All Forum Posts by: John Salcedo

If you care to understand the perils of chasing cash flow look no further than this forum thread. Remember this forum thread began with Rich seeking recommendations on where to buy cash flowing properties below $200k. We now have a turn key operator having to defend whether the neighborhoods their remote clients/investors buy are C rather than D neighborhoods.

Even more amusing, to validate their services we are directed to another forum thread where current/past investor clients are singing their praises because they received a favorable appraisal, got their initial investment back and are cash flowing XYZ per month in year 1. News flash for those who are drinking the Kool-Aid, C/D neighborhood appraisals are not indicative of true value. If you think otherwise, list your C/D properties and see what happens. 

If you sell to a home owner, prepare yourself to pay 5-6% seller assist & get absolutely abused during the home inspection/repair addendum process (yes, even if this was a "turn key" or completely rehabbed property). Now try repeating that process to unload an entire portfolio. Most lack the perseverance after sale 1 and resort to selling the rest of the properties to an investor who doesn't pay remotely close to that appraised value.  Oh, and let's see how well that property is cash flowing a few years from now when the first cap ex event that hits wipes out 2 years of cash flow because these low priced properties are disproportionately impacted by operating expenses, most notably repairs.

Why do you believe there's constantly portfolios or packages of C/D neighborhood single family homes available? I would imagine most are accidental portfolio sales because of the false sense of  reliance on the appraisals/cash out refinances that led to the second, third, fourth purchase and so on. I can only imagine the number of investors who are banking on putting their children through college with these turn key investments and are in for a rude awakening. 

Kansas city flip  Long time client of mine over 100 deals I have funded for him

for my investor  in this deal its deal number 70 for them.  And return to investor apr was 23.3 % I made the rest.

this deal start to finish was 88 days.. average though is closer o 120 to 140 of course. 

PP as is  35k

rehab 70k

Sale price  189k  Net 170k on hud

My fee 12k

Insurance pass through  I pay for the insurance as well they pay me back when it closes  450.. 

net to my client  52k is my client has to pay the utls 

So with my establish clients were we are well under 70% ARV I fund 100 % of purchase 100% of rehab I pay for the insurance and

there are no payments we all get paid off the HUD the same day.. I recoup my insurance i front and my fee..

the fee is all in points and interest there is no monthly payment is all on accrual.. this allows this client to do 3 to 5 deals a month with me. this was a good one they are not all 50k profits but most are 15 to 35k each all with ZERO money out other than EMD which is negligable like 500.00 bucks and utls.. this is how you use a capital partner to scale.. He is very good at what he does though I will say that not many can do this kind of volume no matter what kind of financing there is..