All Forum Posts by: Mike H.

100k to control 1.6 mil in real estate is pretty impressive. What kind of cash flow will you be looking at?

Here's where I've looked at turnkey operations before. I'm in Illinois and have 12 properties. But its getting so incredibly difficult to get any more financing right now in this state, that I'm constantly looking at other states that have better financing available.

Basically, I'm at the point where I want to keep growing but am running into a pretty high wall here where I live. The turnkey stuff is clearly a bit overpriced than if you could do the deal yourself. And the numbers haven't really made sense to me just yet.

I actually wouldn't mind paying 10k more if it means the difference in getting more properties at $300 a month net cash flow as opposed to $350 to $375 a month.

But most of these places seem to want to get you in at 80 to 90 of market value which is ridiculous given that the actual sales that are occurring are probably at that number.

Again, if these turn key places were any good, they would be getting their deals at 60-65% of market and selling them to me at 70-75% so I could do a quick refi - rate and term and be all in with nothing down except some closing costs (2 or 3k).

They could make their profit on the 10% plus the rehab work (their GC fee), plus the property management fees going forward.

MemphisInvest, Norada, and Real Wealth Network all seem to be doing the turnkey stuff. A really smart GC could make a killing if they were to partner up with a property management firm and a couple of local banks and do this right.

I live in Illinois and listen to the LU podcasts pretty regularly. Seems to be quite a bit of cynicism for the organization in here which is odd considering all they do is try to convince people to take action and help show why real estate is such an incredible investment.

While I'm sure they make money off the memberships, I think you have to look at the value that new investors are getting for that money. Which, speaking to an earlier post, also should explain why the costs are less after the first year. Common sense. The person's first year is going to include a ton of calls. After they get that first year under their belt, they shouldn't be calling as often.

I own 12 single family rentals here and love the podcasts and would definitely join if I lived over there. I'm not suggesting they're perfect but show me another real estate training/organization that provides a bunch of classes and all the calls/questions you can come up with for $500.

If you want to look at a crazy real estate training org, try checking out Renatus where their training program is 13k and you can sell their training program to other people and make 3 or 4k. Half the people in there could care less about the real estate investing. They're there to sell the programs to other people. Now thats a program to be cynical about. LU is an absolute dream in comparison. :-)

this is for Curtis:

Wow. They're telling you how to buy houses without pulling any money out of your pocket and that doesn't get you jazzed up?

The quick answer - as you've seen - is if you want to grab cash, you have to look to flip. I don't even bother in my area. Not that I haven't seen a couple of possibilities to do it. Its just not my business model. Why go after 10-20k now when its really going to be worth between 80-100k when it comes back to normal again.

Hold on to it, make $300 to $400 a month without paying anything out of pocket and wait for the market to come back and start moving. Then again, considering you're buying these houses with no money out of pocket, why sell at all - unless you want to move up to multifamily and need the down payment.

But consider this, too. There was an article out recently that said that rents were going to be going up 10% over the next year or two. Add another 100-150 a month to that cash flow and this can be a life changer.

Couple of options to refi quicker.

1) Buy it with hard money. If you have enough reserves that you can pay all cash, you can probably qualify for a hard money loan. The big advantage to buying with hard money is you have the ability to refi rate and term and end up paying no money out of your own pocket. Leave those reserves in the bank.

2) Buy it with a loan from a relative. Have an attorney write up the mortgage/note and agree on terms (7%?). Roll in the purchase plus rehab for the total on this one as well. Then you can refi rate and term and, again, have no money out pocket. Be sure to record the mortgage and be sure to make payments to the relative.

Again, if you have the reserves to pay cash, you should be able to get a relative or friend to give you the loan. They'll be protected, for the most part, by their lien on the property.

Either way - hard money or private - the main advantage of this is that once you purchase, rehab and get it rented out, you can now go to a lender and refi the house rate and term. If you buy it right, you'll end up with no money out of pocket so you can do the same thing again right away. Rinse and repeat.

Qualifying for the conventional refi is the key. You'll need to check that out before you start anything.

ex:
Pay $60,000 for the house
$10,000 rehab
$5,000 lending costs
ALL in for 75k loan (hard or private money).

Rehab in 4 weeks and rent in 4 weeks. Most banks will allow you to refi rate and term after 3 to 6 months.

After the refi, the purchase/rehab loan is paid off, you still
have a 75k mortgage and now you're out no money out of pocket. Your reserves are still in the bank to continue making you look like a much better risk.

I've got 12 houses and am closing on 13 and 14 next month. Did the 20% down on my first one and that was the end of that. All the rest - no money out of pocket (or very little).

I'd stick with the single family. The deals are a little light right now here in Illinois but they're always cyclical. Also, I'd try to get those properties refi'd under conventional loans so they continue to cash flow well.

I would think you'd have no problem putting them all in your wife's name and getting her qualified. With her credit score and income - and lack of debts, that should be an absolute
no brainer with any bank around.

Its better to lock in at these crazy low rates for 30 years as its the cheapest money you'll ever get.

The only problem you're going to run into is the cash out issue. Since you have no mortgages, you'll be doing cash out mortgages which typically require 1 yr seasoning - and some banks won't do them at all.

You may want to look at using hard money to buy and rehab your houses so that you can refi them rate and term with a conventional loan. You pay a little more in fees but its well worth it.

The other comment I have is that I would try to ramp up your buying while the prices are at all time lows. These prices simply aren't going to last so the more you can buy in the next 2 years, the better. After that, all bets are off for what you'll be paying.

Right now, if you include purchase, rehab and financing costs and don't pay anything out of pocket, you can still cash flow between $300 to $400 a month if you cherry pick the deals. In a normal market, thats more like $100 a month.....

btw: Huge kudos to you on what you've done. While it isn't a great use of cash to have it all tied up like you do. The fact is you've added 5k in income over the past 2 years - most of which I'm betting is tax free income. Thats the equivalent of about 70k a year or more.

People seizing the opportunities today are going to be sitting awfully pretty in 5 or 6 years when those prices start to come back up. :-)