All Forum Posts by: Frank Wong

@Bob Okenwa made a great point to qualify the buyer. Don't be afraid to do this. Some buyers are serious, majority are not. Qualifying the buyer actually makes you more of a professional. 

While you are qualifying the buyer you will need to know what your market has to offer. This part will really separate you from everyone else. What do I mean? 

You know what's selling as in SFRs and Multi-units. What the price range will be and a general idea of what the rents would be. What may or may not cash flow, break-even, and what type of historical appreciation is for the market in the last 20, 10, 5yrs. (Google it). Once you have this information you can complete the qualification and also provide guidance to the investor in your area. 

When a new investor talks to me, this is exactly what I do. Questions to ask. What are you looking for? How much are you looking to invest? Looking for SFR, multi-units, condos? Then just let them know what to expect in your market and area. I never sell them a needle in the haystack that does not exist. Just wasting everyone's time.

I would not just put them on an MLS email blast. A lot of agents do this and I think it just deters the buyer because they think you are just sending them everything. If they are a serious buyer what I do is pick out specific properties that fit what they are looking for and basically put it on a silver platter for them with research. This way they have everything they need to make a decision.

Like everyone said don't do it. You should be able to screen and find the right tenant in SF. SF also has very strict rental laws, and you will need to be strict with your screening process.  

No one knows the future but let's look at the current market and your situation. You asked should you buy in the next 3 months. Well, the market won't change much in this time frame. Regardless of what rates do in the short term if there is low inventory and nothing to buy prices won't go down. Simple supply and demand. If you are happy with the current situation and can hold the next 10yrs, buying makes a lot of sense because of inflation money printing, etc. 

A lot of moving parts have to happen for prices to come down or some type of big drop in prices. Let's play devils, advocate, here. What can cause this? Rates are moving up per FED so let's assume they keep that story and raise. Inflation continues to rip up crushing the market. People can't pay for food, housing, basic essentials, rents because of a 20% increase.  

What does this do to the general market? People spend less, look for cheaper housing. People stop traveling. Let's say families move into units and share housing and inventory goes up for rentals. Projected revenue now needs to be cut, lots of over-leveraged investors will be in trouble. STR market goes down because people travel less. Now they have to lower their rental rates. Projected returns based on today's rates are slashed and many operators will be losing money and bleed. Some operators will flourish always winners and losers.

The economy is now in trouble and job losses come in. People are laid off and now can't afford homes. They have to list and sell. Let's say lots of homes are listed and sit with no buyers. This is a process and can take 12-30 months of numerous price reductions, new buyers, new sellers, and new floor prices. Real estate doesn't just drop right away like the stock market. What you saw in 07-09 was an inventory spike because of lending and foreclosures. The market got flooded with homes all at once with no liquidity.  The liquidity today compared to 07-09 is an insane difference. 

So that's just a short bearish argument. A lot of things have to happen for the market to turn. Not saying it can't but it's a process.  

On the bull side, let's say the FED raises rates. The market absorbs it and inflation gets in check. The economy continues to move up. Inventory stays the same as its current rate.  In this case the status quo the market continues to rip up. I call this a "Lockout Rally".  Buyers can't buy because they are scared and there is nothing to buy. If you look at the macro of the market. The cost of labor, materials, land to build homes are all going up. What do you think happens to prices?

I am always long-term bullish in real estate. I have no idea what the prices will be in the short term. I am also open to all possibilities and you have to as an investor. To me it's simple. Home prices can't come down without inventory. It can be just that simple.  Until I see a change that's how I will view the market. 

Go over your concerns with your agent. Ideally you have bids for the repair work you discovered with your inspection report. Come up with a reasonable request for a price reduction. Give the bids and inspection report to the selling party and begin negotiations. Your agent can draft up an addendum for a reduction in price or credit.  Like @Evan Polaski mentioned your realtor should be discussing things with the selling party, that is standard practice. 

It's a tough market for buyers but if you want your offer accepted today, you have to get more aggressive. Go back to the 10+ offers that you lost on. What was the final closing price? What was your offer? You have lots of data that can help structure a better offer. If your price is too low then get more aggressive on price. Price of your offer higher, structure better terms. 

Once you have this information you can make a more competitive offer. Ask your agent what you can do to make it more competitive? There is difference between putting 10 offers that are competitive and 10 offers that never had a chance. Good Luck 

It just depends what you want and what your goals are to start. Both have pros and cons. In this scenario with a house hack you are able to buy your first property with little down FHA loan. A great opportunity to get in the door and into home ownership. You can speed things up by forcing equity into the home by adding value. If you have limited funds for a down then this is your only option.

If you have enough down for an investment property 20/25% down then you have options to explore other plans. Both can work and one is not better than the other. It all depends on what you value and what you want to achieve out of the purchase. Buying a cash flowing investment that is turn key and ready to go day 1 works. Lots of investors do this and works well.  

It first starts with "How much money do I have to invest with?" Once I have that I can see what strategy fits my budget. 

First look at how much you have to invest and put as a down payment. That will tell you what you can and cannot buy in your area. You mentioned FHA so your first property will need to be an owner occupied home. This is actually a great way to buy your first property with little down.

Find a neighborhood that you like that fits your budget. Find something that is move in condition so you can get FHA financing. Ideally something that is in original condition interior that you can upgrade and add value to over time. Build equity over time and after a few years use the equity to reinvest into other deals. If you are looking for cash flow in LA with a FHA loan it wont happen. Don't waste your time looking for a needle in a haystack.

Close after the eviction has been completed. You can do a final walk through of the property prior to close to insure unit has been vacated. 

I would not assume that all multi units will sell over list price. You will need to do a full evaluation of the property before making an offer. Some listing agents will list low to create a bidding environment some will list over market. Each deal is different. 

Let's break this down to what you have available in cash. You said you have a $100k liquid assets. Don't want SFRs. Then you are looking at multi units maybe 2-4 units in a price range of $350-400k. Bring in another equity partner for $100k then double that price range as long as you qualify for financing.

As far as the size of the deal it really depends on the deal and if its turn key or needs work. You asked if you are reaching too far at 2-$3m deals?  Yes it will be too big for the amount of money you have available.