All Forum Posts by: James NA

There are VERY FEW DEALS AVAILABLE RIGHT NOW….

There is inventory for sale…but

NOT…..Properties that can be acquired that;
1) Will have minimum 80% equity vs ARV…after the ALL IN investment ( unless the cash down is way out of balance )
2) CASH FLOW TODAY enough to cover all costs PLUS RESERVES and return all cash out of pocket in a reasonable time period.
3) You could sell TOMORROW if you needed to and not lose any money
4) Dont include rosey hopes of appreciation to cover negative equity 

Al last ALL… of the current wholesale deals are just trashy retail deals. And most of the value in the opportunities has been scaled off by all of the other players.

Ok I’m gambling on the other side…. I have an ever growing war chest.

I “ could” buy a nicer white collar 3/2/2 for cash with my Roth now…. But I’m waiting… 

There’s nothing to gain right now and a lot to lose. ( other than heartburn hoping that appreciation makes a straight up GAMBLE look like an investment)

But ..OK….”IF”…. The markets regain sanity… I will be able to two properties to rehab with cash.. and have cash reserves… and equity…and cash flow.

Possibly from the people who bought from the snake oil guy.

I don’t mean to sound rude…. But even the REIAs… are DROWNING in snake oil.

And some are run buy the gurus and wholesale ( marked way up) sellers.

So under that direction…

1) “must have two exit strategies”
2) MUST have equity
3) Should not consider possible market appreciation as equity

These professional mature standards …are gone…. Because the wholesale Board of Directors don’t want those standard impeding on their profits.

The previous post hinted at a cancer in REIAs…

IN…MY…OPINION….

MANY….REIAs….ARE RUN…BY…THE…  very SHARKS… that we should be avoiding….and who want to take as much of your money as possible.

ok that statement wasn’t polite… so I will back it up with what you need to consider….

1) when I started investing in Real Estate…I was absolutely …right place… right time…

2) the THREE ..REIAs … in my town ..ALLLLL…preached the same foundation.
A) when considering an investment opportunity …ONLY….. Buy investments that had AT LEAST… two exit strategies… or… TWO ways to profit. This way if “ strategy one” didn’t quite work out, you had a B plan.
B) the property MUST have enough equity…AT CLOSING/ the day you become the responsible party, so that if you had to sell…TODAY… you could at the very least, break even/ sell and not lose your shirt.

EVIDENCE TO CONSIDER
3) NONE… NONE…. NONE… of the REIAs in my city preach this any more… but they did… 

4) why would the REIAs Abandon that “ MATURE INVESTMENT” advice?

EVIDENCE TO CONSIDER
5) NOTE WHO ..is on the REIA Board of Directors…. Many of those people are good hard working honest ethical…. But there are also other members of the BoD… who ARE… the big wholesalers, flippers, gurus and turn key rental retail machines.

EVIDENCE TO CONSIDER
6) who are the biggest "financial supporters" backers, advertisers OF/FOR…the REIA….often THE SAME PEOPLE !!!!

Conclusion…
Is it possible that the BoD has been taken over by the very sharks that years ago we were trained to avoid?

“DO YOUR DUE DILIGENCE”  IS STILL TRUE… BUT NOW… BE AWARE… 

" WHAT ARE THE MOTIVATIONS" … THE …R…E…A…L…. Motivations…that effect the investment " Philosophies" , and investment standards that YOUR REIA …PREACHES…. OR MAYBE SELLS.
 

Finally… do not assume that “Your” real estate agent is working for your best interest… unless… BOTH of the following are satisfied… 1) the agent Signs a “Buyers Agent” contract where it is stated that YOUR interests comes first

AND… 

2) the agent / your buyers agent has no affiliation with any other party nor has any financial interest in this transaction other than as stated in the docs… and has no association with any party in the transaction… other than as stated in the disc… you explain up front that any all buying agreements are not binding until after you have AT LEAST a Preliminary Good Faith Estimate/ HUD1/  enhanced financial disclosure… and that ALL parties/ entities and all fees are clearly disclosed. Any change to the fees or entities listed in the disclosures provides to you an immediate authorization to cancel with for refund of all earnest money …. If the above sound harsh and distrustful … the game is rigged… this is for YOUR protection… many agents will claim that this is against their broker policy… so was “ negotiating the agent fees”… until a class action law suit determined that the big Real Estate Agent Brokers were running a monopoly and acting in collusion to fix fees.

I just got “fired” by my agent for asking for a financial disclosure .. so that I could see the relationship between the agent, the seller and the funding source…. … it turns out that EXACTLY what I WAS CONCERNED ABOUT…. was exactly…what was .. going on…. Ok… the agent elected to fire me… rather than provide the docs.

I have a 
GREAT family doctor
A GREAT tax guy
A GREAT financial advisor
a GREAT auto mechanic 

Etc
And there are dozens of jerks, thieves and idiots who have fired me ..or I them… Build your team slowly, with deliberation and keep track of who is willing to be very open with their actions. 

All of the other “players”… politely walk away and don’t look back.

There are a few types of people who will buy your end of line flips….

1) Those that will only buy truly safe … battle born… “equity the day I buy”.. opportunities 

And/or

2) those that were trained to see real estate investing as a much more risky “ investment”… in other words  “ a buy that “SHOULD” have value after appreciation”

With Buyer group #1… if you provide truly investor grade deals that haven’t been stripped of most of the equity before you try to flip, you will build a following of investor grade buyers that WILL pay cash and CAN close “ as soon as the title search is done”… This will net smaller nets for you initially , but you will own a REAL Buyers list… that WILL have the experience… to REALLY CLOSE ASAP.
And that will make your machine run MUCH more smoothly.

Or

2) you can initially max out your net on a few deals as you scape out most of the equity for yourself… but you will only be working with non experienced buyers.. who will buy ….one… realize that they are in WAY too deep… have no B plan.. and they will be FAR less likely to buy again… AND they may never even make it to your first closing .

So.. your choice… cultivate a crop of GREAT slam dunk , low work load real buyer investors…. where all you need to do is find the property , mark it up a LITTLE ..and we do all of the rest of the work…

Or sew a crop of weeds…

I do spend a little bit of my time asking wholesalers to take me off of their lists.

I would love to buy from you.
I don’t want to spend my time doing the initial marketing.
I am willing to pay for your value
But I don’t buy properties that don’t have TWO exit strategies
1) enough equity AT CLOSING so that, at the very least I could sell it TODAY without taking a loss…..AND
2) after my expertise …. I can make my expected net..so that I can save for my family’s future. I don’t need to make a killing… I need to keep moving the ball foreward…. 

BOTH…1…AND…2… of the above..or no deal.
The GURUS, The big wholesale & turnkey rental operations..AND the REIAs have all abandoned the above… ( although years ago this was ..THE… bedrock .. of REI… why would the REIAs stop advocating for the " minimum of two exit strategies"?
The answer is right in front of you…

Examine the structure of any REIA and look who is on the Board of Directors
AND..who the double tripple black diamond “supporters” are…. They are all of the gurus and wholes sale ops… 

They FUND.. the REIA…so the REIAs feel that they can't advocate " no equity = no deal"…and the Boards of Directors… have ties to the big investor machines…

There ..ARE…. Members on the board with integrity… but on the boards…there are also sharks… a friends/associates of sharks.

Do I have absolutely proof? I’m not going to name names… and get sued and blacklisted…So…. no… but ….. just…look…

And…before you agree to buy your next property  from any of these sources,

Explain that you want to see a Prelim Hud-1 / financial disclosure first.
….INCLUDING …ALL… COSTS, FEES , CONSULTING FEES.

You will likely get one of the two following responses..
1) “ the hud 1 isn’t available”… if you are financing…..this is FALSE…the disclosure IS available..as it is one of the benchmark doc FOR the financing.
Or..
2) that wholesaler, guru, or turn key company says that they don’t want to do business with you… what they Actually just taught you.. is that you don’t want to do business with them..
OOOHHH.

OPTION THREE..

no problem Mr Buyer… here’s the Financial Disclosure… note line 36 near the bottom on the right column… there’s a “ consulting fee”… that’s my cost .

Hmmmm I know where I’m sending my business.

I would love to help build your financial future ..

Buying a property without equity…. 
means that if you had to sell.. you will taking a loss equal to AT LEAST…all costs associated with selling.

Selling a $400,000 property that was bought in the last two years means that AT BEST… the equity is equal to 75% of the down payment. ( this is a rough statement and anyone who wants to crunch the hard numbers is very welcome to post them)

$400,000 buy… $$60,000 -$80,000 down… $24,000 to the buyers agent… and another $5000 for other closing costs.

Starting balance ..is $370,000.

New selling /asking price… =$450,000 depending on the region… good luck

Buyer counters at $400,000 and the seller accepts…

Minus the realtor fees $24,000 and some concessions…$10,000 ..

Net is $366.000 

Ok this is a very rough discussion.
either provide tighter numbers or accept the drill
This seller got out lucky.
And didn’t account for the interest paid out or the new carpet , paint dishwasher and sod.

Buy a business with equity…. Or strong cash flow.
or accept that after 20 years of paying a mortgage… a $400,000 house with a 7% mortgage will actually have cost $800,000…. 
a personal property is not a money maker…at best it’s a money saver to help put you in a home

A rental requires… discipline, clear financial accounting , LONG TERM EXPECTATIONS… AND knowing NOW…

THAT YOU DONT PLAN TO SELL OUT WHEN …YOU..ARE READY.…to sell… you remain aware of typical valley and peak cycles..and then “ NEAR” your exit planned time… sell when the market says sell… not when you want to sell.

I still don’t buy at the highs and that’s where we are

Quote from @Joe Villeneuve:

Quote from @James NA:

I learned and evolved in a different real estate universe.
The rules we were taught and lived by… were the SAME rules that ALL of the REIAs  and ALL of the Mentors espoused.

1) DONT BUY A PROPERTY THAT HAS LESS THAN 25% equity.

Now….. no one is saying that ?…  but then they aren’t whole sale deals… they’re RETAIL. SO WHY BUY FROM A WHOLE SALER?

2) DONT use future potential appreciation as a basis for appreciation… unless you ALSO factor in future potential DEpreciation.

3) You're not buying a rental property, you ARE buying a Cash Flowing Business …. And if the business doesn’t CASH FLOW.. you bought a pig with lip stick.

4) NEVER take YOUR cash out of YOUR pocket unless you KNOW that you’re going to get it all back in under three years. …as in the ONLY time you put out $20,000 to buy and fix up is if you KNOW, that you can sell or refinance ( with a cash out return) 

5) in the military when referring to their weapons and their battle plans they say… “ two equals one and one equals none” this means that is the don’t have TWO WAYS to protect themselves then they aren’t really prepared to do battle. TWO EXIT STRATEGIES… proven strategies… or you’re not a professional investor… you’re just gambling with your family’s money.

Almost ALL of the “ deals” I have been pitched in my region of Florida are built to assure that the wholesale gets rich… period. 

There’s a property listed on this website right now in Florida …3 br/2bath. $250,000 , $1500/ month rent… “vacant at closing”

Please ..would SOMEONE show us the math …… how …in…the…WORLD….. Is this an “ investment”…? It’s not even a RETAIL DEAL.

The sooner we start all calling out the bad deals… the sooner the sellers will get back in line… or go away .

If I get ejected from this site…..  whatever…. If this is what this site calls a “ deal”…. I won’t be missing out on anything.

 Rules you mentioned that ALL were teaching?  Not all, just all you were exposed to.  Not the same thing.

Rules, one by one:

1 - Doesn't make or break a deal.  It's only one part.  Some still say that, some STILL don't.
2 - First part is true, but depreciation doesn't impact appreciation.  They're just numbers with percentages behind them, that are applied to the same property.  They don't impact eachother to the point where either one offsets the other.
3 - This is true then, now, and will be in the future.
4 - This is also true, except that it doesn't mean getting it back from a refi is part of making it work.  REFI getting back your money.  You're still buying the banks money.
5 - True.  It's called risk control.

Wholesalers are people too.  LOL.

The "deal" you mentioned is missing so much info ($$$numbers) that you can't say it's good or bad.

Bad deals are always getting "called out".  The sellers are in line, you just don't agree with them.  It's called inflation...and sellers, good or bad, don't "go away"...they just adjust.

4 Posts in and firing bullets at imaginary objects isn't going to get you ejected from the site.  All you'll do is lose credibility.  I would suggest you wait at least 4 more posts before you start firing again.  That's a joke.  Lighten up, and Laugh.

 I’m not worried about my credibility…
Only one thing matters to me..ok actually two things.

1)… NUMERO..UNO… FIRST……..My Family’s assured financial future… so from 2016-2020 I was in Afghanistan two years ago I was in Iraq… and I am writing this post while I am in Somalia…. “Hero stuff”… sure but only because I’m doing what I’m doing for my family.

2) Integrity and morality years ago… I made a killing… I made great money flipping paper, houses and doing sub-to deals.

But after the dust settled I started questioning my financial success……  at the cost of others … for whom maybe after I made a lot more that I expected on a property, I could have sent some of those families a thank you ($$$).

I didn’t.

More recently I met with a lady who wanted to sell her mobile home and land … it was rough…

She wanted. X…. I truly believe that half of her asking price was fair and safe. She accepted… and we then signed legal docs including an option to buy …I wrote a check,,, she endorsed the check… I then gave her cash for the check.

Done deal…. Until.. when I started to move on the deal… she backed out… ( she was not living in the property)
I told myself ( earlier) that I wasn’t going win..at the expense of someone else who was less  fortunate.

I sent to her a registered letter telling her that I “ forgave all debt and commitment” and that she didn’t owe me anything…. But I got the letter back unopened… so she never read my message.and later when I was doing a title history on my own house, she or someone had placed a “claim” stating that the deal was  unfair.. but made no financial claim.

I still have the unopened envelope. 
I hope that she is ok.

I promise that all of the above is true.

Family first …then morality and integrity… 

Ps ethics take a back seat but 

The diff between moral behavior and ethical behavior?
When you are in compliance “ ethically” you can defend your actions to the judge
But when you are in compliance with your morals… you can explain your actions to your wife, your kids, your grandmother and to St Peter 

There have been some GREAT responses to my initial thread…

And some didn’t completely agree with some of my positions…

But NO comment was rude or disrespectful. 
and ….The “ other opinions” are as valid as mine. Please don’t “ pick a side”… 

Please do keep your options open. And keep learning new strategies and techniques. Local economies change, laws and codes change… and our abilities need to evolve too.

there a a difference between "Investing" and " Gambling"....
Sometimes its black and white.... sometimes its a gradient.

I dont have a tolerance for gambling or loss.
And I have a HUGE intolerance for business plans that include exit strategies of  Buy High and hope/wait for appreciation  or Bankruptcy, or Buy High sell Higher to a Newbie,

the local grocery store, hardware store, xxx retail store ( you fill in the blanks)... BUYS AT A WHOLESALE PRICE..from their suppliers ( wholoe-sale-suppliers).........whoooooooollllllllle sale.... something much less than reeeeeeeetail.) Then they re-sell their products at a price that covers all costs plus profit.

But THEY KNOW ALL OF THE ABOVE NUMBERS AND PRICING BEFORE they buy from their supplier..
Its almost like they have EQUITY BUILT IN WHEN THEY BUY.
But the BIGGEST frustration (for me) is somehow the REIAs dont preach and preach and SHOUT....... "buy low...THEN SELL HIGH"
Its almost as if the Whole Sale sellers and the Gurus control.....ALL...ALLL.ALLL... Of the narrative.
How dare I say this?
Because at my local REIA.... the whole-salers and gurus make up a significant portion of the REIA Board.
Its like if McDonalds had a powerful position in the local public school system then the meals.... oh....wait

I recently received a reply saying that ( in effect) don’t expect cash flow or equity for a year ( or two)…

BUULLLLLLL !

In this market… there are two kinds of investors
1) those that are saying… NO…. a lot more than they are saying yes…
2) and those that are risking WAY more than they should

Does a Subway Franchiser PLAN … on not even cash flowing in the first year?
Does a multi million dollar . 100 unit apartment investor ..PLAN … ON having zero cash flow and ZERO equity for years?…NO…. 

INVESTORS…BUY… EITHER… 1) CASH FLOW… or… 2) EQUITY.. ( or both)…

BUT THEY DONT BUY… “ MAYBE”…. “ANYTHING”… unless the risk has a HUGE multiple potential return…

And “ Maybe I will break even”….. is a fools game…. Maybe I will make a little… nope knock yourself out.

Maybe I will make…. TEN TIMES MORE on this risk… ok… maybe I will make 30% on this risk….. no.

NONE of the older investors were taught that “ maybe” is acceptable.

HAVE …TWO…SLAM DUNK EXIT STRATEGIES…. For EACH INVESTMENT…or don’t call yourself an investor… call yourself a gambler.

Quote from @Greg Scott:

The market may correct, but I firmly believe there won't be a crash.  The reason is simple, equity.

Before 2008 people with no income could get liars loans and buy much more real estate than they could afford.  We heard stories of cleaning ladies buying multiple million dollar homes.  When home prices starting falling, the whole thing collapses like a house of cards because nobody had any equity.  They couldn't sell and get out.  We had cascading foreclosures creating a downward spiral.

Recently, prices have been surging.  Given the laws passed after the Great Recession, appraisals and lending is highly restricted.  Appraisals have not been keeping up with prices and lenders won't lend above appraised value.  We sold a house in 2021 and in one day had 20 offers.  Several of them had acceleration clauses stating they would pay more than anyone else up to $X.  Both of them waived any financing contingency because they KNEW the house wouldn't appraise for what they were offering.  They had to make up the difference with cash.  Those people have a ton of equity in their homes.  If they had to sell, they might take a haircut, but they aren't going to get foreclosed. 

There is no  house of cards here to come tumbling down.

 Equity…
Appraisals are highly restricted…. But BPOs aren’t… so “ appraising a house though BPOs” is the preferred loophole by lenders who don’t care about tomorrow.

Near the beginning of the end.. 2006- 2008… there were ads gaaaaalore… about refinancing and pulling out your equity.

We just had two years of that. Yes borrowers needed credit and income verification this time…
but now there is a pool of properties that DONT HAVE EQUITY or as much equity….

So…. AMAZON…TWITTER.. FACE TUBE…. they all start laying off… and the stampede will start as a trickle…

One black swan… ( another COVID type event) .. 

full tilt selling and competition.

Crash?… maybe not…. Better deals and Sub-To?…… all day