All Forum Posts by: Michael Ealy

For MF, the lender usually credits the income of the property more than single family.

Otherwise, I won't be able to buy 1,000 units if the lenders will look at my W2 income - because I don't have any W2 income since all of my income comes from cashflow from my properties.

The answer is IT DEPENDS.

Generally investing in college towns is GOOD.

But, treat like any other real estate investment.

• You got to buy it a good price with at least 10% (preferably more like 20%) discount vs. its current market value; AND/OR
• The property has to cashflow (rent less all expenses); AND/OR
• The property has to be in the right area so it will appreciate over the long term. Generally, a college town is usually in demand and appreciates over time. However, it also depends on the college or university - if it's growing or in demand.

If you can't buy it at discount and it does not cashflow and there is very low appreciation potential, then, it's a bad deal even if it's in a college town.

 A note, short for promissory note has 2 parties - a borrower and a lender. In real estate investing, a note is accompanied by a mortgage document that puts a lien on a property. By doing this, the note is collateralized by a property (meaning, once the note is paid off, the mortgage lien is released but prior to that, it can't).

How do you make money with notes?

There are basically 2 ways.

1. One is to buy the note at a fair price and you, as the note buyer, becomes the new lender and receives the income stream (mortgage payments) from the borrower.
2. The other way is to buy the note at a discount (for non performing notes), foreclose on the property and now you become not the lender anymore but the owner of the property.

Depends on your state. Usually, the first to file the lien is the first lien holder. Ask a real estate attorney in your state.

Even though I can buy a property cash, sometimes I just wholesale it if it's too small for me to handle. I specialize in 50+ unit apartments and hotels so when I encounter a single or a small multi family with lots of profit potential, I usually decide to wholesale it. 

I sometimes close on the deal first then sell it to a buyer. That's called the DOUBLE close. There is no need to have a real estate license to do that. Otherwise, no one can sell their house For Sale By Owner.

Sometimes, I put it under contract in an LLC and then assign my ownership in that LLC to a buyer. Do you need a real estate license to do that? Not really.

And if you can't close the deal yourself because you don't have the funds or the ability to raise the funds quickly, you should think twice about wholesaling.

Contrary to what the gurus say, wholesaling is not a beginner's strategy. You got to be: 

• great at finding deals 
• good at estimating repairs
• good & creative in legally controlling a property
• good in marketing and selling 
• and can raise the funds if you need to close.

Lots of things can go wrong in all those - hence, wholesaling is not for the newbie. And if you don't have the funds to close (or can raise it quickly), you might as well have a real estate license to help you find deals and find buyers.

Factor in 10% for cap ex and 10% for repairs and maintenance. For high crime areas and/or older buildings factor in 15% for cap ex (% of rent).

I am pretty sure, after acquiring over 1,000 units that with those assumptions, very few will turn out to be deals even in Cleveland.

I suggest before you jump in, learn from my experience with one of my buildings I sold. The numbers look awesome on paper BUT you need the right team, the right strategy and the mental fortitude and experience to make the deal profitable. A lot of things can go wrong and you need RESERVES. Read below:

https://www.biggerpockets.com/forums/311/topics/64...

If you want to accumulate that many doors in 1-2 years, then I suggest the Midwest. Prices are low compared to rent and positive cashflow with the right property management (& right purchase price) is going to be there.

Be careful though of "D" areas in the midwest. Sometimes on paper the return looks really really good but the actuals will not be or there will be too much hassles.

I live and invest in the midwest. I am hands on and I have a team that can handle the "tenant-drama" and hassles. Like this this 48-unit I sold and made over $1M on:

https://www.biggerpockets.com/forums/311/topics/64...

If you're going to house hack, since you're going to live in one of the units, you will have NEGATIVE cashflow. The minimum criteria to house hack is IF you end up paying less vs. renting and by the time you factor in the loan paydown you are actually breakeven (meaning you are essentially living there for free), then I would say GO FOR IT.

Since you're emotional about it, you might as well hire an attorney to evict them.

In investing, you got to keep the emotions out.

Easy to say but hard to do.

But, it's when things are hard and you persevere, that's when you become great!

The appraisal is going to be the key.

Make the house look nice & smell nice. Remove all clutter. Appraisers are humans too and they get affected by what they see and smell. If you can stage the house - that's even better.

Get solid comps and hand it to the appraiser.

Also, make a list of property improvements you've done and if you have the copy of the receipts, give them to the appraiser.

Basically by doing the above, you make the job of the appraiser easier and you increase the chance you get the right appraisal.