All Forum Posts by: Malhar B.

I used to do a lot of Craigslist marketing and realized the most effective marketing technique was to repost several times a day. Of course, don't spam Craigslist, but sometimes, depending on the market you're in, you can get pushed down rather quickly.

Usually, right around 9am, 12pm, & 5pm were the best times to get marketing out. I'm sure you can guess why that is.

Track your marketing on Craigslist and it should definitely help you realize what's working and what's not. There's a few good BP blog posts about Craigslist that can likely provide some good info also.

As far as phone calls, I don't get any--I usually work the e-mail route.

I do REOs. That's all I do mostly, sometimes private sellers, but mostly REOs.

Seeing that there are tenants in the property, I wouldn't assume the property is in horrible shape, but then again, people sometimes have no choice but to live in not so safe/clean/functional housing. Things to watch out on are what you'd watch out on any property -- all of the major elements of the home, plumbing, electrical, mechanical, foundational/structural, roof issues. Those would likely be the major things.

Foreclosures are usually "as-is" without any disclosures, so, I'd DEFINITELY get an inspection from your inspector--make sure it's thorough and because you're local, you should be there when the inspector's there.

Also, regardless of the price you come in at (even if it is full price), you'll want an additional stipulation in there that says the rents will be pro-rated as of the date of closing and that you'd like to negotiate a lease with the current tenants prior to closing (or even prior to the end of the inspection period). A month to month tenant means they can leave in 30 days (and, if they want, tomorrow--and you have little recourse) and if you have one leaving in October, that's pretty soon. Also, October gets into the colder months which is generally a more difficult time to rent properties. If you can negotiate new leases from say, August 1st, 2010 (I don't know if the bank will allow it), you might really be able to do some good stuff with this deal.

Check and re-check the numbers, but the basic formula for a cash flow property is:

1) Figure out max payment... Market rent - desired cash flow (net income per month you want) - management fees (if any) - maintenance/vacancy reserve = Max payment (PITI)

2) Use this PITI figure in a mortgage calculator and figure out the original loan amount.

3) Figure out offer... MAX OFFER PRICE = Loan amount - Rehab - Holding costs - Closing costs

There are several unknowns, so generally, 50% rule makes you money. So your max all-in should be $55K including closing costs, rehab, & holding costs. Depending on the rehab, this looks like a pretty nice deal.

Nothing down makes little sense. I've done nothing down on a bunch of deals, but it's not like I didn't have to come up with the money from somewhere. I use a lot of OPM to do deals. I've had purchase, rehab, holding, etc. costs all funded by private investors.

I do a lot of REOs and the banks are strict. All extra clauses get thrown out, but you don't really need any. To be honest, I've NEVER had a problem getting out of a deal, if need be, via the inspection clause.

That's the only contingency I've ever needed. In fact, there's even properties that I don't spend a single dime on the inspection and they return my EMD promptly. (I usually have documented photos of the property and possibly a quote from one of my contractors). Regardless, inspection clauses are the only clauses I use with REOs. If you're working with private sellers, other clauses should be allowable--I guess it can't hurt to have a backup clause.

Thanks for your responses!

I've had some success collecting in Missouri through garnishing wages. Thus far, no collections in other states, but as our portfolio grows, I just wanted to know my options. Thanks for your help everyone!

I invest in 3 markets, all outside of 500 miles of my home area. Thus far, all of my deals have been lucrative investments. The key to it, without a doubt, is the strength of your team of contractors, inspectors, agents, bankers/brokers, property management firms, listing agents, lawyers, etc. I've done, wholesales, flips, rentals, lease/options, etc. all out of state and truly would not have been able to do so if it weren't for my team. Yes, you must learn about the area... but investing locally "because you live there", in my frank opinion, is not a good enough reason for me.

To me, it's like saying let's throw a dart at the map of the USA and go invest where the dart lands. Stock market investors don't throw a dart at a ticker board and invest in the stock that the dart lands on, so why would you do it for any other investment? I actually wrote a blog post about this... check it out (it's in my status).

I agree with most of the above posts. It is important to take a trip out there and have face time with potential team members. Also, I don't rely on any one person to give me the ins and outs about a property. There's just too much information to gather and it's my private investors' or my own money... and I'm not willing to risk it.

I put checks and balances in place. The realtor goes out and does some task, then the inspector goes out and does what he needs to do, but checks up on the realtor's task, then several contractors go out and check up on what the inspector advised, then the property manager or listing agent will go out and do an analysis of the work the contractor did, etc... I always get documented details for everything--pictures, reports, contracts, whatever the situation warrants.

To figure out values, you have to look at comparables. An fairly decent realtor can help you with these. I usually ask for EVERYTHING that has sold within a half to one mile radius of the subject property and try to get all of the details I can about those solds. Then, I evaluate the comps by comparing it to the subject property.

For improvements, the inspector has to be knowledgable--I screen them thoroughly, get references, find out their licensing, how many inspections they've done, take a look at their sample reports, etc. Then, after their done, I'll talk to them over the phone before I get the report and then after I get the report. We talk and develop a scope of work, which then is written up and sent to several contractors. The contractors go out to the property and bid it all out and I get to compare apples to apples. (Of course, all of these contractors are thoroughly screened as well). During the course of the rehab, my inspector(s) go out and analyze the progress to make sure everything is being done properly to code and on time and in budget. Finally, upon completion, my property manager or listing agent goes out and evaluates the property.

We hold everyone accountable. If you break it down, it isn't all that difficult or different from a local rehab. Yes, there is more involved, but it can be done successfully with checks & balances in place.

Hello everyone! I was curious, has anyone used a collections agency or attorney to collect rents from a tenant that was evicted? If so, which do you prefer, attorney or collections agency? How do you go about selecting one (obviously you'd want an effective one, but a balance of cost too, I'm sure)? If I have a judgement, I'm sure it is a lot easier to get the process rolling, but curious what route others have taken.

It is my understanding that collections agencies take a percentage, anywhere from 20-50%, whereas the attorney may charge an amount in addition to the amount owed; so, if $1000 was owed, the attorney may charge the evicted tenant $1300 and keep the $300. Any experience, thoughts?

Thanks in advance for your help!

Per your comment about buying from a relative, be very careful. You may have to check to make sure the transaction that you propose qualifies as an arms length transaction (a real sale, with the buyer and seller not related and not working together). Otherwise, you might get blacklisted by potential lenders.

What J Scott proposed in his second reply:

"What you might want to consider in this case is just to buy it with an FHA loan, put 3.5% down on the purchase, and then rehab with your own cash. On a $175K purchase and $10K rehab, you would be contributing about $16K, plus any closing costs."

is probably one of the best ways to do this deal. From the sound of it, $10,000 in repairs doesn't sound like much, especially for California and if the property is deemed inhabitable, FHA lenders should loan on it.

I'm assuming when you mean down, you mean option consideration fee? ... It's tough right now, there's a lot of people who are trying to sell crappy rehabs with "$100 down"... I agree with you it's tough, but hang in there... I usually feel good at somewhere around 3-5% on a rent to buy, but I never say that... the first question, IMO, when they ask how much you want down should be, "how much do you have to put down?", or something along those lines... sometimes, they'll say something high like $10K, in which case, you might want to say, great, that's right around what I was looking for... if they say something like "uh, zero?" ... you'd say, well, I'd need at least X amount down (3-5%, maybe) and see what they say. It just takes practice and once you converse with more buyers, you're sure to learn... experience is the best teacher in this biz... second is Biggerpockets! :)

Another option you may want to consider, Bryan, is finding investor buyers. I know there are A LOT of out of state investors investing in Indianapolis -- shoot, I'm one! The advantage you have is you're there on the ground. That may reassure a lot of investors out of state. I know several investors on the ground out there that work with out of state buyers, many are here, on BP... do a search, I'm sure you'll run into a lot of them. It may be another avenue for getting rid of these properties.

Finally, a last thought. I read that you said that no banks are financing... how many did you try? One day, I sat down and called, literally, every single bank in Indianapolis. I got a whole bunch of "no", but that's because my situation is different than yours. I don't live in Indy. They don't think I am at all invested in a property should the property flop. You have a better situation--you can build a relationship with the bank. Try the smaller banks or credit unions that are local to your investment areas. Explain to them your idea/plans and show them your track record. Eventually, I'm sure you will find someone. Keep your chin up--I assure you, you can do it!