All Forum Posts by: Evan Polaski

@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.

@Cloey Green, this is totally contingent on what type of deal you are doing.  But the easiest way I answer that is: would I live there?  If so, there are probably other people like you that would be interested in living there.

If you are buying a single family home, almost any town/city will work.  

If you are looking at a 300 unit apartment complex with a $100mm purchase price, then typically you want large, diverse economic, growing cities.

If you are buying an Airbnb, well this is a marketing game.  Some of the most successful ones I know are totally remote, unique cabin in the woods type.  But you typically want to be easy drive to some major metros.  Or, you could buy a generic condo in Orlando, put crap furniture in it with bad photos and lose a lot of money...

@Richard Rafferty, given the relatively small nature you are looking to take on with your first syndication, personally, I would find it hard justify the typically 20-30k+ for a paid mentor.  Admittedly, I am not one that typically finds paid mentorship very valuable, but I also respect that my degree is in business with a focus on real estate, and my first job out of college was in real estate (so it is a little hard for me to take my 20 yrs of knowledge and rewind it to try to view mentors from a completely fresh lens).

A couple points: I view mentors, especially these expensive ones as a catch-22.  Mainly because, while I think there are some that offer truly valuable information, you need to know where you "holes" are to make sure you are plugging those.  To know your holes, you typically need experience.  But also, even as Joe points out in his book, the true value of a syndicator is pulling together all the pieces.  

So, if you don't know how to build financial models, there are some available that are pretty good online (adventures in CRE is a great resource).

You don't know what assumptions to use, talk to your PMs about expenses and rental levels.  

Don't know how much renovations will really cost, again, either PM or GC conversations.  

Raising money is all about marketing and sales (not real estate specific) so either hire marketing agency and read sales books, or hop on some LinkedIn courses on marketing and sales.

Not sure the legal structure to use: talk to accountants and attorneys.

Need deal flow: talk to brokers and go to a lot of networking events.

Lending terms: start calling banks and loan brokers.

From there, it is all risk mitigation.  Floating rate loans may help cash flow early in deal, but put a lot of risk into deals.  Do you raise for your reserves and capex, or do you hope your cash flow will cover it?  Raising reserves makes sure they are present day one, but also dilutes overall returns.  What fees to charge and returns to target?  Well this is going to be more mandated by your investor base than anything a mentor can help you with (i.e. there are groups raising money targeting low double digit returns, with limited cash flow, and other groups that need to show mid-20s to get investor interest).

Lastly, if you are looking at a mentorship: really hammer on HOW they will help you be successful.  There are a LOT out there that use their mentorship as an opening sale to get you to help the mentor be more successful.  There are a lot of groups out there that basically want you to pay them to find the mentor deals, so he can take a slice of your deals.  Or, the "pay me to learn how to raise money, so you can then go and raise money for my deals".  

And if you are just not sure if a property you are sent from a broker is a good deal, you can always get on these forums and ask.  No deal is perfect, and anyone on these forums will have different investment objectives as you, but you will typically get some things to at least think about before moving forward.