All Forum Posts by: Lance Johnson

You should definitely consult with an attorney to be sure, but without an exchange of consideration, it sounds like there might not be a bona fide contract. Contract law is pretty tricky in this area; a friend of mine just went through the other side of it. The lease was signed but the prospective tenant hadn't yet delivered the deposit and first month's rent. Before it was delivered, the tenant backed out. Unfortunately, the determination was made that the case for a bona fide contract was weak without the consideration, so no further action was taken.

My advice, though: consult a contract law or tenancy law attorney.

@Kyle Wifler I had a similar issue recently in my San Francisco rental. Mine wasn't related to a closing date, but the timing was similarly bad. I started my Craigslist advertising in advance, even though I couldn't show it. I stated that the unit was occupied and wouldn't be available for showing until a particular date. Some people ignored that and still called or e-mailed asking to "see it today," but most did not. I scheduled showings for the first possible day that I could get in there. I wasn't able to get the exact start date that I wanted, and I ended up with about a 14 day vacancy when all was said and done, but it was a lot better than waiting to do everyone on the first day the unit was vacant.

@John Mathewson - If you are having trouble getting your current volume churned, I'd advise extreme caution on growing your numbers. You need to solve your problem of scale first, otherwise, you may find you are sitting on properties for 4-6 weeks instead of 2. You can only squeeze so much more productivity out of existing team members, so if your current team has no more capacity, the only option is to build a bigger team.

If your contractor is great, he should be pretty well connected to refer you to other great contractors. Some people are hesitant to refer people away from them because they want more business, or "more pie." But what I think too many people fail to realize is that there are two main ways to get "more pie." The first way (that most people think of) is that they are fighting for a bigger piece of a single pie - in order for anyone to get more, someone must be getting less. The other (and better) way, though, is to just make more pies. Sure, you might get a slightly smaller piece of each pie, but on the whole, you're going to have a lot more pie, and so is everyone else.

If you can't make more money bringing on other contractors to do your 50-60 flips, then it sounds like the basic economics might not make sense.

This is all about your risk profile. If you can't get a clean title, don't do the deal. And even if you are told they can deliver clean title, make sure there is title insurance in place.

Based on the limited information given, it doesn't sound like the homeowner is likely to prevail in the lawsuit. If the title is tied up in a lawsuit, I don't see how the bank could close a deal, anyway.

As to the eviction - these can be hard. It has taken people months to get people out of properties, even when they have title. One option would be voluntary removal, sometimes called cash-for-keys. Basically, you tell the person who is occupying the place that you will pay them cash in exchange for the keys to the house and their departure. This can save a lot of time, legal costs, and carrying costs, but it doesn't always work. The legal process can be lengthy, so really, as I said to start, it's all about your risk profile.

There are many things that go into knowing your market. Here are just some questions that you should at least be able to start answering. Of course, there are some parts of knowing your market that depend on your overall strategy, property types, and the sub-market you are in. Knowing about Atlanta (for instance) can only get you so far.

• What is the going cap rate for your area (esp if you are doing 5+ unit MFH)
• Are there new jobs being created in the area? Or are jobs stagnant? Worse, are jobs leaving?
• What are the market rents for units like the ones you are considering?
• How many people are renting vs. owning in the target area?
• What are average vacancy rates?
• What should you expect to pay for utilities (water, garbage, sewer, etc.)?
• What type of tenants are looking for a property like yours? Will they likely meet your screening criteria?
• If doing "residential" properties (4 or fewer units), what type of appreciation are you expecting, if any? Would you do the deal if appreciation was 0%?
• How are the schools in the area?
• What is crime like?
• What are average Cap Ex for properties of this type and age?

Some of these things you get from knowing the area, some of them you can research through local Chambers of Commerce or real estate reporting sites. Some of them you know by calling local utility companies or property management companies and asking. Network! Find a local REA and ask there. Talk to other investors. Ask appraisers. Meet neighbors. Talk to the mailman who walks down the street every day.

At the end of the day, there is no single source of information that will help you to "know your market."

Good luck!

Call your lender and see of you can simply renegotiate the rate. Since there is no equity - in fact there is negative equity - there is really nothing to refi against. No new lender is likely to give you a 110% LTV in a refi deal. Your current lender, though, has a lot of incentive to negotiate a better rate to prevent a short sale or foreclosure and if you can save some interest expense while they still get on time payments, it is a win-win.

I agree with @William Robison - there are certain areas of the city that I wouldn't consider as an out-of-state investor. I was chatting with one of my investment partners today and said we would need to move to KC to invest of some of the things were were talking about. I could tolerate that, I think... Kansas City is a great place.

Also, I strongly suggest that you check the Ultimate Beginners Guide:

http://www.biggerpockets.com/ubg

You might also find the Podcast interested, especially as they have a few episodes devoted to beginners.

There shouldn't be a problem with this, although you would want to check with your lender to make sure that this isn't a problem. You should also make sure to get a letter from the gift-giver stating that it is a gift. Closing costs shouldn't be very high, but you also need to make sure that you comply with any and all gift tax laws that apply.

@Josiah Charland - it sounds like you're already off to a start with the work you're putting in. The real question is how much cash flow do you need to make this happen? If you need $5,000 / mo and you are getting a 10% cash on cash return on your investments, you'll need $600,000 in cash (equity) invested across your various markets. If you can get by on $2,500 a month, you only need $300k in equity.

There is no single "best way" to achieve this. My recommendation is to set a few key, achievable goals and then develop a strategy. Have you looked at the Ultimate Beginners Guide, yet?

http://www.biggerpockets.com/ubg

That will help you get an idea for what's possible.

Determine how much free cash flow you need to replace your income, and then start building out the strategy to achieve it.