All Forum Posts by: Jonathan Burmenko

@John Thao Given the little information given it is difficult to tell if this is a good deal or not.

How did you analyze the deal, is it priced appropriate for the area? Have you looked at the rents and expenses to see if this will truly cash flow.. may have to do some more investigating.

What do you consider a good deal? Are you targeting a certain cash on cash return? Cash-flow per door? etc..

@Sarah Johnson Sorry to hear that, start by referring to your purchase and sale agreement. Have the agent that represented you look over the agreement, they should have pointed this out to you prior.

This is why we put certain contingencies in the contract to give you not only time but an option to back out when surprises such as this pop up. If needed, you could get a lawyer and ask for their professional opinion.

Best of luck, don't let this small setback stop your investing career! Great learning lesson!

@Francois G. First I must say I completely agree that using leverage is a great way to build wealth over time, especially given the interest rates we have seen this year. Money is fairly cheap to borrow.

But, I work with many clients that pay all cash for investment properties. There are multiple reasons and it comes down to your individual goals. In the competitive market of the Bay Area, cash offers have a big advantage when buying properties that get multiple offers. Not having the loan and appraisal contingency helps an offer look more attractive. Also, some investors pay cash because the increase in cash-flow from having no loan benefits their day-to-day life... granted you could also borrow from the equity in the properties if needed.

@Alex Kehaya Being a broker in the Bay Area myself, It depends on several factors..

If the listing is new and been on the market for only a few days, I would not put in a low ball offer. It will most likely not be taken serious as sellers want to see multiple offers and take the best one once everyone has seen the property is for sale.

Now, if the property has sat on the market for a while, and has seen one or several price reductions with no interest, then go for it! Definitely put in a low offer with POF and it will be looked at seriously. You may want to look for off-market deals also through your agent, I have been able to get clients good deals through pocket listings.

@Giovanni Branch Those are good numbers to start.. 

Now if you are buying and holding or BRRRR, it meets the 1% rule but there are many other costs to consider.. are you paying cash? What will your PITI be as well as vacancy, CapEx reserves, maintenance, utilities, etc..

Also make sure to double check rehab numbers since it can potentially costs more than originally thought. Best of luck! 

@Tristan Osborne Good to see there are more 21 y/o with a good financial mindset.

Not sure where in CA you are located but I am in the Bay Area, and as you know it is an expensive market. Depending on the strategy I always suggest newer investors start with a house hack of some sort. Look into more affordable neighborhoods and make sure to analyze your deals thoroughly to make sure the numbers make sense. 

You may want to look into wholesaling as well, to help you build more capital to confidently invest the right way with proper down payment and reserves. You may also want to look out of state as the money you have saved will go further in other states. You need to decide on a strategy and location that fits your investment goals.

Lastly, don't spend on liabilities and continue living below your means to save as much as possible.

Hope this gives you some ideas and a starting point.

@Serena Tillman I see this in many cases with investors looking for their first property, it is very easy to jump into a deal based more on emotion than on the numbers. Make sure to double check your numbers, do you have vacancy, maintenance, CapEx reserves.. etc. There may come a time when you will need property management or an unexpected cost comes up and you will not have the buffer to cover it.

I would agree with Daniel, and advice you especially for the first deal to not gamble on appreciation but to buy a deal that pays for itself over the long run. Keep looking and you fill find one!

@Jack Perfett Great mindset to have at your age, I can relate just turning 21.

I definitely would not recommend "pouring" money into the stock market right now. Do some research on the several factors pushing the market right now, it is still volatile. I would recommend however opening a Roth IRA retirement account as the power of compounding interest over your working life will be immense, simply put a small portion of your income and dollar-cost-average over years.

Most importantly, don't spend on liabilities and save most of your income to invest. Everyone has their own specialty but real estate is extremely powerful to leverage the money you have and get great returns as well as cash-flow, appreciation, and tax benefits. House-hacking is a great strategy that many college students I know are taking advantage of, run the numbers correct and it comes out to the same price of renting if not cheaper.. but you are building equity and paying down a loan.

@Kody Romero I agree with the with the suggestions made above. Being in another expensive market myself in the Bay Area, house hacking is one of the easier ways to get started and learn the management process (Experience is the best teacher). 

If you run your numbers correctly, you could find a deal that will cost the same as renting but you will be building equity at the same time. After the few years of staying there, you can sell tax free and re-invest into another market or whichever strategy you choose after college.

@Benjamin Papet That is correct, the goal of BRRRR is to get as much of your initial capital out to re-invest into the next BRRRR deal, which is the last "R" repeat.

At the time of writing this, interest rates are still fairly low so there is no real point of paying off the mortgage.. unless being leveraged and having that debt will keep you up at night, or the cash-flow you will make will significantly better your day-to-day life. In most cases, especially if you are starting out it is best to roll the cash into the next deal and build a portfolio of income producing properties.