All Forum Posts by: Mitch Messer

Quote from @Connor Thomas:

I recently bought my first BRRRR and am trying to figure out what I should do next as I feel like I am a bit in a bind. Part of it is a learning process and I have learned a lot for future deals. Another part may be me getting a little nervous. I was thinking the house would rent for 1200-1350 but it seems now the range is 1000-1200 with 1200 being the highest for the area so may be hard to get. I was estimating the ARV at 160-165k which I don't know what it will be for sure but I'm a little worried it might be less which throws a wrench in things as well.

I bought a two bedroom one bath house in Indy for 70k which was 10k under asking. Renovation is 46k and is being done now and roughly 4 weeks from being done. I purchased it with a HELOC so higher interest debt until I can cash out refi. Plus any miscellaneous payments such as interest, inspections, etc.

At this point I think I need to finish the renovations regardless. It’s looking like this will cash flow neg just with est mortgage payments plus insurance and taxes of $1100ish (after renovation), property management of $120.

The house is a simple two bed one bath with a garage and a fenced in backyard. The renovations are going to be higher end and the house is pretty simple with a detached garage but no closets in the house.

I feel like I wanted to really start growing my portfolio but feel like I may have jumped the gun. What recommendations might I consider? Let me know if you have any questions

 
Hey @Connor Thomas, you're learning the #1 lesson of real estate investing, which is to run your financials carefully in advance!

Don't panic: You're not the first in this bind, and you won't be the last!

Every investor ALIVE has a story like this, if they've been around for a bit. (Some of us have more than one...)

So here you are.

Your first step should be to get the facts and then reassess your options.

You'll need realistic and accurate estimates of your ARV, your remaining repair expense, market rent, and total projected holding costs.

If you run your numbers and you can still make this work as a rental, then great! Just be 💯 certain that you'll be able to refi that HELOC debt off when the time comes.

However...

At this stage in your investment career, I would URGE you not to sign up for negative cashflow in the hope that "the market" will save you. That's NOT a viable plan (for reference, see years 2007-2011).

If you can't hold it profitably, sell it fast and move on!

Then, before buying anything else, make a list of all the learnings you got from this experience, and then list the systems and policies you'll put in place to ensure you never do this again!

Good luck to you!

Quote from @Pat Arneson:

I have an opportunity to raise capital with a private individual at a flat interest-only rate as a way to reduce interest charges and eliminate origination and service fees. I'm looking for ways I can "protect" this private lender. 

In theory, this is what I'm proposing -- I'll fund 20% and cover closing and rehab costs. Private lender will wire ~80% to my business bank account shortly before close. In essence, it is a cash offer. I am assuming I can write the offer as cash, so long as the private funding is guaranteed otherwise I may put my EMD at risk. For non-auction properties, I'm assuming the title company can draft the deed of trust and promissory note and record at close? After all, most lenders just use the standard Fannie Mae template... For auction properties, I'm assuming once I purchase a property I can draft and record the deed of trust following recordation of the conveyance?

Then, upon resale, does this private lender simply inform the title company of the payoff?

Is there anything I'm missing?

Thanks!

I don't understand: If you truly want to protect the PL, why not close with a title agent?

1. You'll want your private lender (PL) to have a lender's title insurance policy. Your current approach leaves your PL exposed to any title flaws that might arise.

2. You'll want your PL named as lender on the property insurance policy. Who's going to ensure that this policy is in place?

If it helps, put yourself in the position of the PL.

What happens if the PL wires the 80% to your business account and then you get hit by a bus? How would the PL ever get their money back?

What if you did buy a property at auction, and then before you recorded the deed, you got hit by a bus? How does the PL prove that a deed of trust ever existed?

Title companies and closing attorneys exist for this specific purpose.

Why not use them?

Quote from @Vijay Nidumolu:

Glad to see lot of inputs on Tulsa Area. I was driving by last month and noticed lot of construction happening in Bixby area. I even saw new single family Rental community near bixby downtown. I guess that means, there is healthy demand for rents in the metroplex.
I am curious if there is a city or few Zip codes within Tulsa, Broken arrow, Bixby, Jenks and Owasso, that is preferred by prospective tenants ?  Also, it will be great to get feedback on relative risk from tornados and floods, for the above cities. Any thoughts are welcome.  

I'll bet my favorite Tulsa super-agent, @Tom O'Stasik, could answer your questions!

Quote from @Lauren Ruppert:

Okay, so I have a property that I want to renovate.  I'm going to need about 60k-70k.  I have two other properties with no mortgage that are cash flowing nicely.   At this time, what is my best option for getting the cash I need?  

Need more info.

Once you put $60-70K into renovating that property, how will you get those funds back out? How long will that take?

Quote from @Angel Peng:

I found a quadplex for $390k. It has so much traffic and popularity just 2 hours of being placed on Zillow. This is my first investment property. I will be doing a conventional 20% down. I am willing to go as high as $480k for this place. How should I make this offer? Should I offer starting at asking price with an escalation clause of $3000 higher than the highest bidder until $480k? And I would require that they show the price of the 2nd highest bidder. 

Another offer would be that I start at $420k with the same escalation. 

Or should I just start at $430-450k to begin with. 

I am willing to go as high as $480k but obviously would like to avoid it if I could do it for much lower. 

Thank you all for your expertise. 

You're asking the wrong questions.

Your financial analysis of the opportunity should dictate how much you offer, and nothing else!

How do you know this property will even cash flow at the $390K asking?

Exactly why are you willing to "go as high as $480K for this place?"

Unfortunately, "traffic and popularity" don't translate well into cash flow and cash-on-cash return.

Don't get so caught up in the excitement of "doing" a deal that you miss actually "getting" a good deal. 

Quote from @Jake Tiffany:

Hey everyone, many of you send mailers, texts and all sorts of campaigns to try and find deals. I'm attempting many of these strategies as well. I'm a newby so I haven't had much luck yet, but that's ok I'll keep grinding.  I own one rental currently and am looking for more. I get calls, texts, cards and letters constantly on this rental. Lately, I've started thinking maybe these people are wholesalers or investors that could have properties to sell. So I've started texting them back saying that "I'm not currently interest in selling but am trying to build my portfolio. If you have a buyers list, I'd love to be included." A handful of people have responded and asked what my parameters are, etc, which I thought was pretty exciting. Of course, after that brief interaction, I'm pretty sure I just become lost in a sea of other text messages.

My question is do any of you see a way to utilize a strategy like this?  I've had a pretty good percentage of people respond which is nice but that's all. Any ideas for what I could/should do next to capitalize on all these messages from potential owners with properties to sell?

Truth time: I suspect the reason you didn't get any responses back from these alleged "wholesalers and investors" is that hardly any of them are actually transacting deals!

The fact that they contacted you cold even though, I assume, you have ZERO interest in selling your rental pretty well sums up most of the marketing done by wannabe wholesalers. They waste a TON on money shotgunning postcards and letters out to wholly unmotivated owners until they run out of money.

The tip-off is that "buy-box" question. You will eventually learn that wholesalers with deals will just send you what they've got! They don't care about your criteria, since it's not going to change the kind of deals that they come across.

The take-away here is not to be like most newbie wholesalers: Don't do "carpet-bomb" marketing!

Instead, target sellers who have an actual problem, sincerely engage them to learn the specifics, and then solve their problem (and ideally get paid)!

Quote from @Joan Garcia Hernandez:

What are you guys currently doing to target Off Market homes, and what has been most successful for you? Is there anything I should avoid? If you are pulling list, were are you getting them from?

Generally speaking, the easier it is to obtain a list of prospective sellers, the lower the likelihood of getting good deals from it!

Any list you can pull for a few bucks has already been hammered by hordes of investors before you.

Not saying this way can't work, but I recommend a different path...

I prefer to focus on sellers who have a reason to sell but who require some effort and skill to identify.

My favorites are #TiredLandlords, namely owners who have filed an eviction lawsuit against their non-paying tenants.

Many of these folks are through being in the rental business and are open to hearing about a way out.

Even better, #TiredLandlords are ideal candidates for seller financing, since they don't need the sale proceeds to buy another house, PLUS they are already conditioned to receiving monthly payments over a period of time.

Quote from @Hector Espinosa:

Hey everyone!

I’ve been on the hunt for properties and finally found a couple that I’m seriously thinking about making an offer on. 🎉 I’m still finalizing things with my lender, but before I move forward, I want to be 100% sure I’m covering all the key steps.

Here’s the checklist I’ve put together so far:

1. Home inspection – to catch any hidden issues.
2. Appraisal – to confirm the property’s value matches the offer.
3. Financing contingency – securing my loan approval without surprises.
4. Title search – ensuring there are no liens or legal issues.
5. Seller disclosures – reviewing any known problems upfront.
6. Neighborhood research – making sure the area fits my investment goals.

Are there any crucial steps I’m missing or anything you think I should focus on more? I’d love to hear from anyone who’s been through this process—your experience and advice could make all the difference! 🙌

Thanks in advance for your help!

You're missing a BIG ONE.

As an investor, there should be a Step Zero: Analyze the financials!

Nothing else on your list matters if this purchase doesn't achieve your investment goals.

Also, you have NO WAY to determine your offer price until you run the numbers!

Remember: Once you close the seller will get paid, guaranteed!

The real estate agent will get paid, guaranteed!

The escrow agent will get paid, guaranteed!

The loan broker will get paid, guaranteed!

The ONLY person not guaranteed to get paid is YOU!

As an investor, that's your ONE and ONLY JOB!

Quote from @Phil Petite:

Quote from @Mitch Messer:

Quote from @Phil Petite:

Quote from @Mitch Messer:

Quote from @Phil Petite:

I definitely hear your concerns, Mitch, and I have the same concerns, as well, but that's why I am asking for some advice! I'm not sure what to do.

If you were me, and an investor wanted to give $110k at 7% interest - what would you do if your strategy is to buy-and-hold?

Have you already closed your first buy-and-hold deal?

Yes, I've closed on 4, rehabbed them, and they are all rented with tenants in place :)

OK, and for these deals, I assume you use your own funds to acquire and rehab.

With private money, you're now substituting some individual's funds for your own.

However, unlike when it was just your money, you'll need to proceed with extreme caution to make certain your lenders are well protected if/when things don't go as planned.

Private lending is its own whole profession. It isn't something you can pick up in a few Forum posts.

Honestly, if you need private funding, you're best off finding an experienced private lender and doing at least one deal with them to at least see what's involved, long before involving your friends and family.

That is, unless you don't particularly like having friends and family...

I understand what you're saying, and I really appreciate the advice, Mitch! Thank you! :)

Thanks for the connection, Phil!

However...

I can't DM on this platform, so check my profile here if you're trying to reach me "live."

Quote from @Darrell Kirby:

I have an agent that has been attempting to sell my property(Duplex) for 190 days. She is telling me that it is a slow market. I consider her a friend but I was thinking about retaining another agent. One deal fell through during a sale so i stuck it out.

When is a good time to switch agents?

Having a rental property sit unsold for over six months is what I would call catastrophic, particularly if it's vacant!

However, before you switch agents, I recommend you gather up a bit more information.

You should request recent comparable sales data that will help determine whether the problem is a "slow market" or an incompetent and ineffective agent.

Has anything sold near the subject property in the last 190 days? If so, where, for how much, and by whom?

If not, the problem may be your market.

Also, did you ever get any interested buyers? How many? What did they say? Why didn't they buy? What follow-up was done?

You need more data.