. As such, your success will come from knowing the nuances of the market and where you can drive value/achieve strong returns. You can do that in NC and you can do that in AZ.