All Forum Posts by: Joseph Cacciapaglia

I always compile my own from the public records. Well, actually I pay a VA $3.50/hour to do it for me. I select areas that I want to target, and have them put lists together of the non-owner occupied properties. Most counties have all this data online these days, at least everywhere I've worked. Another strategy I've seen investors use is do an open records request with the public utilities to see who is behind on their water bills, etc. This is public info in many places, so they have to provide the list. I find making your own lists works best, because then you can be hyper focused on properties that are in your target area.

Running a short term rental is being in the hospitality business; it's much different than being a typical landlord. However, there is a ton of upside if you do it well, and you're in a good market. Some of the things that some first time STR owners don't think about are costs for furnishings, linens, utensils, and the like. Even if you get those with this purchase, be prepared to replace them regularly. Also, if you aren't hiring a manager, you should expect to receive regular questions and requests from your guests. Responding to them in a timely manner is very important, because you will live and die by your ratings on Airbnb and VRBO.

A full service property manager will take a significant portion of your revenue, but they'll definitely earn it. In markets that have a lot of STRs, it's not easy to stand out. Your property should have a theme or design that makes people choose it from the crowd. You might need to provide snacks, coffee, and toiletries. Whether or not you're allowed to provide food will vary by area, but many guests have come to expect something. I know several investors are doing well with STRs, but there are definitely challenges. It is not passive income, if you're doing it yourself.

I think you'd be better finding someone that works almost exclusively with investors, unless his 25% is actually a huge amount of business. I think it's usually a very different person that's good with the investment side than the person good at retail. I would ask the following:

How long have you been working with investors?

Have any of your past clients have executed a BRRRR strategy? Do you know what that stands for?

Do you have recommendations for property managers, inspectors, lenders, and contractors?

Do you invest yourself?

Do you have any formal negotiation training?

What parts of town have the most opportunities for my strategy?

What is a reasonable expected response time for your questions? The number one complaint clients have about most agents is their responsiveness. It's good to know upfront what the agent's standards are.

What is your typical deal size?

Why do you like working with investors?

I'm sure I'm missing some, but it's a start.

@Ara Abrahamian The reason it is easier to force appreciation in 5+ unit properties, is because they are usually priced based on cap rates not comparable sales. If you have two identical 4-plexes sitting next two each other with different rental rates, they are typically going to sell for about the same amount. This is because the marginal buyer in most markets is the owner occupant, and they aren't necessarily cap rate driven. On the other hand if you have two 5+ unit properties sitting next to each other with different rental rates, they are going to be priced accordingly. This is why it's possible to force appreciation simply through better management. You don't actually have to change the property, if you can raise the rents as is.

It's very rare that a seller's stated price is their lowest price. I would almost always ask for some discount from their first number. However, I also don't want to lose a good deal because I tried to negotiate a great one. How does it compare to your typical deal? Is that an OK deal, good, or great? If it's great, I might make one attempt to get lower, but quickly accept if it looks like I might lose it. If it's good, I would push a little harder, but still would probably just accept if it seemed like I was losing it. A deal in the hand is worth... If it's just OK, then I would pick a price that makes it great and start from there. I don't do OK deals, so I wouldn't be afraid to lose it at that point.

So way back when I got into this business, wholesaling was called flipping, short for flipping contracts, and flipping was called rehabbing or some other thing. HGTV came around and confused everyone about what flipping was, so then someone decided to start calling it wholesaling. It's been around a long time, but hasn't always been called wholesaling, at least not in the markets I've been in. It's also something that most people were pretty quiet about, until they realized there was money in selling wholesaling courses. The people that I knew that did this years ago, didn't want people to know that they weren't actually the buyer/seller in these transactions.

You might want to look into refinancing your portfolio first. Arbor recently came out with a product for exactly the type of portfolio you described, although you may not meet their minimum loan amount yet, unless you've added a lot of value to that total acquisition cost you mentioned.

I definitely don't think you need to fly around the world to find investors. They exist in every major city, so I would focus locally first. Just get out there and network.

I always opt for the 30-year fixed option, because my goal is to maximize my cash flow and overall returns. Mortgage rates are very low, so I would rather reinvest my cash flow over time than pay off a 4%+- interest rate. I know some people are risk averse, and want to pay off all their debt as soon as possible. However, I think that having the shorter term is actually more risky, because if your rents decrease, you will have negative cash flow. By using the longer term mortgage, you reduce risk by having a cash flow cushion.

I am comfortable continuing to use loans for investing, with a couple of caveats: 1. You want to be sure you will break even in the case of a significant reduction in rental rates. For example, if rents go down 5-10%, would you start taking money out of your pocket each month? If so, can you afford that? I don't expect a big dip in rental rates in Texas in general, but I wouldn't want that to put me out of business. 2. You want your rate fixed to be fixed for a long period of time. The people that really got in trouble last time had "teaser rates" and couldn't afford their rentals when their rates reset.

Last time around in my market, wholesaling wasn't as popular as it is today, but the people I know doing it were basically out of business. It was so easy to find good deals, that no one really needed a third party to make that happen. The hard part was finding investors and capital to make those deals happen. I don't know if that will be the same in the next downturn. The creation of the CFPB really screwed up the capital markets last time. Hopefully the gov't learned from their mistakes... hopefully.

I always get a little worried when people talk about investing with "no money". I've put together a few no money down deals for myself over the years, but they're certainly not easy. However, you did mention OPM as well, so that's a great start. There are plenty of lenders that would like to make loans on solid investment properties here in San Antonio. However, you'll have to figure out where you're going to get your down payment and closing costs. Even if you are planning to use a BRRR strategy, you still will need income and credit to refinance, and most of the HML will want to see that you have some level of cash reserves.

Do you have friends and family, or other potential investors in mind for your deals? If not, you should start networking hard to find people who will put money into deals with you. You probably won't get a real commitment until you have a real deal on the table, but you want to have at least several people that have showed some level of interest before you go out shopping for properties. I struggles when I first started in real estate. I wasn't able to close on the first several deals I got under contract. I thought I had investors on board with my plans, but they all fell through. Today it's much easier to find people with capital, because everyone is online, but you still have to put that work in ahead of time.