All Forum Posts by: Jake Hartnett

Learn more about wholesaling. $10,000 is plenty of money to start wholesaling and you will actually have deals under contract. Or like others have said, team up with a wholesaler and bird-dog.

Another second, wait until you get to Minnesota.

Saving a little extra cash for a year is great, but then you are an out of state investor. If you really want to be an out of state investor there are much better markets. It would be tough to break even if you sell in a year because you probably have to figure losing 10% of the sale price (6% commission, 3% concession, and everything else that comes up). Maybe the market will jump 10% in a year, but I would never count on it.

If I were you here's what I would do over the next year.

1 Save Money

2 PM @Tim Campbell, agent, investor, flipper extraordinaire. He works a lot in the areas you mentioned in another post.

3 PM @Conor Hesch about a 3% down 30 year fixed rate with no PMI. No joke. He's probably swamped for the next year anyway, so get the details from him now and get on his list. He's a busy man.

Good Luck

Ikea Cabinets are junk. I will never buy them. I work at a custom cabinet shop and I've had to deal with these pieces of garbage. You might as well hang cardboard boxes on your walls.

The biggest problem with them is the backs are made of that folding cardboard stuff. A cabinet back provides all of the structure to the box, and allows you to screw through the back into the wall. The Ikea cabinet backs are flimsy so the boxes rack and you can never get them plumb and level, and you have to use their confounding hardware to attach to the walls and use sheet rock anchors. The bases have plastic legs that break right off.

These are basically disposable cabinets. I might put them in a flip if I really wanted to screw over the buyer, but I would never expect them to hold up to normal wear and tear in a rental. Just go one step up and buy the cheapest cabinets from Home Depot. It will save you a ton of money in the long run. They might not be the frameless "euro-style" you are looking for, but if you want something expensive-looking, spend a little more money, don't buy cheap junk that looks expensive and falls apart.

@Ted Scearcy @Davit Gharibyan, You all have gotten farther than me, I just called the city and they told be I had to come in person. I haven't been able to because I work on weekdays.

Good Luck.

Another way to find deals (depending on what kind of properties you are looking for) is to network at REIAs with other investors. There was a 1031 Exchange conference here in Minneapolis a few months ago. That would be a great place to meet investors who are interested in selling smaller properties.

Another idea that I haven't been able to implement yet is to find a list of recent evictions in your city and send mail to the owners. After that experience I bet a good number of them will be ready to drop the property.

@Scott Harper, Yes. You can buy as many properties as you want after you close on the first one.

I finally get to post a success story after years of tire-kicking and hemming and hawing.

I closed on a duplex yesterday that will allow me to live for free with a roommate once I do a few cosmetic repairs and get the rents up to market rate.

For anyone who can't seem to get their first deal done here is what I did:

1. Set a due date. Last December I decided I was going to close by May 1st.

2. Decide on criteria. Live for free? $300/door? Buy 20% under market value?

3. Decide on property type. Location, condition, number of units etc.

4. Figure out what is holding me back. The big thing for me was nailing down expense estimates. I couldn't analyze properties because I went back and forth on expense estimates. A home warranty plan really helped me dial that in.

Once I removed these barriers that had me moving in 10 directions at once it was easy to look at properties and give the thumbs up or thumbs down.

I got the best commercially available financing in the world, the American Dream Loan through US Bank. Its 3% down, 30 year fixed rate with no PMI, and its a portfolio loan so its not subject to FHA requirements. It has to be your only property when you buy it, your first property, or you have to sell whatever you currently own so its your only property when you buy it. If you have any questions about this loan contact @Conor Hesch. He is amazing and he will go to bat for you to make sure things get done.

I also had an amazing realtor @Tim Campbell. Both Tim and Conor are investors and they were my dream team. If you don't have a great realtor, get one. Or just call Tim, he is overqualified to help find you a duplex, or flip a house or spec-build, or anything else.

My profile has said Investor for about 2 years now. Ive finally earned it.

Thanks Tim and Conor.

One important thing to remember when thinking about expenses as a percentage of rents is that everyone comes from a different market. When @Ben Leybovich and @Brandon Turner talk about 10% for CapX that is on relatively inexpensive properties in Lima, OH and Podunk, WA. A water heater costs about $800 whether the unit rents for $800/month like in their markets or $1600/month like in my market. A unit that rents for twice as much does not necessarily cost twice as much to maintain.

Taxes and Insurance and PM and other costs might track rents, but CapX and repairs are pretty stable throughout the country, so expect these expenses to be a lower percentage of rents in more expensive markets.

I personally added up all of the capital improvements to a "standard" unit in my area and divided by the life expectancy (conservative) and came up with 7% of rents for a "standard" unit in my area. But this number isn't very useful over time. If I have a property in a high demand area and rents increase by 50% my CapX isn't going to change.

I would be careful about investing from a distance in the Twin Cities unless you know the market well, or have someone on the ground. Neighborhoods are changing fast, even people who live here don't know about a lot of the development that is happening in certain neighborhoods.

The solid A and B neighborhoods are very competitive (zero or negative cashflow) and the C neighborhoods can be tricky. You are looking at older housing stock, and subtle differences within larger geographic areas. The twin cities is very segregated. No one crosses the river, and tend to not cross the interstates. People will write off everything in E Saint Paul because its a "bad" area, but its as large as a small city, so there are some great neighborhoods and some terrible neighborhoods.

I think the major competitive advantage in the Twin Cities is that its very steady. We don't have the boom and bust that many cities see. There are many diverse fortune 500 companies here that tend to not lay people off in massive numbers, and that keeps the local economy fairly stable. On the flip side, cashflow is not nearly as good as some other areas that may or may not be more exposed to the boom/bust cycle.

So if you do find a good deal, it will probably be a good deal forever, and it will probably not lose significant value in economic downturns, but the price you pay for that stability is lower cashflow. I just looked at some data and it looks like Chicago sees the same trend, fairly flat median home price when compared with other major cities.

PM me if you have any questions about specific neighborhoods.