All Forum Posts by: Judah Hoover

Okay, for what you are doing I would say it should be a true gross rent number you are using. The 1% rule of thumb is to be for anything is taken out.... why take out vacancy if you aren't going to take out repairs.... why take out repairs if you aren't going to take out taxes... all the sudden you are doing a full cash flow work up.

Don't take out vacancy.

That is a rule of thumb not a rule. Big difference. Don't use that to make offers. Just use it to see if a property is even close enough to do more follow up. All offers should be made based on a much more complete vetting of the property.

Avoid realtors when wholesaling. I love the realtors I work with, and have some great relationships, but its almost impossible to wholesale from the MLS.

Find other ways of getting leads to wholesale. Work directly with sellers.

Cash for keys can also be used to describe getting a tenant or rent to won buyer out of a house. Its an investor or manager or owner saying "please just leave the house and I will pay you a little cash for your trouble".

Deed in lieu is them signing the deed back over to you so you don't have to go through all the legal steps of foreclosing.

I am unclear on a few numbers. The monthly cash flow CANT be higher than the monthly rent... but that is what you are saying. ($7,175 in rent $7,600 in cash flow??)

How well do you know the market? Do 3 times the research on the market as you are on the deal. Since its 4 hours away I am guessing you actually know very little about it.

$625k is a big investment and I wouldn't lightly go into a market I wasn't 100% confident about.

It doesn't really matter what is legal or illegal (its totally legal by the way). If it looks like a duck and quacks like a duck as far as the board or realtors is concerned.... its a duck.

So just be ready, once you are big enough to get on their radar (around 50 to 75 deals a year) they will try to come after you for "practicing real estate without a license".

Not saying that's right, or that they should... just telling you what they will do.

A buddy of mine just had to pay $50k to settle with the department of real estate in his state, because they didn't like what he was doing.

The key thing here is its a personal relationship. So it it likely they WONT charge you points, because they wont know that is usually how its done. 

And if they ask for them I would offer a higher rate with no points vs points and a lower rate. It keeps it simpler for you and them like @Ned Carey recommends above.

But to answer your direct question... in personal made private notes and hard money loans, its always more common to annualize the interest. That's not to say the payments will be made monthly.

Depending on the situation it can mean one of 2 things.

Owning more on a property than its worth.

Owning so much on a property it wont cash flow.

I guess technically since (in this area) it takes about 7% to sell a property, owning close to or more than 93% on a property could be considered over-leveraged.

What are your questions? I would tell you there aren't many if any rules, but its almost never advisable unless ALL OTHER options have been tried.

I would avoid anything under $75k in value. All you are going to do is be in areas of town you don't want to be in. Experienced pros can sometimes make a living selling city junk, but its best avoided.

If you look up what that house was worth 35 years ago I bet it was about the same thing, but a nicer home in the suburbs that was worth $50k 35 years ago is now worth $200k.

Dont mess with junk at any price.