All Forum Posts by: Michael Ealy

There are good deals everywhere.

You just have to know...

• where to look
• how to look at a deal and envision how to add VALUE to make it into a good deal

Here's an example that I shared here on BP:

How I Made Over $1M In One Deal After 6 Years of Headaches

Thanks for sharing this @Chris Rendall 

I am sure the real estate gurus will not share things this way. They want to portray real estate investing as very easy when in fact it's not.

Hang in there.

Here's an example of a deal that have way too much hassles but after 6 years, I made over $1MILLION on it. :-) I summarized what I learned here on BP:

https://www.biggerpockets.com/forums/311/topics/644570-how-i-made-over-1-million-on-1-deal-after-6-years-of-headaches

Welcome to BP!

You can learn a lot here.

Great question.

And you might not like my answers but I'd rather give you the truth you need vs. lies you want :-)

1. Out of state investing specially BRRRR is tough. Not impossible but tough. Specially as your first deal. Why? With BRRRR, there are so many things that can go wrong as you rightly pointed out. You might get the wrong contractors, the wrong property manager, you might even get the wrong lender so your money is stuck and you can't refinance out.
2. If you can do your first deal in your backyard, then that will be preferred. Maybe partner up with another experienced investor. He/she puts up some of the cash and do all of the work. You put up the credit and most of the cash and learn. Then you split the profit. By doing this, you have some semblance of control, you learn and your risk by working with an experienced partner becomes less (of course after vetting the partner very carefully)

I am real estate developer, specializing in apartments 50+ units and above and hotels.

The answer: YES it is hard.

There are many moving parts. If any of below is screwed, the whole deal could fall apart or will not be as profitable as projected.

You have to be good (or have team members who are good) at:

• Finding deals
• Analyzing the numbers
• Negotiating the deal
• Raising capital
• Investor relations
• Construction estimate
• Construction management
• Permit process
• Relationship with the city/town/village you're doing the development
• Exit strategy definition and implementation
• Sales and/or Leasing
• Property management (if needed)

I wouldn't start out as a developer. Start with a small multi (2-4 units) that is already existing, that needs cosmetic repairs (paint, carpet, windows, but not foundation issues or other major structural renovation). Be willing to pay a fair price as long as you cashflow even while paying for property management.

Then learn as you go and trade up to bigger and bigger projects.

I am assuming you mean loan to buy a property.

You didn't specify the amount of the loan.

But to answer your question, 18 yrs old is the legal age (in most states) so you can get a mortgage. Find a mortgage broker in your city/town specializing in working with real estate investors. Or unless you want to "house hack", then any mortgage broker will do.

Your maintenance number is too low. Double it for student housing (5% to 10%).

Also, don't include the utilities with the rent. They have to pay for that separately so they don't abuse it.

Can you negotiate further on the price? If it's listed for 100 days at that price, there's a reason it's not selling.

Lastly, have you inspected the property? If it needs repairs you have to deduct that from the price and add that to your downpayment.

Charles,

After buying over 1,000 units, here are some of the biggest "value-add" property changes:

1. New Paint

2. New Windows

3. New kitchen appliances (stainless - smart appliances)

4. Opening up the layout

5.  Moving from carpet to Hardwood floors

Charles,

Your IRA should be a Self-Directed IRA for you to use it to buy real estate.

Another option is buying tax deed properties or properties foreclosed for non payment of taxes. You can buy them cheap - some below $30K.

Sorry for your loss @Andrey Y. 

There is no sense in blaming you for not doing your due diligence on the deal. I commend you for taking responsibility and for sharing this on BP so this company won't scam another investor ever again.

Having said this, let me see if I can help you by giving you some useful advice.

You have 2 choices with this property it seems like.

1.  You keep the property. You refinance with another lender so that you don't end up paying 9% interest. It sounds like you have breakeven equity. If you can hold on to this property long enough, you will still make money with this. However, you need to take control. 

• Fire the property manager and hire a new one. You are right in saying that $3,000 to turnover a rental house for paint and carpet will NOT cost that much.
• Refinance as I said above to keep the property cashflowing when it's rented. Also, is it possible to increase the rent?
• Another option you can do is sell the property on a rent to own basis so that maintenance and repairs (minor) will be the tenant-buyer's responsibility. You can also increase the price since you are selling it 2-4 years from now.

2. Sell the sucker. By doing this though - you lock in the loss. BUT, you no longer has the hassle.

If this happened to me when I was starting out, I will choose option 1. BUT, I understand if you decide to sell because you're an out of state investor. If you decide to sell, learn the lessons and move on.

Hope this helps.