All Forum Posts by: Matthew Hull

So the 1% rule is just a way to filter down the many deals you might look at. It’s not a metric for knowing if the deal is going to fit your goals. Your performance goals are base on a bunch of factors.

Seems like the “buy box” is the real filter for most everyone. You figure out what kind of deals meet your investing goals and then you filter the opportunities within that framework. 

How are you all taking that first pool of opportunities and whittling it down to a manageable list to investigate further? Is it the buy box? Is it a particular cash flow goal? Is it an appreciation goal? Do you have simplified ratios or percentages you’re using to make quick decisions?

How are you filtering opportunities down to a manageable list if the 1% rule isn’t cutting it?

I would go to Autodesk.com and ask around the forums there. The people who can share those kinds of resources are the people doing the design and drafting work as their profession. 

If you have to submit plans for your build out, historic records aren’t going to get you permitted. You’ll need all the requisite licensed professionals providing new drawings of what you intend to do. Check with the building permit department about exact submission requirements and what work requires licensed designers and engineers.

If you’re just saying the survey cost of getting the existing building layout documented is too much, you might be able to get creative and avoid the costs, but it’s not a great bet to make. 

If it’s not penciling out doing it with professionals, this sounds like a deal you may not want to do. 

Good point, @Jay Hurst. 😮

The thing is, you could take that $45k and leverage it with multiple deals to regain that $130K in 1, 2, or 3 years. It’s a numbers game and a leverage game.

For example, you could split that $45k into two (properly analyzed) deals, leveraged with smart financing, and then refinance after rehab, cash out your equity, cash flow the properties, and carry on with more deals using the equity you extracted. Let’s pretend you create $80k of equity you can extract from each property ($160k total) - now you’re on your way to a much faster “recovery” than sitting on it or investing in a 7% stock.

There are even ways to keep that $45k and leverage other people’s money to make the same returns. 

Read “Real Estate Deal Maker” by Henry Washington. It’s super insightful.

But as you’ve ascertained, the deal must pencil out. Analyze rigorously and don’t do a deal that doesn’t meet the metrics. 

The ebbs and flows of business include losses, even big losses. I like @Mike Dymski's perspective. Move forward and keep building. And heck - go ahead and keep what you have and try to salvage it so you're not bleeding. Just don't get stuck investing time/energy into recouping something that can be recouped in a different investment faster. 

Rather than 1031 exchange, have you considered rent to own? Get buyers on board (maybe someone who doesn’t yet qualify for a mortgage, but is financially prepared to purchase). Have them sign a lease (rent) and then sell them the right to purchase (own) after a 2 year period (priced at estimated appreciation). The purchase of the rights would be non-refundable and would go towards the purchase of the home (in essence, a down payment). They would have immediate control and responsibility for improvements and maintenance. 

What you’d get?

1) A down payment up front of $15-$30k per property (or whatever they can afford that you’d accept). 

2) Rent (not applied towards purchase) - covers your mortgage, but no more maintenance or management fees, etc. 

3) A windfall of the balance of the purchase price at the end of the term.

Bonus: if they want, they can apply additional funds towards the balance of the purchase price on top of rent. 

Cash on cash on cash. 

You don’t get as much leverage right away, but you get SOME immediate leverage and you’d have much better cash flow. 

Also, title doesn’t change hands and if they back out, there are no refunds - they just terminate their lease and away you go and find another buyer.  

I am only spouting something I heard on BP Rookies podcast, so I haven’t done this. However, depending on your goals, the concept may be a boon for you. 

Done. Let’s connect! 

 Sounds great. I’ll reach out this week!