All Forum Posts by: Michael Ealy

@Dorian White, if there are no comps sold in the past 90-120 days, I will be wary of even buying a property in that area. If no one is buying, how can you sell?

Having said that, how are you doing your comparable analysis? Quarter of a mile radius, sold in the past 3-4 months? If you can't find any sold, then go half mile or even 1 mile (if it's a rural area) sold in the past 6-9 months. 

If you still can't find one, what about new construction? New construction will of course be higher than the price of renovated homes so at least it gives you some idea of an upper price (maybe deduct 20-30%). 

Lastly, you can find the replacement cost of similar properties as the last way to calculate what a single family house is worth.

Be careful who you listen to. Ask: "Does he have a hidden agenda?"; "Why is he teaching what he is teaching?" "What's in it for him?"

You got to be skeptical of real estate gurus. Most of them admit they make more money selling information than doing real estate deals. Or in some cases, they teach to get investors to do deals with them.

Having said that, I like Grant Cardone's concept of thinking BIG.

Large multifamily has scale. With my 50+ unit apartments, I can hire a full time maintenance manager. It can have a dedicated property manager and a separate leasing manager. Here's an example of a 48-unit apartment building that I sold last year and made over $1M.

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

Larger properties ironically are actually easier to finance than smaller properties. So going BIG actually makes a lot of sense. However, does it make sense for EVERYONE? Of course not. Start small and work your way up. And what is small for one person can be big for another. Start where you can at the price you can afford and then learn as you go. Have a cushion in case things don't turn out as expected (because they rarely turn out as expected). And then trade up to bigger and bigger properties (with bigger and bigger cashflow).

Thanks @Shea Spinelli

How is your market doing? What real estate strategy do you specialize in?

I agree with @Joe Villeneuve

So many things can go wrong with a flip that you actually want to be MORE conservative instead of less, specially with your first deal. Getting a bad deal will set you back not just money-wise but most importantly, you will lose precious time when you could be doing multiple deals already.

Having said that, define your exit strategy upfront because that determines how you enter the deal. 

I would fix-n-flip around the median price point. Low end houses are harder to sell as they appeal more to renters and landlords. High end houses on the other hand might be slower to sell (higher DOM).

What is the median price of single family homes in your area? You can safely flip houses within +/- 50% of that price. For example, if the median price is $150,000, then fix-n-flips will generally work for houses priced $80,000 to $230,000.

@Spencer Cornelia, congrats on the deal.

Seems you get a lot of bashing from other Vegas investors. That's concerning but here's an idea for you that I used in one of my buildings in a "D" area that I eventually sold for over a $1M profit. Here's my post:

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

HINT: I don't like renting a building in a "D" area to market tenants, nor section 8 tenants. In situations like these, you got to be creative to turn a profit.

As someone who has done over 1,000 deals, to acquire your first deal in the right way, I suggest the following:

1. Decide on which market to buy into and understand that market very well, like better than what you can see on the MLS. In the markets I invest in, I know the market block by block. I know what type of properties that are easy to rent, how much rent people are paying, how many days on the market properties are leased and sold, etc.
2. Make a lot of offers. It's a numbers game. How many offers have you made? If you've made less than 20 offers, then you've not made enough offers. I know an investor who make 1,000 offers a week on HUD listed properties. He has a full time Virtual Assistant in India doing that for him with permission from a local HUD certified agent of course. I am not saying you should make 1,000 offers a week. But if you've made less than 20 offers and complaining it's too hard, you should make MORE offers. If you're not willing to do that, then maybe real estate investing is NOT for you.
3. Make money when you buy and you got to be patient in finding the deal where the numbers make sense. If not, you'll end up with a bad deal that will cost you time, money and sleep. The good deals are out there - but I agree with what most of the BP'ers here have said: most of the good deals are NOT on the MLS. Which is my last point which is...
4. You got to learn how to find deals NOT on the MLS. Network with your local REIA and find good wholesalers who can find off-market deals. Learn how to find good deals through driving for dollars or even doing direct mail campaigns say to out of state owners or to landlords with code violations, etc.

Real estate investing is hard to those not willing to do the work. But if you're willing to do the work, it's hard at first but eventually it gets easier and easier.

The only way I will buy properties from a wholesaler who finds the deal from the MLS is if he/she can sell it to me a lot lower than the MLS list price.

For example, for a property listed for $65,000 on the MLS, if you can sell it to me for $45,000 and show me the numbers make sense even with the repairs (say with an ARV of $100,000 and repairs of $15,000), then sure I will buy it from you. You are providing a real benefit to me by securing the property at such a low price that you are saving me time in finding a deal and negotiating it.

But once you market a property on the MLS selling it for $56,000 and it's listed right now for $65,000 - then it is not worth it for your buyer (as he/she can just wait until your contract expires and buy it off the MLS) and it's not worth your time too.

I invest in the Cincinnati area so I am not that familiar with the area.

But just doing a little bit of research (a few seconds using Google), it sounds like that area is a "C" area or even a "D" area. 

Your numbers (expenses) are too optimistic - i.e., they are TOO LOW.

Generally, in C and D areas you get a lot more turnover. So make your vacancy 10%. Also, there are more repairs so make your repairs 15% not 8%. Lastly, given the property is old (built in 1916 and FRAME not brick), I would allocate 15% for capex.

Lastly, you are not factoring in management - that's another 10%. Believe me - you will want to outsource the property management of properties in bad areas. The headaches are not worth it. Otherwise, your time will just go to this one deal and you won't be able to buy any other property. I have property managers with all of my rentals. Doing so allowed me to buy hundreds of units since 2006. Learn from my post  - How I made Over $1Million on One Deal

Run your numbers again and don't fall in love with any property. Be realistic with your numbers. NO DEAL is better than getting a bad one.

I will NOT do this deal unless your cap rate is at least 12% with the revised numbers.

Thanks @Marla B. for the kind words. 

Thanks @Josh Hershner (I will send you a PM)

Thanks @Eduardo Zepeda. That's why I love real estate investing too - specifically rehabbing properties. We turn around an eyesore, a non performing property and we improve neighborhoods. And make VERY GOOD living in the process :-)

Hi @Elbert D., do another deal of course! I am always looking for a project to work on - as you said, a lump of coal and turn it into a diamond. Thanks!