All Forum Posts by: Jesse Arriaga

I didn’t look at how old this post is, but these guys are an unmitigated disaster. They have millions in lawsuits against them and are in default on multiple loans that I’m personally aware of. In short don’t walk away, RUN. 

Before paying $30K to anyone for advice you need to ask yourself if this mentor is aligned with your interest and success. The problem I’ve always had with these people is that once they have your money their self interest is no longer aligned with yours. They are typically more focused on selling the next $30K membership then they are with what happens to you. Coming from a background in corporate finance, I’ve always gravitated toward a structure where the student brings something to the mentor that the mentor believes in enough to work side by side with the student to mutually benefit from the outcome. Think about it. Ask anyone one of the many people out there selling dreams if they are willing and interested to work with you that way and see what they say. 

Did you sign up for this with Connected Investors?  If so, how did you do?

First thought, you should have agreed to a scope of work and budget before you embarked on a partnership deal with someone else. Making decisions about improvements is a function of price point and competition in your specific market area. We look at improvements to houses we are competing with or trying to match comp value as our guide. In general, we focus on kitchens, master suite / bath, curb appeal. We have rehabbed houses from $150K to $1.4MM. We also never design to our personal taste. When grays are in, we paint light gray. We keep finishes relatively simple but elegant. For example subway tile. A good tile installer and make it look great and you can add subtle accents. 

I've never liked the idea of not walking a property we intend to buy, especially if it's a rehab. It's impossible to tell how bad of shape something is in without hands on inspection. If you don't have the expertise personally, bring a contractor to walk the property with you. You will learn as you go. There is no substitute for experience. I don't care how many deals you've done, there is always another lesson to learn around the corner. We don't typically buy properties that someone else rehabbed. We find that that the ROI doesn't meet our minimum threshold. We did buy a 10 unit apartment complex with the plan to turnover the leases at expiration, while making minimal changes to meet a Sec 8 requirement. That deal has been a home run. We increased one bedroom rents from $550 - 600 to $750 and 2 bedrooms from $750 - 800 to $950. We stay full. In summation, we were taught that if you're not embarrassed by your first offer, it's too high. When buying distressed RE, the key is in the follow up. Most sellers are not going to accept your first offer. The best thing you can do is make more offers and expect to have a lower closing ratio. I would also say that once you understand different exit strategies, you get better at asking questions to better understand the sellers true motivation to sell. That's the key to knowing how to style your offer.

Best,

Jesse Arriaga

I would consider Zero Scaping the back yard. Relying upon tenants to do proper maintenance on yards usually ends badly. You can put a provision in your lease that give you responsibility at their expense. We have language in our leases that it is the tenants responsibility to maintain the landscaping in the same condition it was in when they took possession. We are dealing with a property now that the tenant failed to meet that standard and we are assessing a fee from the security deposit to cover the expense. In Austin, the demand is so high that you should be able to put enforceable provisions in your lease to make the tenant financially responsible. Best long term solution in my opinion is to convert the space to as low maintenance as possible while maintaining attractive appearance. Last comment, I really don't like the idea of having tenants do work on our properties. We very rarely will allow it and never on anything big. 

Good luck,

Jesse  

I would start in your backyard where you have the most local knowledge. You're in NY, there should be plenty of opportunity. I think the question you should be asking yourself is what strategies have the best potential in your area. 

Seasonality is understatement. The season is very short. Acadia Nat Park is in an area called the Mid Coast. I used to spend summers in Penobscot Bay in Deer Isle. This part of the coast is a combination between summer tourist and commercial fishing / lobstering. From a short term rental perspective, you would have a stronger market in Southern Maine. You would get more of the NE/ New England summer people. It starts to turn cold in August. It's a beautiful place, but I find it baffling why one would chose this location unless it was for personal use as well. You could build a radius around Kennebunkport and find a deal that would be in demand during the summer season. We had family in Stonington / Deer Isle, so we spent our time up there.  Good luck!

So you want to Invest in Real Estate, but you find yourself a bit skeptical of people / companies offering to teach you for the cost of a King's ransom. I've had this idea for a long time, but have been too busy to do anything with it. I decided to write this post as somewhat of a test to see what kind of response I get. We started our business  in earnest in 2013. Our experience includes investment in large Multi-Family syndicated deals, Wholesaling Residential, Fix and Flip Rehab from $150K to $1.4MM, buy rehab / reposition, hold and manage rental portfolio. One thing I must say is that anyone suggesting rental property is Passive Income, doesn't own rental property. Yes, you can outsource all the management and a good chunk of your profit margin to a third party. We manage everything we own. Our rental portfolio is 36 doors located in Houston and S.E TX / Golden Triangle area. Although it's a lot of work, managing your property personally gives you intimate knowledge of all aspects of your business. We intend to create a property management company when our rental portfolio gets larger to support our assets and offer the same services to smaller landlords for a fee. 

Prior to Real Estate, I was in the midstream energy asset development business. We were a private company that relied upon raising capital to fund our projects. One of my roles was to develop relationships with Private Equity and Institutional Investors. I often hear people toss terms around that they scarcely know what they really mean. I learned some interesting things working with PE Fund managers. They are highly educated, usually Ivy, a small group that manage very large sums of money in the billions. Within any market, they all know each other and operate with a very similar set of rules. First and Foremost is Alignment of Interest between Investment Capital and the Management Team. PE Managers are more interested in the Management Team then the deal they are promoting. They require that all management invest along side the Funds capital regardless what the ratio looks like. They want it to be a "meaningful" amount to each individual. This keeps management engaged and incentivized to protect the investment when things get difficult. The last thing they want to do is step in and have to take control. This is a fundamental cornerstone they never deviate from. 

We have participated in and been pitched all kinds of programs promising to help build our business. What I take issue with are programs that ask for tens of thousands of dollars for so called "mentorship". We have attended 3 day seminars where little is actually taught and it's more akin to a 3 day infomercial to sell you a program. This is a true story. We live on the Bayou in West Houston Memorial area. Our house flooded after Harvey. We completely remodeled after the storm and bought another house down the street to Rehab as an investment. There was a house that was purchased by two women as an rehab investment two doors down from us. I met them and learned that they had paid over $40,000 dollars to be mentored by a group that I am familiar with. The long and short is that they were using comps from houses located in close proximity that are zoned to a different school district. The houses zoned to this other school district trade at a substantial premium and will skew the ARV or After Repair Value. When I was having a conversation with one of them we discussed specific comps. When I looked them up and saw where some of her comps were located, I brought this to her attention. How a mentor that is being paid that much money could allow her to misprice a deal that badly is inexcusable. Sadly within a few months, they we foreclosed and out of business. Not only did they misprice the value, they ran into costly issues with contractors because their Mentor was probably selling the next training program and not keeping a watchful eye on what their students were doing. This is just one example, but there are many others. There was NO Alignment of Interest. It was a one way street in favor of the company selling the program.

That brings me to the point of writing this Post. Why spend tens of thousands of dollars for a promise? We will interview people interested in working with us. If all parties mutually agree, we will enter into an agreement where we have an exclusive first right of refusal on any deal that is originated by a student. We will teach you how to find deals, what to say to prospective sellers, how to write and deliver a contract, what is the best exit strategy, what is the best way to structure the deal. Take the tens of thousands of dollars you were going to pay a so called mentor and use that money for marketing to find deals. When you find what you think may be a deal, bring it to us for critical evaluation. If we like the deal, we will either fund it or invest along side you. When risk is shared, all parties are incentivized to take action that is in the best interest of reaching a successful conclusion. Whether you have tens of thousands you would like to put to work in the market or you want to learn how to wholesale to generate immediate income with no capital at risk except for your marketing expenses, we are interested in talking to you. We don't care about your formal education, we care more about your desire and willingness to work hard, accept instruction and take action. Most people never get off the ground because they fail to take and maintain action. You don't build wealth or a successful business overnight, but it can happen faster than you might think. Everybody's circumstances are different. Contact me on Bigger Pockets if you would like to discuss this in more detail. Thanks for taking the time to read this and look forward to seeing what response I get. 

Best,

Jesse Arriaga
 

In all fairness, I have never participated in their mastermind group, but I have been pitched grossly over priced so called education programs from people that spend more time promoting and exaggerating what they’ve done in the hopes of getting a check from me with 5 zeros. Mentorship is great. It’s proven very effective and just makes good common sense. It’s also a more intimate relationship. What I see manufactured for sale is more a promise than reality. People don’t just give away really good deals. A business model that has always made sense to me is teaching people how to find good deals and have them bring them to me for more critical evaluation and execution where I invest my capital beside yours. It creates an alignment of interest. The problem I see fundamentally with so called guru promoters is that they share no risk with you. In a previous life, I developed midstream energy assets. I had the opportunity to work with Private Equity investment managers. They are small groups of people that manage billions of dollars. Alignment of interest between management and investment capital is a cornerstone principle that is never compromised. Bottom line, if it sounds too good to be true, it probably is. There are plenty of good people on a platform like bigger pockets that could be a great mentor in the true sense of the word.