All Forum Posts by: Lucas Machado

@Drew Morris Unless you have a rich uncle, no one is handing money out for you to rehab a house.  Putting aside an angel funding your deal, here's your options: 

(1) find a hard-money lender, who 99% will require you to put down a fairly big chunk of cash (perhaps 30%?), to fund the rest of your rehab - and they take the property as collateral if you default; 

(2) go to your local REI, build connections, tell every single person you are looking to flip a property and that you will bring them the deal and split the profits in exchange for their money and experience; make them feel your passion and energy; depending on the person, you might get 50% profit if you have it under contract, perhaps lower - asking for anything over 50% would probably be offensive;

(3) Use your own money.

You need to seriously get creative to get a few deals under your belt and develop your lender network (this could be anyone, friends, family, HML, private lending). Now that I've done 10+ flips the last couple years lenders are finally coming around to funding my projects with 0 money down (at hardmoney rates).

I think the importance of this topic though can't be under estimated. The interest/financing you have isn't something to work backwards on. You're ability to finance deals tells you what deals you can do. This isn't to say you should get analysis by paralysis or make a last second pivot, but once you get a property under contract, you should already have a game plan how you will finance that contract (even if that game plan is begging 20 previously identified investors to work with you!).

Hard money loans have a high rate of interest. I'm not saying it can't work for a rental, but of course it can skew the numbers quite a bit and if you don't end up qualifying your in a very tough spot. I also wouldn't make a hard money loan unless there person put down a significant downpayment.

$1,700 a month for $69,900 is pretty strong though if it's mint condition. You can get it under contract contingent on financing (if the seller allows), and pitch it the local REI to partner on it. You can also work some kind of wholesale or close-and-re-sell with whoever you partner with.

Obviously this is a subjective topic - so these are some subjective opinions:

You have no interruptions in the morning - or at least extremely less interruptions. Planning your day, organizing your day, eating healthy breakfast, not racing to your 9:00 a.m. meeting - these are all things that are very good for the average person. I would imagine the whole "I thrive on living the edge of my seat!" is actually a small percentage of people vs. successful people that meticulously planned their time.

If you've been successful without these things, great. There is quite a bit of luck involved in business, or perhaps you just had a genius idea that timed the market perfectly. Perhaps you were naturally born with some skill that was so amazing your planning didn't even matter. You can end up at the right place at the right time with the right stock options. Of course, not everyone can count on that. Most of us have to make our own luck. The better your plan for yourself, the better you will be, the better position to capitalize when the opportunity shows itself. And even if you had been amazingly successful without meticulous time management, there is a good chance with even better time management you could have accomplished even more.

Logically speaking, the best time to plan is the morning. To be successful, you obviously have to be meeting with many people, having many communications, which almost all happen in the middle of the day. If i'm working 4-deal at once, my phone literally never stops ringing and I HAVE to take those calls (and I am mainly referring to major decisions - I always use a GC, administrative support)- so the idea to me that I'm going to run-point on multiple deals and sit quietly and plan in the middle of the day would never work.

@Jan Wanot

I've never done a structure like this - but to be clear you made a $10,000 EMD and on top of that another $51,900?

The other thing I would note - I've never taken taxes into consideration in this fashion. It's kind of strange that you're accounting for 15% taxes on non-existent profit . . . but I'm not an accountant . . . 

How did you get from $21,084 - Dad takes 20% - and get to 0?

Pretty gutsy going in for $89k rehab and a $370,000 total purchase for your first flip : )

@Brendon Maxwell Can you outline the details of how you located "the ones I have looked into"? Hard to say how to find better leads or other strategies without knowing what your current strategies are : )

@Nick Cuttonaro YES! I'm reading Grant Cardone's "Be Obsessed or Be Average."

Everytime I read even 2 pages, I'm so ready to push harder and harder to reach higher levels. I even had to stop reading before I go to sleep cause it gave me too much adrenaline.

@Jerrad Dumont Consider cash flow, capitalization rate, cash-on-cash return.  I'm not huge on rentals, but when I am using them in the shorter term, I would look at each of those and make an assumption as to the how much on-going costs will be, in terms of insurance, taxes, wear and tear, utilities, vacancy. These will vary property to property, neighborhood to neighborhood, age of the property and certain aspects. Replacing things like a roof and central cooling aren't cheap. I would also not simply look at your current rent numbers, I also look at the market numbers in the case of vacancy.

I also don't look at in terms of just my rental returns. Depending on your neighborhood, things like cap rate can be incredibly high (war zone), or fairly low (luxury properties). Doesn't necessarily mean one is better than the other. For example, in my geography - Miami-Dade, Broward, Palm Beach County in South Florida, areas like Wynwood and Coral Gables have property values substantially higher than any cap rate rental number you could ever look at. Doesn't mean it isn't a great deal now or the foreseable future. In fact, you could treat them as flips, wholesales, etc. If your in this for the long term, and the municipality is pumping serious money into the area you're looking at, you could make a substantial amount of money on appreciation. Look up the Community Redevelopment Associations in you area. A good deal "numbers" in a CRA, in my view, is a great deal when balanced with the real world of a government subsidizing the that area of the city.

This also goes to another point in terms of my recent evaluation of rental strategy. If we're at the top of the market currently, it's not necessarily a "great time" to accumulate a large amount of rentals - I'm not saying don't buy a rental. I'm saying, you think a cap rate of say 10% is great for your market - and your investing in that number. One day, perhaps in the near to semi-near future, you may wish to sell that property. If the market corrects or has a reduction, all of a sudden, you're rental is worth substantially less in terms of re-sale and your for all intents and purposes tied to it.

Anyways, I'm no rental pro - but I'm looking to expand in this area and this is how I am looking at it. If your strategy is simply what every other investor on the planet is looking at and bidding on, going to be tough to find great deals (at least in my market, where people buy things at low cap rates or well over market values). If you can see the bigger picture that other investors aren't necessarily seeing, that's where the "gold is" as general business perspective applicable across all industries.

As an example, I recently purchased a property which may turn out to be nearly a 100% ROI flip. Essentially, there was paying tenant (but paying late alot) in a luxury building with a $1,500 HOA (boat access, crazy amenities) - but with the level of rent it was $1,000 or so loss every month. No landlord was willing to buy it to lose $1,000 per month (and it got floated on wholesale lists like 10x). No regular homeowner was willing to buy to lose $1,000 every month and to possibly move in. Typical flippers weren't going to get involved with a 10-month lease to lose $1k every month. It was in pretty good shape so really I knew I could fix it up for around $25,000 (I did a GC walkthrough with GC specializing in condos). Anyway, I took the risk and negotiated with the tenant post-closing and made it clear that i can pay him $5,000 now to find a new place and cancel his lease, or he can wait till the end and then he will leave. He agreed to the $5,000 - and now I perhaps have the largest flip I've ever done.

@Timothy Woodland Find a deal. Go on MLS, Craigs List, scan wholesaler lists, grind out hand-written yellow letters. Make contacts that can execute on deals. Once you have a potential deal, pitch it to your contact, execute either a JV agreement or whatever process makes sense to cut you in for 10-20% of the deal profits. This is different than wholesaling because you will be working hand in hand with the investor and rewarded relatively well for sourcing the deal. You also don't need to be shadily circulating someone's home on a massive buyer's list. You can upfront say you work with a partner who assists in funding deals.

I've done this several times with hustling investors getting their start - they bring the deal, I source the money and/or transactional experience. I'm often surprised where or how they dig up deals on extremely limited marketing and/or time budgets.

@Ray Lai 

White letters go to probate - list is normally around 500. I don't split test it. I don't consider it 500 letters a month a legit sample size.

I don't split test yellow letters; though I know my old yellow letters produced a 1 to 2% response rate. My quote around that time, was going to be 85 cents for the version of mass yellow letter I wished to run - so that would have reduced my mailing list by about 30-45% vs. postcards. I do split test my postcards.

My perspective on the yellow letters is: (1) they are not branded, and I'm building a brand in my local market; (2) I don't want to use a "mind game", for lack of a better term, to make someone call - where I have no reason besides some highly general list to believe they wish to sell; (3) everything - all marketing - ties into my global online marketing - so sending out materials in the real world that does not in detail reflect my website, colors, branding, company name doesn't jive with my business model (even my white letter, comes with my brand business card and House Heroes customized letterhead). It's not this letter or that letter, or adwords, or Facebook: it's my marketing model.

The campaign I was referring to was a postcard that got 1.5% (though it had a few more hits this week, so not sure exactly where it is now). This was a unique mailing list though - to which I believe I'm either the only (or in the very small minority) of investors marketing to.

As a general matter, though, I've been spending the vast majority of my time developing unique lists and marketing systems to properties and opportunity that other wholesalers/investors cannot recognize or cannot execute on. I certainly feel, that's where the gold is. Marketing in normal channels has its place, of course.

@Imran Raz I have a guy I've used many times that I'm happy with. I'll send you a PM.