All Forum Posts by: Ross Paller

If I was just starting out and needed to gain cash but had little to no cash to start there would only be one route for me

The good thing is that this is the same route I would suggest for anyone getting started. The number one skill to learn in Real Estate. 

Finding Great Deals.

Here are the 3 things I would focus on:

1) Become an expert Underwriter. Learn what a Great Deal means. That means that you need to learn what a properties After Repair Value (ARV) would be. That means you need to understand how to conduct a Comparative Market Analysis (CMA). Then you need to learn how to calculate rough construction/rehab estimates.

2) Learn to Market. Get in front of people who may be interested in selling their house. Direct to Seller. Not through middle men like Real Estate Agent and Wholesalers. You can do that later. Once you understand how to do it yourself.

3) Learn to Sell. Figure out how you can provide VALUE to a potential seller. What makes you different from other wholesalers or real estate agents? Without value the only thing you have is price. 

When you get Great Deals all doors start to open. Monetizing is very easy with multiple options.

The best thing about these 3 skills?  They are accessible to ANYONE. You just have to grind!

Good luck going to flight school after you figure out how much money you can make with these skills.....

If I could rewind 15 years and start over again, here are the things I would focus on:

1) Buy an easy cosmetic rehab. Even if it wasn't going to be extremely profitable. 

2) Get help underwriting the deal from an experienced, unbiased source. Like a Realtor

3) Have a deep financial contingency set aside. 20-30K at least. 

4) Don't be in a hurry. When problems arise (and they will) take your time to solve them.

That's if you're dead set on starting right away. If not, wholesale a house or two first. Learning how to get direct to seller houses and great deals (cutting out middle men) is the #1 skill. 

With a great deal on the first one you actually purchase, you will have created space for yourself to make mistakes. You will make plenty. I know I still do.

There is definitely a place for Wholesalers. Even Virtual Wholesalers.

Some say they are simply a middle man and provide no value.

I think a middle man provides the a necessary function. The Market Maker.

In a lot of cases they are getting houses from people who are not actively pursuing a sale but want and need to sell. 

However there is one huge problem. Most of these guys are not the type that @Jonathan Greene mentioned (The local wholesaler. The Investor with a surplus of deals). Most of them have no intention of purchasing. A lot of them don't even have the ability to purchase.

That brings me to the SINGLE Metric that all investors AND wholesalers should be judged on...

Percent of Contracts that are closed. If they get 10 houses under contract to buy how many of them actually close?

Who really cares who buys them as long as they aren't getting contracts just to get contracts. They need to know what a good deal is. They need to be reasonably sure that the deal will close.

I've seen a lot of sellers who have moved out of their house or made purchases based on the money they would be getting just to find out a day before closing that it wasn't going to happen.

The CRASH is for sure coming....

Here's how to protect yourself:

1) Only buy good deals below current market value

2) Prudently escrow the money it takes to get them into service (in service = making money)

3) Don't over-extend on the amount of projects you can do at one time (project = time between purchase and "in service")

4) Continually build your skills in getting deals (sales/networking/marketing), building a better depth chart of vendors, project management, and writing strategic scopes of work for the properties you buy.

5) Put money aside after every successful project. Always have cash reserves.

Do these 5 things always then you won't care what the market is doing.

They say Cash is king. 

I really don't think that applies anymore as the number one advantage of Real Estate is the leverage (it's easy to get money for it).

However, You need cash reserves to make sure you stay in business and can keep building (both skills and wealth).

To answer the question of BRRR vs Flip - It's all about "do I have enough cash reserves to make sure I'm going to stay in business?" If the answer is yes, BRRR! No? Flip or even Wholesale.

I would be pretty conservative about answering that question. 

The ultimate goal is to hold real estate. However, each flip gives you more skills, better relationships with vendors, and more cash reserves. In time you will be doing nothing but buying to hold as long as you stay in the game long enough.

Most people try to "build a team" prematurely.

If you are trying to invest out of state, you are most likely picking a market that a lot of other investors are in. That mean's there is a lot of business going around for the potential "team members."

How many calls do you think they get for someone who is going to "buy 10 houses this year and wants to build a team?" Then how many of those do you think actually deliver?

That means that if someone is responding to you they are likely not the busiest ones. i.e. you're getting the bad ones. Benjamin Franklin once said that "if you want something done, ask a busy person."

Now I know that some people have built their business around helping out of staters. There are obviously exceptions to all rules. 

My first suggestion is to only look out of state after you have "cut your teeth" closer to home where you can experience and learn from the process way more quickly. 

As for experienced investors, once you know the game you'll crush everywhere.

If you get started in Real Estate these numbers and decisions will seem like pennies to you. They will be inconsequential.

I would take all of that mental bandwidth and focus it on learning how to wholesale.

This will give you the hands down most valuable skill in RE which is sourcing good deals.

It will also put some cash in the bank. (Maybe a lot)

After doing this for a year or so you will be able to flip houses or BRRR at will. You will have total control over your destiny.

In this pursuit you will eventually have the money to put a down payment on a 2-4 plex. You will use an FHA loan with 3% down. You will use your newfound skills to find a banger of a deal.

Real Estate Agent = Real Estate Expert

All General Contractors = Rehabbers

All Wholesalers are sleazy

HGTV is real

Banks are the best lender

Cash is king

Great starting position!

Don't overthink it. Grab a house off the MLS that needs some updating. Mostly cosmetic would be preferred.

This way you can gain some experience and avoid any major issues that might come from a bigger rehab.

Who cares if you have to leave a little in the deal instead a 100% BRRR. The main thing is to get the appreciation clock ticking on a property.

The move is always whatever SAFELY leads to owning more assets.

Safe means after you have conservatively underwritten the deal including maintenance, property management, vacancy, etc it still has positive cash flow. Even if only by $1.