All Forum Posts by: Blake C.

@Chris Nelson I wouldn't call them deal breakers. For me they are things I have to factor in. One more is a roof. If it has lost more than 50% of its life, I need to start accounting for replacement. I really use this when factoring in plumbing, electrical, mechanical, and such. I would buy one that needs all this done, and I might not do it all immediately, but I would want to begin factoring the need to do so into my purchase price. 

The scary part i the cost of money can change if prime moves. I dont anticipate needing management. I self manage my own properties and my partner is willing to help with that... I just know him enough to know I will carry 80% of the management load. :)

@Jeffrey Lester You reasoning for getting on MLS is great. I feel that when I am new to any market, I have to look at 100 or so houses to really get a feel for the market. Yes you can do off comps, but personally, i don't have the confidence to pull the trigger without significant exposure. With the internet what it is, you don't have to have realtor access to get info, but Im sure it would be easier. You will have solid access not just to listings but to sold comps. This will help. Relationships are huge. So if you get the relationship going with this realtor, the relationship might prove more beneficial than the MLS info.

As for the wholesales... you are right. A few deals a year would help as a college student. The problem is that wholesaling takes lots of knowledge (finding great deal, knowing comps, knowing rehab prices, knowing what really needs to be rehabbed and what doesn't, ect). Im still not THAT experienced and I don't wholesale for these reasons. However I have a very trusted wholesaler that I can birddog for. If I find a deal I can't do or don't want to do, I can pitch it to him for 1000-1500k. Of course, he doesn't pay for MLS leads... only off market stuff. I take him to the house let him evaluate it. this is risky if you don't trust the person, because they can just steal the deal. I trust this guy enough Im not afraid of that. I haven't successfully completed this yet because the two I have sent him, we didn't get our contracts accepted, but I know this strategy will work.

The only MLS deal I have done is a foreclosure a few years back when the market was flooded. At that, you had to be fast. Fast required confident in your numbers. This is hard when you are just gaining experience.

Thats why i told you on a post a while back to look for a HUD foreclosure at hudhomestore.com. if you live in it yourself, there are properties on there that are only available to be bought by owner occupants. This will limit the number of people chasing the house, thus making it easier for a newbie that likely needs some time to make a deal come together. Otherwise you are likely going to be fighting the sharks.

The other strategies you talked about work... but for me, I know at your stage, I would have needed a mentor to guide me through doing that. As hungry as you are, you will figure this out if you dont get discouraged. Keep fighting and putting yourself around people that are smarter than you... and really, smarter than me. If they aren't doing what you want to do, dont listen to them. If they are, copy them. 

Here are some things to think about:

1. You say it has a sigma... it this getting better or worse. If this is an area that used to have a worse reputation, but for some reason more people are wanting to live in this area (closer to work, hipster appeal, whatever), then the market is moving in your direction. If its still declining, personally, I wouldn't want a part of any declining area. 

Things that tend to go bad that I would want to factor into my purchase price of an old home if they aren't already done:

1. What is the water line made of?? If not copper or Pex, you will likely have to replace this. 

2. Has the sewer and gas lines been replaced in the last 25 years. If not, this could be an issue down the road?

3. Mechanical... if its older than 15-20 years, its moving told the end of its life. 

4. Wiring - Is it Copper and Romex? This is good. I don't love aluminum wiring or knob and tube. The older wiring can cause problems down the road. If its has fuses and not breakers, this isnt good. 

5. Termite damage - this can happen to any home, but older homes have had more time to be exposed if this is an issue in your area.

If the above five things have received attention in recent years, this eliminates many of the negatives of purchasing a home pre-1980.  

Would you do this deal? It doesn't have the cashflow I like, but its on 100% financing. 

50K house (3/2/2). 22K needed in repairs. ARV of 90k. Rent at $950. 100% financing, including repairs at prime with a floor at 4% and no ceiling. 15 year note. I will only own 50% of the house/business, but I found the property, will oversee the remodel, will find the tenant, and deal with many of the on going maintenance. Partner brings the financing and book keeping.

I usually don't use the 50% rule when I do a major remodel. This one I figure taxes, insurance, CAPEX and vacancy will be about 40%.

Leaves a total of $60 a month in cashflow and aprox $290 in equity pay down to be shared. Again, no money down for me. 

@Jeffrey Lester Im not sure how exactly to become an unliscenced agent, but you are on the right track by trying to leverage the connection that you have. My suggestion is you offer to buy this realtor lunch and let him know what you are trying to do. Ask if there is something you can do for this realtor to help him win. Just being around the right people, will gain you valuable experience and exposure to the info you need. 

All markets are local, but in most places I have been, its hard to find deals on MLS once markets start to get hotter. A few years back, in the bottom of the markets, the market was so flooded with deals that investors were finding deals on MLS. In the last year and a half, I haven't actually bought a deal off MLS. There are so many investors that they get snatched up before I can get an offer in or there are so many offers, the price gets to high for what it is. I still mine MLS everyday, but I'm not getting deals from their despite trying. Someone is, but not me. I dont say this to discourage you, but to encourage you to hunt in many areas.

What I have been able to do is leverage a few personal friendships with realtors to get connected with seller before the house even hits MLS. This happens when a seller with a beat up house approaches a realtor to sell (both of mine were estate sales). The realtor explains that on MLS, it won't sell as is to a retail buyer. The realtor suggests showing a few investors the house first (Thats me). I offer and as is price thats fair and the deal gets done in a week. Everyone wins.

I didn't get to this position overnight. It took developing a relationship with many people. Once people know you are looking, they might start brining you deals... especially when you have a real relationship with them.

Stay hungry and keep hunting. You are going to get a groove at some point. It might take a year to find the 1st deal... or heck 2 years. But each deal after will come fast and fast because you will get better and better at this. 

With all that said, you are on the right in trying to build connections.

@Nadiya Lonkevych May be 10 miles away is too close for you. Decide how far you are willing to go. I know on the podcast the guys talk about how there is a place within 2 hrs of where you live no matter where you live. Try to meet successful investors near you and find our where they are making money. See if you can do what they are doing.

@Jeffrey Lester Just a thought... my first rental wasn't really a rental. I bought a distressed property, lived in it while I repaired it. Once I got it habitable, I had two buddies (really friends of a friend) move in with me. I actually made money living there. This isn't 100% investing, but if you decide to stop living at home, it can be a small step towards getting into this with just your toes. There are great advances to being an occupant when it comes to acquiring property. You can get good financing and access HUD foreclosures that are only open to owner-occupant buyers for a time period.

@Ned Carey @Jeffrey Lester You cant stress about timing the market perfectly. You need to avoid obvious bad times... like the Buffet quote alludes to. If your model is based on market timing, you are counting on luck too much. Count on finding one heck of a deal, limit your risk through wise decisions along the way, and don't sweat the timing as long as their isn't a red flag. 

If you could read a few books and time the market you would be rich instantly. I hope you figure out how to, but you might get exhausted trying to perfect that approach! 

@Jeffrey Lester I don't think investing is very risky. As an investor, I do lots of things to take risk out of the equation. Here are a few:

1. The deal has to cashflow from day one... this gives me room to lower rent and still make money.1

2. I buy it below true market value. Its not even always easy to find properties 15% below value... but the more value you buy, the more cushion you have. 

3. I don'y buy for appreciation (its icing on the cake). This keeps me from chasing the hot markets. Usually, the steeper the climb, typically the stepper the drop. This limits the upside on appreciation, but lowers your risk. 

4. I screen tenants well and have a willingness to wait another week or two to find a tenant that meets my standards. 

5. I budget for CAPEX. The only true cashflow is whats left after the 50% rule and financing.

6. I keep a stockpile of reserves that are from the cashflow. When you aren't living off the cashflow, then even if you have a rough year, you had good years before and after that year to make up for the bad stretch. 

7. I budget into my purchase price to tenant proof and repair all aging part of the house. EX: If the hot water heater is 7+ years old, I leave it, but budget a new one into my purchase price. This limits large ticket surprised down the road. 

8. I calculate my sales expenses into my purchase price. Real Estate is a costly asset to sell, so i budget 8-9% for this. 

Dont let risk scare you off. Calculate really what the risks are, and know that you have accounted for this and will still make money. When you do so, investing wont be risky... it will be risky not to invest!