All Forum Posts by: Michael Lee

Hello Tyler!  We are in two completely systems and beliefs.  I might be a good candidate to give you good feedback.  I grew up in Dallas, Texas and I am very conservative in my beliefs.  One of my best friend's was from Minnesota but his dad was transferred for a few years. Then after the 6th grade he went back to Minnesota.  I still miss him even though that was 50 years ago.

My back I ground is in real estate and construction management for about 30 years after I graduated college with honors back in 1980.  I would like to share my knowledge with you.  Being a wholesaler can be risky and you need to be beware of your fellow wholesalers.  

A good way to start may be "reverse wholesaling" where you are a specific looker and knowing what buyers are looking for.   Having that approach puts you on more of a definite list.  Look for "hot pockets" to work in.

Good luck to you!

Hello Anne!  Nothing I have watched or listening to over about 7 years full time, I have never heard about that situation.  That being said, another wholesaler or owner can charge what thay want and that is just more profit and their greediness is showing.  This fee should have been disclosed at your first meeting.

If the title company is convenient to you that's just a part of the negotiation.  I would make a closing dependant on all the tenants being gone.  You should not count on anything that might happen.  That fee raises a red flag.  It is much harder, time consuming, and can be very expensive to evict .  

Good luck to you!

Hello Chad!  It is very difficult to use just one item to make a determination.  One of the most important is Positive Cash Flow, one of the others is C on C return, then the 1% rule of thumb calculation.  That last one is OK to be adjusted b6 common factors to make it fit better like it's location, return wanted, and the overall economy and possible inflation.

Another factor that can play with your results like your loan interest rate or it's terms.  Your goals can effect each formulas used or the type of real estate you're after.or your guts.  This was a good exercise for investors to consider and think about.

Good luck to you!

Hello Martha!  It really depends on your cash available, your experience, your ability to pay the loan if you become unemployed or how much you make.  The #1 loan has the best chance to get a long term loan and you should get about 3.25 with good credit.  The #2 loan depends more on your savings or investments, your experience and if a partner is involved with lots of cash and their credit score.  

There is only a couple or a few ways to get a long term loan (over 12 months). Depending on your available cash or credit and the quality of your investment, you'll have to pay about 6 to 12% plus maybe points plus fees up to about $1,500. Either a FHA loan, owner financing, or Private Money Loan will depend on the quality of the subject property. Owner financing is probably the most flexible.

#3 is about like #2 but would not include an FHA loan because of its owner-occupancy requirement. The FHA loan will usually be harder to get because of the underwriter and still be going through a bank. It will depend on the time you need to close and how desperate the existing owner is and if they need any cash.

You might could get it a "subject t" tocontract where

Hello Bill!  Have a direct deposit bank account at you bank.  Do not use that account for any other reason.  It is a good way to collect while having a breakfast for all tenants you have on the 30th of each month. and "corner those that have not paid yet but I believe this event might be hurt by this virus that is currently preaching against density.

Good luck to you!

Hello Lizbeth!  It seems like we hear "the more units, the better".  What that basically means that 1 disoccupancy does not absolutely kill you when the other unit is having occupancy.  It's location could help or hurt you.  I also believe that the tenants aquire and pay for all utilities.  

If you have to provide one or more of them, I would cap their expense in the lease for each month that will save you from any high or unplanned expenses.  Make sure the Inspector reveals any current building permit violations or if either interior of the units or the exterior has any major repair expenses any time soon.

Good luck to both of you!

Hello Timothy!  What you need is called "skip tracing" and that can be purchased from a company that does that, you could ask the neighbors, or it may be part of a trainer that you join, or call the county tax assessor office or go down and see what they show.  They might have a forwarding address that might be the owner's and you could send them what's called Direct Mail.  

Hand written address on the envelope could help as well as a colored envelope or an unusual size.  You could also leave a note on the exterior of the front door that includes your basic contact info and interest.  Do not sound like an expert because that may scare them. They may just come by occasionally and take your note.

Good luck to you!

Hello Anthony!  One way that is not talked about much is called "owner financing".  It is probably the most flexible loan there is   It does depend on the reason they are selling or if they desire any immediate cash.  If you show them their potential of the money they can make on your rate and the amount that you will provide monthly over their debt amount and show the monthly spread can be very attractive.  

You can do a "subject to" and that their price would be paid of a  price that can be reduced by x with each of your payments (usually a lower amount like $100 or $200 dollars) and they can keep the deed until they are paid off upon your resell for a limited time like 1 or 2 years.

There's also the FHA loan that only requires a 3 1/2% down payment that usually requires owner occupant for 12 months and works well with a duplex, tri-plex, or quadruplex plus the repair/rehab money needed. The other units usually require a low or no rent payment by you.

Unfortunately a bank is usually involved but the loan is guaranteed  and stays under that loan when you leave.  Of course you would want an "add value" house that you can add value to by doing repairs or improvements and that you can do some or all of the work.  It could be a good deal for you depending on your creditability and cash on hand.

Another good thing about that loan is that it is usually long term. That usually being a rental that can more than pay for itself and be a good passive income Investment if it is in a good location.

Good luck to you!

The 1% rule is the sales price or ARV times .01 and that gives you the monthly rent average, not the yearly rent. Use comps done in that area to get a better idea of what you can collect. It might be higher or lower than the 1% rule of thumb. On a MF that is more than 4 units is usually an income-based return and the valuation to determine the ultimate price taking the yearly net income times the average cap rate factor used in that area.

The positive cash flow is usually the determining factor or the cash on cash return based on your actual net yearly net income divided by your actual cash outlay (to get the property ownership plus any repairs or improvements made) to get the return percentage.  

  That will give you the projected return percentage to help you decide on that investment acquisition.  That percentage could be adjusted by it's firmness, projected economy, occupancy used, or your gut feelings.  Use your heart feelings, not just your brain.  

You have to determine your minimum return percentage to make it worth your while considering plus any major capital expenses as well (that are not regular).  Any returns should be based on the yearly totals and to be compared to other investments, usually.

Most comparisons should be compared to others in that area or on the average income or expense in that same area. Property Management rates are usually 10 to 12 percent of the net income.  

Monthly utility and maintenance expenses are usually based on actuals provided by the existing owner and may differ based on your style and/or tenant comments. 

I hope any of this helps.

Hello Michael!  The first mistake I see is on figuring out a practical return. Those income numbers give you a real investment return based on return on a 20% down payment would only make a little over 4%. of about.  There are many ways to do this.  It even fails the 1% test used during the investment quality.  The 1% amount applied to the price and is a rule of thumb that many use when figuring the rent.

A 10% down payment would only give about a 10% return of cash on cash return assuming you could get $1,500 per month rent. Multiply the sale price by 1% gives you the rent you might get which should be figured by comps in that area.

Another thing to consider is the ability to make the tenant responsible for those utilities because those could vary widely and be your regret on taking that responsibility.  I live in Dallas Texas a ND a local paper had a story that said Jerry Jones, the Cowboy owner had a water bill of $10,000 of one month because of his irrigation system.  So watch out.

That area will determine alot of the income and expenses you will incur.  When the debt payment based on a 30 year deal comes out much higher than your calculated rent. Now, the 1%rule comes out to 15,000 per month so something is wrong.  You need to use that area to determine what you can get.  That deal will either work or not.  I think you'll have to be very creative to make that work and use your found numbers to come up with a value.

Good luck to you!