All Forum Posts by: Christian Malesic

DISCLOSURE: I mean no ill will to any of the fabulous Real estate agents (or Realtors) out there. I provide herein only my experience and advice.

I have found that becoming an RE agent is one of the easiest things in America to do as the barriers to entry are tremendously low. Thus, as one might expect, there are a lot of sub-par performers in this field. What's more, the good RE agents are doing big commercial deals, working for home builders, doing million-dollar plus listings, etc. So, if you are a landlord or RE investor looking for properties in the sub-$100k region, it is extremely difficult to find a GOOD agent.

If you have one KEEP THEM, but still consider...

If you are doing more than a few deals a year, why not keep the money in the family. There are fees to become an RE agent. There is a course or two to take, continuing education (relatively minor), state licenses, dues for being a member of the National Assoc. of Realtors (as well as state and local chapters - this allows you to call yourself a Realtor), and their are broker fees. Let me explain that last point.

Broker Fees: Every franchise is different. Every broker runs their business their own way and the fees and way they compensate for deals is all over the place. As a VERY GENERAL rule, plan on $125 a month (includes MLS access) even if you do nothing with the agency that month, these are some sort of 'office fee'. Also, VERY GENERALLY, plan on making about 2% net of contract price for every deal.

I further recommend to not be agent and buyer (though this is permissible if you disclose that you are an agent). For example, my wife and I decided she will be the Realtor and sign as such. I am the buyer (I mostly buy, though in rare situations I am the seller). My wife is more or less a one-client Realtor. She works for family and friends occasionally and is gaining some popularity at our local REI club. She does not seek this work and is comfortable just working for me, as being a Realtor is not her full time job.

Again, I hope I did not offend anyone as it was not my intention to do so.

A local bank with real people in their REO office are definitely approachable. In fact, if you establish a track record of easy to deal with, word is your bond, fast, good pay, etc., etc. they may come to you with their REOs.

Every local bank with whom I have a relationship shares their REO list with me and actually emails me when they have new properties they think will peak my interest.

Large banks - forgettaboutit.

PS - I bought 3 REOs (at separate times over the period of a year or so) from a local bank that is about 5 years old with 6 or so branches. I dealt directly with the President and have come to know him personally. To the point where we have provided each other advice on general business topics. On the third purchase he gave me an offer I couldn't refuse - he agreed to match the exact terms of my normal financial institution on the loan AND knock $2k off the final negotiated price iff I finance with his bank. I took the deal. In a uncharacteristic set of circumstances (for the way I run my business) I since sold that property (I am usually a buy and hold REI) to someone who gave me an offer I couldn't refuse.

What is not clear from your original post is if YOU would consider living in the house. If not, I am with Mike and Tim. If so, the rules all just changed. Please advise.

My father explained it to me this way as a young man:

You have to work both hard and smart to be successful, neither will replace the other.

Where are you getting this? According to whom? By RE pro do you mean 'agent'?

YES! I would accept it!

I would be all over it. A bird in the hand and all...

You need to appreciate how many deadbeats there are in this business who do not pay and come up with excuse after excuse. You did not post all of the details, but I will be surprised if they pass.

In my mind there are two angles from which to approach purchases. The first is discussed throughout here and the second rarely is, if ever.

The first, how do you get the numbers to work? is all over BP. There is even resources to the left and entire forums. ROI, the 2% rule, cash flow... it is all good. It is important. I am not minimizing the importance of it all (I do it myself), but it is only one side of the coin.

The second, what is the current owner willing to sell the property for? Think limbo here, and "how low can you go" This is both art and science as too high is not the best deal you could get and too low insults the seller, making him hard with which to negotiate. But, why is HIS side of the equation important?

Let us say that all of your math from part 1, says a deal at $70k is 2% (based on the mini-equation), meaning $1400 in rents divided by $70k is 2%. What do you offer? Not enough information, you say. OK, let us say asking is $77k. There is that old back of the napkin math that tells us that 90% of normal MLS properties (non-REO, non-pre-foreclosure) sell for 10% off asking (of course, this is in markets that are not hyper where bidding wars cause contracts to go over asking price - like DC). You conclude $70k is a good number based on the asking price as well. Hey, that matches part 1! Start at say $67k (hoping to get a deal and giving yourself some negotiating room) and plan to end up at $70k. What if I told you that you could have got it for $60k? How would you ever know how low you can go without insulting the seller?

Use part 2 - the other side of the coin. Know what they need to get to totally break even (BE). That is: to pay off all mortgages, home equity loans, agent commissions, lien satisfaction recordings, transfer tax, etc. Get this info from the very first post of this thread. Take the BE #, add a reasonable profit for their pocket and compare to Part 1 above.

That is the science. Sprinkle on a little art and you are a Real Estate Investor.

Sure. You entered. Don't deny that. Do not lie. Do not commit perjury.

Buy WHY? WHY did you enter? Check your lease (as stated by other posters). Our lease has an emergency provision which allows us to enter with zero notice in certain situations. If yours does not, make sure you add that clause after all this.

When the upstairs tenant complained, did you go to the property to inspect from the outside? Did you smell odors? Odors of defacation and urine? Of dead meat? Did you knock? Was their no answer? Could it be that you feared the worst? Maybe someone was injured or trapped or expired?

I was not there. I can not answer these questions for you. Why did you feel the urgency to get your LL key out of your pocket and enter? What is your story?

Can your story persuade the judge that the situation was dire enough that it kept you from giving notice?

BTW, putting all of this on the PUBLIC Interent was probably not a good idea. Think about that one.

Many have posted on this subject and replied herein. Look around if you want more replies and examples. BP is full of responses to this question.

Think in terms of stock investing. Are you looking for growth? Then, reinvest all profits in the business like microsoft of years ago did (or really any tech stock). Are you looking for Income? Get some positive cash flowing properties and enjoy the steady stream. How about high risk speculative? then play the appreciation game. Look for properties you think will appreciate faster than your interest rate plus inflation.

See how this goes? What works for you? I am growth. I am also buy and hold. We take very little out of our company as we are trying to grow it into a behemoth (according to our terms, of course).

Check out the REOs and Short Sales forums here on BP. Read the back posts. There is a wealth of knowledge right here!