All Forum Posts by: Michael Ealy

Hi @Angela Holmes,

Yes, the answer is "It depends". Do you have:

1) Good credit and a job?

2) Are you able to find a property at a discount? 

3) Does the property cashflow if you finance the purchase (80% Loan to Purchase)?

4) Will you be able to INCREASE the property value by making renovations?

If you have good credit/job (and therefore can qualify for a mortgage) and you can buy the property at a discount and/or increase the value by making renovations, then I would buy the property all cash and refinance the property once you've done the renovations and increased the value. This is known in BP as BRRRR (Buy-Rehab-Rent-Refinance-Repeat).

If you don't have good credit/job, and you can buy the property at a discount/increase value through renovation, buy it cash and then flip it for a good profit. 

If the property cashflows like crazy even at 80% Loan to Purchase and you have good credit/job, then buy it with 20% down and now, you still have 80% to buy 4 more properties just like it.

Hi BPers and Happy Monday!

Let's encourage one another with success stories on how you guys play Monopoly in real life. Let's encourage the newbie investors most specially because, let's admit it - real estate investing is not easy. It is not for the faint-hearted. When I was starting out I was encouraged by what other experienced real estate investors were able to do and I told myself: "Well if they can do it, I can do it too!"

Here's my super short encouraging story:

I attended a "guru" seminar (I didn't know BP at that time) back in 2004. She was a big wholesaler in town. About 200 people attended that 1-day seminar and I was so excited. I went out and applied what I learned, specially on how to analyze deals and making offers. But I was struggling initially.

In 2006, I finally found my niche. I would buy cheap houses, fix them up and rent them out. And then I "graduated" to fixing small apartment buildings. I found out that property management is the key to successfully making money with rentals. Then, I moved up to 100+ unit apartment complexes.

Now, my biggest project is a hotel development. I literally traded from renting houses to hotels - just like the game "Monopoly". The 3 keys to success are:

1)  Learn how to find, analyze and secure good deals. Without good deals, nothing happens.

2)  Learn how to become a good property manager and build a team of excellent property managers. Property management, done right, makes a good property better or more valuable.

and

3)  Don't give up. It's not easy and it's not for everyone. You lose the game if you quit. So stick with it through thick and thin and eventually, you will reach and even surpass your goals.

What about you? Are you playing the game Monopoly in real life? If so, how did you do it? What did you learn?

Welcome to BP @Phillip Lumpkin! and yes, I am in the midwest market too. I specialize in developing hotels and apartment complexes.

@Llewelyn A., very detailed answer and I totally agree with you. It's not cashflow vs. appreciation, it's BOTH. At the end of the day, cashflow and appreciation (realized) are both MONEY :-)

And I like your answer @Frank Wong - it also depends on where you are in your investing career and how much cash you have. When you have very little cash, it makes sense to go with an equity play and gain that cash which can then convert to meaningful cashflow.

When I develop projects, like hotels or apartment complexes, I look at the over-all profit of the deal and my goal numero uno is to get BOTH cashflow and appreciation and realize the appreciation quickly, i.e., not wait for it for decades. I do this through value-add or forced appreciation combined with acquiring the property at a low enough price.

Then, long-term appreciation is my icing on the cake and we get that through efficient property management which results in higher cashflow over time which results in higher valuation (appreciation).

The key in any relationship, business or personal is transparency and being clear on expectations upfront. What are the partners' roles, equity contribution and form of contribution (money, or labor/expertise, or combination of both)? Then get these in writing with a good attorney knowledgeable about real estate and partnership law in your state.

Apparently, some of these are not clear, hence the lawsuit. 

If you have nothing to hide, show them your books and your bank account. You might need to show these anyway when the case goes to discovery.

One advantage of showing your books is that doing so could avoid wasting time on a lawsuit. I would rather move on to the next deal.

Since you have no experience, I agree with @Account Closed: focus on knowing how to find, analyze and secure good deals. The money always follows good deals. 

Also, since you have no experience, you have to be willing to give up MOST of the equity to your private investors and/or you have to partner with one with the experience to make the deal work for your money partner. Structure something like below:

YOU - find the deal, find the experienced partner

Experienced partner - finds the cash or money investor; and does the rehab and sales (if it's a flip); or rehab and rent (if it's a rental), etc

Money investor - funds the deal