All Forum Posts by: Gregory Walter

Most REOs are sold as part of a larger portfolio in a sale to institutional investors and high net worth individuals or listed on the MLS. To go after REOs that are listed find a great agent that watches the MLS like a hawk, can answer all your questions, and is intelligent, diligent, and cares more about building the relationship by doing right by you then a quick sale. If your looking in Charlotte, I can point you in the right direction if you private message me. Good luck!

There are so many things to look for.  The question is beyond the scope of a forum post.  There are professionals who have spent years picking up a lot of little things through formal training and learning by experience.  Try to link up with a real estate agent who is an investor himself and well rounded in his knowledge base.  If you ask how much something costs to repair and he/she can't give you a ballpark number they either don't know or aren't confident enough to give you an answer.

First things that come to mind that people may not think of:
- Crawlspace or Slab Foundation - Crawlspace makes it easier to relocate utilities and do structural repair if necessary now or in the future.
- Cost of work required based on current market rates (for example right now electrical work is very expensive in Charlotte metro compared to historical norms)
- Are any code issues with the City of Charlotte or LUESA?  City of Charlotte code enforcement inspects for minimum housing standards, LUESA inspects for adherence to NC state building code.
- Building materials - type of pipe, type of electric wire, type of shingle and type of roof sheathing underneath the shingles, sheetrock or plaster walls.  Some things matter more than others.

A lot has to do with judgment that comes from experience.  Link up with an experienced real estate investor and an experience real estate broker.

One flipping the work gets much harder for each different trade you add.  If you have a house that needs a lot of work by one or two trades (electrical, plumbing, HVAC, Flooring Installer,etc.) it might be an easier flip that finding a house that needs less work but by more trades.

Is your cousin a Realtor in those area outside of the metro areas?  I've never had a problem finding properties that will cashflow in Charlotte.  Charlotte is a huge city geographically, with plenty of areas to look in.

To find good deals anywhere you just run the numbers.  The numbers don't lie.  

I'm not a fan in investing in undeveloped areas.  @Dawn Brenengen said it right the trade of is cash flow for potential appreciation.  Because if you buy in an undeveloped area when the area does develop your property, your property will be competing with newer homes which will affect its value.  
The other thing I think about it who is going to rent.  In Charlotte, there are people moving to the city all the time, often for high paying jobs.  These people have a reason to rent and money to pay the rent.  If I go out to a rural area, I ask who is going to be renting from me and with properties so cheap out here why are these renters not buying.  What level of rent will I get relative to expenses I may incur?  etc.

On a side note, I don't think the properties in NC are particularly expensive.  People from NC may feel that way relative to how dirt cheap there were in year past.  Anyone from a major metro, especially on the West Coast or NE can tell you that when a city becomes an increasingly desirable place to live people and the supply demand curve changes people are willing to spend a larger and larger share of thier income on housing.  Charlotte and I believe other cities in NC are still pretty affordable when you look at housing expense vs. income relative to cities that offer similar lifestyles.  Plenty of room for property appreciation based on that measure.

I'm going to reply to somethings other people have said in this forum: 

1) Don't buy a property that doesn't cashflow when there are areas in the country that will allow you buy property that cashflows easily and the same or similar prospects for growth.  The multiple of the rent that the property sells for gives you a gauge for how reasonably valued the property is relative to its utility.  If the rent is .65% of the purchase price your likely paying a premium for the ownership and anticipated growth in value.  That growth may not be realized and values could drop on speculation.

2) Don't buy in a slow growing city just because the rent is good relative to the purchase price.  Maybe it is because the there aren't many people wanting to own there relative to people wanting to get out.

Regarding Cali: If you are in any state that has overly tenant friendly laws that make it near impossible to evict a tenant in a short period of time, I'd look elsewhere.  Thats a huge contingent liability.  Especially in a place where your cost to carry the property during that time would also be high.  If you can't get a positive cashflow, or don't have a good margin of safety look else.

I like my market because I always cash flow, and my total expenses are low.  That creates a margin of safety.  I could have bad 6 months and still make money in the year.  In some other markets like the bigger cities in california or NYC metro, it might take you years or a decade to recover from a bad 6 months.  Fortunately, in the past 5 years, I've never had even a bad month.

I was able to move to Charlotte, NC to pursue real estate investing.  If you aren't able to or don't want to move, find a broker/investor in a growing city that still have good buy to rent ratios in decent areas and cut him in on the deal so your interest are aligned, or be a good client so he takes care of you.  By being a good client, I don't mean throwing money at him, I meant be deliberate in your approach, honest, and mindful of his time.  If your a serious investor, and he's smart, he'll want to take care of you so you do more deals together, and you refer your friends and family as new clients for him.

What are typical ROI's on single family homes in B- or better areas in Fayetteville?

If your willing to try Charlotte, have access to conventional financing, and don't mind working at it a little its possible.  Thats 8 deals generating $500 a month in cash flow.  The limiting factors would be your ability to operate those properties (leasing, property management, etc.) and availability of financing.  If you have good credit you could take some credit card balance transfers along the way to supplement your ability you put 20% down for your first 4-5 deals and 25% on you last few deals.  You'd be trying to do deals with a 70-140k purchase price with initial cash expenditures of 15k-30k.  Another issue is maintaining a good enough debt to income ratio for future deals.  Also on any balance transfer you'd take you want to make sure that could roll them by new balance transfers, personal loan, or other funds when they are past a 0 or low rate introductory period.   

Having the account labelled "trust account" or "escrow account" is important, as is keeping funds separate from your own, as is the account being held at a NC bank.  Those are the big three for security deposit accounts in NC.

Almost all of those are also indicators of projected growth.  If you read old news papers you'll often see what pundits cause signs of either slow down or the market being overhead before the market takes off further.  

I think a good investor should always be looking for recession proof properties by buying properties with a built in margin of safety.  Examples include properties that rent at a relatively low rate compared with salaries of the applicant pools.  Properties with rents at a high multiple of fixed costs.   Properties bought at a low multiple of rent.  Properties with high cap rates, etc.

The other thing is in those rural areas rents are often lower.  If you have a significant repair it takes a big bite of your profit.  Labor is cheaper (in Eastern NC compared with a large city) but materials cost mostly the same anywhere in NC.  If your in a large city, like Charlotte, you rents may be high enough that larger repairs don't take as big of a bite out of your cash flow and profit.

As a supplement to the good info Nicole left

1) You don't need to register a DBA with the secretary of state if you're operating in your own name.

2) If you have a regular job and Ok credit you may qualify for conventional credit.  Conventional credit is often BY FAR the best source of funds.  Any decent real estate agent can link you up with a few quality lenders.

3) I think Nicole hit the nail on the head.  He is probably not a licensed GC or is not registered with your county to pull permits.  In my opinion pulling permits the main reason to hire a GC, otherwise you could hire a supervisor who is not a GC for less money.  Also, my understanding is that many counties technically require the licensed worker or a supervising GC to pull the permit for the work they are doing.  The homeowner would pull the permit if they were doing the work.  

4) You just get a list and call and do an apples to apples comparison.  Its best to get your list from referrals from someone that works with multiple lenders, and does a lot of transactions - another investor with a lot of volume or an a real estate agent that works with investors.

5) Many sources but if you don't already have one, you should work with an another experienced investor mentor, or link up with a real estate broker that specializes in working with investors.

6) There is a lot of good information on bigger pockets and a lot misinformation on bigger pockets.  If you haven't already you should link up with a good real estate broker who can help you analyze the deal and make sure everything is copacetic.  Being licensed guarantees a minimum level of quality.  Pick someone that is a real estate professional first and a salesman second and someone who specializes with investors. 

If I can be of any further assistance please reach out.