All Forum Posts by: Mitch Messer

We used to have a similar philosophy ... and then we went to live in Clovis, New Mexico for a few years! 😂

Plenty of lovely folks there, plus it's where Cannon Air Force Base is located, but we soon discovered that just having a base nearby didn't necessarily make for a lively real estate market.

Shortly after that, we adopted our MUCHAS criteria:

M - Near a military base

U - Has at least one college or university

C - Has a Costco or equivalent

H - Has a hospital ranked at least as a Level II Trauma Center

A - Has a commercial airport

S - Has a Sprouts (organic grocery) or equivalent

This has led us to look at often-overlooked markets like Lubbock, Texas and Augusta, Georgia.

May be worth a look for you as well!

Welcome, Shane!

What specific markets are you considering?

Hey AJ, FYI I did see your DM but cannot reply here. See my BP profile to reach me directly!

Always glad to offer a critical eye, especially when it comes to the financials!

Yes, you can safely assume that all numbers provided by the listing agent will be ... highly suspect! 🤣 You'll want to confirm EVERYTHING!

Also, I'd be very careful that tenants not wanting renovations isn't just code for "I don't want you poking around to see what I've done to this place!" Inspect thoroughly and be on the lookout for unaddressed/unreported repairs!

That said, assuming no tenant damage (and if it won't net you more rent) I wouldn't renovate if the tenants don't want it.

I think the real question is whether the tenants are actually paying market rents.

Good luck!

Hi @Helene Goodworth. Congratulations on looking carefully at the financials before buying! (So many "investors" do not.)

Yes, you're missing a few things:

1. In "Expenses" you've missed vacancy and management. We're pretty conservative with our numbers, so we set vacancy at 1 month rent lost every 12 months, or 8.33% of gross rents. Here that would be $6355 annually. Management costs are about 10% of gross rents in our market, so that would be $7626/yr.

2. Is item "Repairs and Maintenance Furnaces" just for the furnaces, or for ALL repairs? Either way, for THREE units, $1,231.20 seems far too low to accurately reflect your annual repair and maintenance expenses.

3. What renovations are required to the property now? These will need to be factored into your all-in costs. EVERY property has some deferred maintenance and unaddressed repairs, and so you'll have to deal with those when you acquire.

4. Cap rate (NOI/Price) isn't a meaningful metric for you here: You instead want cash-on-cash return (Cash_Flow/All-In_Investment), which tells you the rate of cash returned on your invested cash. Even if you bought with all cash and did ZERO renovations or capital improvements, just with the missing expenses mentioned above, your cash-on-cash return would be closer to 6-7%.

You should re-evaluate the complete analysis to see for yourself. It's the only way any of us investors gets better at this!

@Felicia West In which U.S. state would you be looking to do short sales, REOs, or foreclosures?

Every state has a unique set of laws and regulations regarding the foreclosure process, so your ability to succeed will depend largely on where you're operating.

Also, all three of these require advanced skills and background, so I wouldn't necessarily start here.

That said, if you do then be sure to get top-notch training and complete deal documentation from folks who have seen at least one full real estate cycle.

Rather than specializing so soon in your real estate career, I would instead recommend just getting in front of as many real estate owners with problems.

Just getting really good at talking (and listening!) to sellers in need will serve you far better over the long-term than focusing on any specific tactic.

Good luck!

Hey @Nate Caffero, rather than putting someone else on the deed and pulling out equity to do deals ...

... why not keep your equity to yourself and just work with private money?

Assuming you can find a great fix-and-flip deal, you could borrow what you need from private lenders and not need a ton of cash (although you would need some money for the rehab).

Also, has your bank told you what the specific credit requirements for their loan would be? Are you close?

You may be better served fixing your credit rather than involving an equity partner at this early stage of your investing career.  

@Russell R Massey I can't DM here on BP. You'll need to either call.

I'm eager to help: Let's connect!

Hey @Russell R Massey, I'm happy to connect you with a super-smart Georgia real estate attorney I know who can give you the answer. (See my profile to reach me.)

That said, unless these Fi-Fas are substantial, the juice may not be worth the squeeze.