All Forum Posts by: James Mccarthy

Hi all,

I am taking one of his courses on Udemy, some really great content. I did a lot of research on the company and have studied under a few others. I believe in following success, learn from it, and make it your own. I am a new investor and always looking for potential mentors. There is a lot of red flags for me with his teaching. I know a great deal of what Phil teaches too be true based on its the same thing that the most success and practiced investors in the industry are doing. Phil uses some or too much grey area practices for me. He is motivating and speaks with such confidence you will tend to believe him. Its hard not too, but in my studies I have seen tons or real world practices and just feel too much of his teachings is just on making money, which is the idea but it needs to be a win/win for everyone not just for your own wallet. He talks about fix and flip as a waste of time and money and to go for the cosmetic and just doll it up, sell it to a retail buyer and not really put any work into it and make as much cash as a fix an flip. I was taught to take a property that needs little to no repairs and do some basics to make ready for renting a basic face lift. Meaning if you can get a good deal, help the seller and not have to gut the place you can rent for some cash flow because you can't really sell for a whole lot because you bought around market value because of little work needed. For rehabbing the point was to make your money on forced appreciation up to current market value of the surrounding area (find the worst house in the best area). Buy distressed properties for a discount, help seller with their real estate problem and make your money in renovating, the massive work needed is why you get it so cheap (seller still gets a fair cut), then sell as a remodel or renovation and make your money on forced appreciation. Phil wants to buy your house and sell as a complete renovation with only cosmetic work done (he doesn't say this outright but he sells to retail buyers a property most investors would rent because of low value but sell as a remodel in current market). He knows the difference in the comps and clearly makes a case on your house needing work to get the sell. To me this is a little shady, and reputation is worth a lot when it comes to these kinds of transactions. The point I am trying to make is to use caution, there are a lot of great teachers out their. Phil has some great stuff, but take it for what its worth and get what you can out of it, but I would say you should not rely just on his teachings. As for mentoring, it might be okay but seems over priced with the teaching so far. I don't' think he is a scam but I don't feel he has everyone's best interest in mind.

Hey Kasan,

I would not disclose full details of the deal such as location unless you have it under contract. If you do he can't take it from you and if he wants to be a part in it, you have the leverage. You need to know your numbers, you make your profit in real estate when you buy. You need to buy right. General rule of thumb is ARV after repair value * 70% of as-is - repairs is the ballpark max offer when looking to buy. If your numbers are right and presented appropriately you won't have to convince anyone to be a part of it. It will just make since, if you buy into it with 30% equity because you bought at a discount and the arv is pretty high on top of that, a person with the means would be crazy not to want a piece of the pie.

You can't predict the future, but in this business you can come close. For instance you can learn the market and know where it is going, appreciation values, comparables, and so much more. When I am building a deal (still learning/school) I put together a package that shows my credibility, why the seller would sell to me, and why the buyer would buy from me and also why a lender might lend to me. I tailor individual packets for each of them. I don't go to a buyer or a lender without showing them they have made a profit before they commit. I show the profit margins in equity, and the potential profit of the arv when said and done, and give rock solid examples of how I know it will sell. I also make sure the have legal documents to protect their investments, such the real estate itself. If I can't deliver they know its a deal and I have to hand it over.

The seller is happy too, he gets his real estate issue solved, though you buy at a discount, cash buys makes this much easier. If you have cash buyers people will take a lot less for money now or they have a time sensitive issue and may lose everything, so you are still saving the day. Plus I would find my buyers and get their shopping list then find the sellers. 

BiggerPockets has lots of tools to help make an informed decision. Hope this helps.

Hey Kevin and Marc,

I will run this by a lawyer and document everything, thanks. Great advice also regarding standard of living. I would have probably documented too much. Thanks guys.

Congrats, I love the idea of house hacking.

I do i have pictures videos, garbage,theft, and vandalism just to name a few.

Nope i barely had rent at the time because it kept going up. I had not been approved for another place just yet. At the same time i learned i had to give two months notice. It was a tiough time. Now things are better financialy and i gotta get my family out of her. I have a much nicer bigger place line up when i can leave here.

Hey all thanks for all of the advise, I am looking into all options. This is literally damaged our standard of living, and is flat out embarrassing.

Hey Gail, 

Thanks I will do as you say sounds like a good action plan. I think we will write a specific letter of intent on this vs just sending them a handwritten letter telling them there is bugs and we need help. I think this may be an effective way out too just move. They were going to charge me 3 grand to break the lease to move. Thanks again.

Hey Rick, 

Thanks for the input. I have spent hundreds on pest control, my girlfriend has sent a letter. The pest guys come in an spray, they don't do any real prep. I think it's completely in affective. I do have a mattress cover but its not enough.  My girlfriend keeps a clean house and is battling this daily, they are coming in from the walls, under carpet and flooring, neighbors on both sides constantly having issues. I really don't want to go to court. I stopped reporting issue to them because they simply say if we have a bug problem then its because of us and we our the problem. I see the bug guy a few times a month knocking on many different units to spray. My research says it takes much more then a spray, I have bombed, sprayed, sticky tape, powder. The most effective way is heat treatment but not something I can do in an apt. Now I spend 4 hours once a week powering boiling water in corners, bed frames and any other hot spots.

I recently went and read some reviews, they all complained about bed bugs in the first sentence of the review. 4 years ago, this was not an issue, now I seem to be just stuck. I have been recording this, like you say. I will write another letter and have the bug guy come in again and maybe after all of that they will let me out of the lease without hurting my credit or rental history.

This is an interesting topic, I am a brand new investor so these ideas are just my opinion not something I have done. 

I think they're so many options to think about here. Single family homes limit your income potential while raising your maintenance base. Idealy I would want to buy/leverage multi family homes. Banks will finance you on up to 4 plexes same as if you were buying a single family home. Also I read somewhere, I think here (biggerpockets) that the banks have raised the amount you can have leveraged at any give time to 8-10 or 6-8 whereas it was much lower in previous years, I could be wrong, may want to research this. So if you had 400k, you could put down the minimum down payments and buy as many properties as you can. If you read the books Brandon has he explains a lot of this much more detail better than I can, but if you pay cash you are not leveraged and your roi (return on investment or cash on cash) will be really low in the long run, but you get more cash flow rents on a single rental unit, and more risk of lawsuit etc (if you own outright someone will try and take it, if you don't own because the bank has first mortgage you are much more protected) and you will own less properties with less cash flow in the end. If you can get long term low interest annualized traditional loans, I would buy as much as I could of only multi family homes. You get the benefits of great financing, your cash flow will be per unit not per house, your maintenance cost will be limited to one building vs two or three homes with individual cost associated to them. If you have single family home, you have to pay property manager per house or do it yourself, you have to pay higher costs for doing maintenance as its not leveraged with wholesale pricing and if your tenant leaves you have no income on the whole property also this once postive cash flow is added to debt and not positive income. If you have multi unit homes you save on expenses per unit, one roof, one driveway to shovel and one property to manage etc. If one is vacant you still have 1, 2, or 3 more rents in that one purchase. Your rents are compounded with more renters so that is an instant increase in cash flow. You collect on up to 4 units per building, all of which are paying your mortgage, interest, taxes, maintenance, upkeep, property manager etc. Your roi will based on your down payment and may be the only money you have invested. You literally will get more bang for your buck. While completely leveraged your renters cover the cost of everything, while you take advantage of depreciation, many other tax benefits, passive income, debt paydown, rental increases annually, you can force appreciation and get higher rents. On top of all that after a few years when there is good equity in our real estate you can pull it all out tax free. You get to pull the increase value for appreciation (assuming it appreciates), the equity from the paydown, and tax free as you are getting a loan vs selling. Then your renters pay down your new loan for you and you invest all the money you just got into more properties or better ones and again increase your monthly passive income. You could do a 1031 exchange and upgrade all your properties after a bit and buy a apt complex. Again, one roof, more rents, one property manager etc. Massive cash flow then. Keep in mind you have to buy right and do your homework. Just like Monopoly, trade in your green houses for the big red hotels.

Maybe you just want the passive income and not all the work studying and learning how to do all of this? With that kind of money and the fact you don't need money right now, you could be a lender. By law regular people can't just lend large amounts of money and for good reason. With the money you have I do believe you make more than you need to be an accredited investor. Meaning you can loan your money out at higher interest rates higher than that of a bank say up to 12-20% depending on what you are loaning on, plus you can get points (more money and insurance) all backed by real estate, if the borrower defaults, you keep payments made (if any depending on the set up), points and the property itself and all the work done on it. It's a safer an very easy way to make money just like the banks do. In reality the borrower is not going to borrow 100%; more like 70-80% of total as-is value so they have lots of skin in the game which decreases your risk on the investment as that is instant equity in the property. Usually they get the property under contract with 30% or more in equity built in before they come to you to borrow and the arv (after repair value) is based on the the neighboring real estate values. ARV values can dramatically increase the value of the property if your borrow buys distressed homes or just in the right area.

You could borrow more money for your investments from the bank at a low interest rate, then lend at a much higher interest rate, now you are really leveraging as your borrowed money is free, you make a constant income on both borrowed and lended money, and you have created through more investments more passive income that you never really paid for and is yours to keep.

After all of that maybe you can't borrow any more the traditional way because of the imposed limits. So with lots of cash I would, if you can I have never heard of what I am about to say, I just thought it up, you buy with cash your properties, then you sell owner finance at a little higher interest rate than that of good credit borrowers bank will lend to people that can't get a loan the old fashion way but can afford to buy a home. You are providing them with a service they can own and not waste money in renting, you still get the monthly cash flow per property and if they are buying under contract you may be somewhat protected from lawsuits as it's harder to take something you don't own all on your own. They would have to take from you and the other owner which is harder to do.

Now you have all this cash that needs to be invested because if its not working for you, you are actually losing money through depreciation of the value of the dollar. The value of money has gone down so much it's basically worthless. Leverage as much as you can now and pay back with other people's money/renters with cheaper future dollars, you have a fixed loan so payments stay the same as the value of the dollar goes down; you make more money. Rents still increase, property value still goes up, equity still increases. When you buy now and the value of money keeps going down you create more wealth, in the future it will take a lot more cash to do what you can right now, but everything you buy now is locked into today's pricing, thus increasing you return on investment. Your investments should always keep up with current inflation and pump out all the cash you need regardless of what the economy is doing.

I really just wanted to throw out a few ideas but went on a bit of a tangent. These are things that I am learning and practicing now for my future. Education is key to wealth building and success. I truly hope someone gets some value out of this post... I work 13 hours ***** overnights, so I am a bit tired and heading to bed, sorry for all typos, redundancies, and anything else caused from my tiredness. LOL