All Forum Posts by: Jeff Stephens

@J. Martin a lot! As I read those two suggestions, I realized the common theme between them is the idea of empathy: put yourself in that target market's shoes, and ask yourself "what would I care about if I were them?" Tax benefits, quality of the materials, etc. are both great examples.

When we market to free and clear absentees, I tend to emphasize both the tax benefits (especially if there are major capital gains they will be hit with, which it sounds like is the case if they've owned since the '80's and '90's) and the fact that the 5% or so interest they can get from me is far better than the 1% they can get on deposits (if the took the cash and just stuck it in the bank.

@Omari Brown I'm not sure if you have an established relationship with a go-to title company yet, but that would be another excellent resource for you. If you don't have that go-to relationship, you might begin cultivating that relationship soon. Once the title company knows you're a legit investor that will bring them closings, they will be more than happy to provide you lists like this at no cost.

I would recommend diving into as much educational information as you can find--both written/audio and "real world". Here are a few examples:

Read a Few Books

Equity Happens by Robert Helms and Russell Gray

Rich Dad Poor Dad by Robert Kiyosaki

Listen to Some Great Podcasts

The Bigger Pockts Podcast

The Real Estate Guys Radio Show

Get Some "Real World" Information

Find a property in your local area for sale, and ask the listing agent for as much information as you can get.  Look at the flyers and online information they post.  This is your chance to begin applying what you're learning in the books/podcasts, in a safe no-obligation way. Create a list of questins and ask those of the listing agent. Pretend you wanted to buy this property and do some some practice analysis to see if you think it would work as a rental investment.

In short, I'd recommend just getting as active as you can in consuming as much information through books, podcasts and people as you possibly can. It may seem scattered and haphazard at first, but you can't help but learn from everything you'll be exposed to.  

@Account Closed I wanted to chime in and share my experience with this. I have purchased Equity lists from Listsource and actually had a bad experience with it. We got a terrible response to our mailing with it, and as I started to investigate and try to figure out why, I came to a few conclusions for myself:

LTV is a Specific Number; Equity is a Guess

When someone buys a property, that property is appraised (value). And the loan is obviously a specific number. So the LTV calculation is very black-and-white--it is what it is, so it's a reliable number.

Equity, on the other hand, requires the list provider to assess the current market value of the property, and then subtracts out the ORiGINAL loan balance on the property.  They don't factor in any amortization of the loan (I asked Listsource about this); if the loan was 10 years old, this number in their equation is going to be far off.  Worst of all, though, apparently their market value guess was way off too (way too low).

In short, their equity calculation involves a whole lot of guessing.... and in my experience, looking back, at least for the Portland, OR market where I live and work, their guesses were way off. Our market has been extremely hot and prices have been quite high.

In my specific situation, I was looking for short-sale candidates, so I bought a list of people with negative equity. I ran the filter at about -10 to -40% equity....and there were thousands of people on the list (maybe the fact that the list was so big should have been my first clue that something was off). I bought the list and sent the mailing. We got literally no real responses to that mailing. But you know what responses I did get? I got calls from my FRIENDS. I had inadvertently sent them the letter--the copy for which clearly said "if you are late on your payments or underwater, give us a call so we can help you"--because they were on my list. These are people whose financial situations I know well, and I know they were not 30% underwater on their homes. Needless to say that was quite embarrassing...not to mention a huge waste of money. I complained to Listsource with very little response.

Raul, you've posed a great question here. I think your best path is to take this question to a CPA who knows the real estate business. Ideally that CPA will ask you questions about your anticipated activity (do you plan to buy and hold real estate, flip, wholesale and not take posession, etc.) as well as other elements of your financial life (do you have a spouse, other income, etc) and help you make the right choice. 

@Sam Leon I have a triplex as well, and have often wondered what I could get for it if I sold it. In trying to figure that out, I've personally come to the opinion that a 3-4 unit building is sort of unique because it's right on the border between a SFR and a small apartment building. Like you, I would prefer to value the property using cap rates and NOI like apartments would be valued (which I perceive to be a more sophisticated analysis), but I think in reality a triplex is a very "retail" product. One broker pointed this out to me by asking me, "Jeff, who do you think buys triplexes?" My answer: Beginning or other small individual investors. So with that in mind, they are often not familiar with NOI and cap rates, but are very familiar with the simple notion of "sales comps." For that reason, I believe that when I go to sell my triplex, I will simply be paid the going rate for triplexes, whether that correlates with current cap rates or not.

All that is to say that in my own opinion, the rents going up or down a little in this triplex may not affect the triplex value as much as it would it it were a 5+ unit building. That's just my take.

@Mark Clarke I've done what you're describing as well, but I do recall that when I did it, the new lender on the new property was a little jumpy about my downpayment coming from a HELOC on another property. It worked out OK, but I do remember a little extra dialog about it.

That said, one thing you may consider doing is taking your draw from the HELOC a couple months in advance of making offers on your new primary residence. If you just take the funds out and put them in your bank account and let them sit for a couple months, it may change the conversation because you borrowing from the HELOC and buying the new property are now two separately and apparently unrelated events. Sure, you'll have to pay interest on the HELOC for a couple months, but I'm guessing the interest rate is low and it may be worth a couple hundred bucks in interest to have that flexibility.

@Frank Acquafreda You're very welcome--thank you for posing a good topic. I'm happy to share the story of my path, though it may not be as exciting as you would think! :)

I owned a business (a marketing agency) for about 10 years, so as my business had profits, I'd pay down the HELOC I took out to buy that triplex. Then, when there was a good available balance, my wife and I would borrow it again and go buy another property (SFRs after that first triplex). Then we moved and kept our house as a rental. That got me 4 properties with 6 units, plus my primary residence.

A couple years ago I started getting tired of my marketing agency, and I started winding it down and doing some soul searching to figure out what my next endeavor would be. I knew I'd always been intrigued by real estate investing, but all I knew was the "get wealthy very very slowly" strategy, and knew nothing of the "put food on the table next week" strategy (short of being a realtor, which I wasn't interested in). So I started studying short-term investing strategies like wholesaling and flipping, and teamed up with a partner a year ago, and we've both been at our new business full time for about a year.

@Frank Acquafreda What you described in your initial post is exactly what I did (albeit in Portland, OR). My wife and I bought a house for $190k, and by luck a couple years later it was worth $325k, so I extracted some equity through a HELOC and purchased a triplex. In hindsight the triplex purchase itself wasn't a home run (really low cash-on-cash considering I had to put $90k down with conventional financing), but here's why I'm happy I did it:

It got me in the game.

That alone was a huge thing. I had no idea at that time (2006) that a few years later I would be a full-time real estate investor. But I'm fairly confident that if I hadn't had a "just do it" mentality and bought that first property, I might not be an investor today.

I totally agree with @Joe Villeneuve about being careful with your home equity, and I think @Sam B. proposed strategy is a great one too. But probably most of all, I think instead of trying to craft the elusive single perfect strategy, it's important (in my opinion) to simply get started one way or the other and take that first step.

You're at an exciting stage, and I wish you the best!

Jeff

Khaliq,

We have been working on getting a PPC campaign set up as well, and I thought I'd share what we're doing.  First of all, we are working with an SEO/PPC management company.  We are right now using Google only, but in the future I do expect we will expand to Bing. I also plan to experiment with Facebook ads in the near future as well. Our monthly budget is around $300, which is quite small because we are still testing out our methods, ad copy, landing pages, etc.

In terms of effective keywords to bid on, in my experience the more specific you can be, the better.  For instance, instead of "we buy houses", you would probably be better off buying keywords such as "we buy houses sunrise FL." I am not an expert, but I believe the key is to think like a searcher.  In other words, if you were facing foreclosure, curious about short sales, or just wanted to sell without a Realtor, what searches would you run to learn more about those topics?

With Google, you can geo-target, which is extremely important. Presumably you don't want to be buying ads that people outside your market will see, so that's one of the main criteria you will use.  

Right now my biggest focus is on creating valuable content that visitors will truly benefit from, and buying ads that drive people to that content. This might be free PDF downloads, etc. but I am really focused on making sure the information is going to be truly useful to them in answering whatever questions they set out to answer when they started their search.

Lastly, if you're like me, the idea of paying a PPC management company when you're just starting out feels a little uncomfortable. But in my experience dabbling with PPC in previous situations, you can spend a lot of money running ads that might not work, and effectively learning on the job. I decided to go ahead and pay some experts to help me shorten that learning curve and ultimate save some money (I believe!)

Jeff