All Forum Posts by: Philip Cutting

Hi @Steve Baldwin ,

First, thanks for taking the time to answer my question!  I am looking at Hondro's course(s).  They look pretty good.  

[edited]

My long term goals are pretty insane :). I've been operating my business from Europe for a few years because my son has been getting intensive therapy here for some injuries he sustained at birth.   We will be coming back to Columbus in June of next year (2015). I'm now getting ready to wind back up my investing machine because I took some time off to focus on the birth of our second son (whoot!). 

My main strategy is buy and hold, but I'm looking to start working in wholesaling, because in the past I've let a lot of deals just drop off when I couldn't keep up with all the leads my marketing efforts were producing.

I have around 20 units (sf, doubles,small multis) in Columbus, and another dozen spread outside of columbus. I want to start doing around 84 to 96 wholesales a year and adding 12 to 24 units per year to my portfolio. I have a small team in Columbus 

My near term Goals:

• 2015 to June of 2016: 84 (7 or 8 per month) wholesales and adding 12 (one or two per month) buy and hold units per year.
• 2017 to expand to have a rehab team and start flipping part of that deal flow and expand on the deal flow to properties per year.
• Open my property management company and Real estate business services (like bookkeeping, payroll and mail processing services) to others rather than just serving my own properties. 

If you are really curious I could outline my 5 year goal, but they are so fluid that it's hard to predict.  My 2015/16 goal might be a little aggressive, but I hope to be within 30% of that goal at a minimum.  

What are your goals? 

Thanks

Phil

I'm looking at getting my RE (sales?) license in Columbus ohio. My goal is to get the broker license to build my RE company.  Starting out, what are the annual dues (mls access and such) for a RE agent? Once you take the courses and pass the exams, how hard is it to find a broker to give you the freedom we need as investors?

Thanks!

Phil & Nevie Cutting

I think some other things you can do is pay for relocation, and assist in a security deposit, but that might be pushing it.

Paying for personal property is probably still going to be an under the table thing. I'm not sure you would put that into the purchase agreement, but I would try and see if the bank pushes back.

That is pretty interesting! Thx

Hi @Kevin Yoo

I work with http://cogocapital.com/. They lend up to 50% cash value on properties that you own. I'm not sure if their terms will work for you, but give them a call. Mention my name, it might help some.

Note that they are hard money lenders. If you have good credit and a job and stuff, then try to use a local credit union.

Good luck

Phil Cutting

That's a hard question.

Ways to find value range from free to paid and the difference is normally the time it takes you to get the real data.

I use PME Blackbook (also known as REI Blackbook), but that's a paid service, and that works in NY. Another good service is realquest express (freeish).

Otherwise you can look at solds in zillow and trulia, but I don't like to use them much. Although they have gotten a lot better in recent years. You should look at zillow because the people selling their home will, and you need to be able to defend your opinion from that if zillow is not accurate.

Also, I think NY has that as public data that you can view online.

The best thing to do is call up some appraisers in the area and offer to take them out to lunch or dinner and ask them how they find the deals (or find an investor friend and on one of their appraisals, the appraiser probably put his source for his comps) and hopefully they are not just using the MLS.

Also, it is always worth it to put a property under contract as long as you are clear with the seller what you are doing. Your needs and their needs have to match and if they do, then you can work it out so that they work with you because of all the value you bring. If they are not motivated then there is nothing you can do in the first place as an investor. Don't let unmotivated sellers eat all your time, that's what realtors are for (and another reason to get a realtors license).

The way that you figure out if investors will be willing to pay for it is to find out who are the guys that are buying and just ask them. Look for a list of properties that are purchased that does not have the house itself as the mailing address. You can find a bunch of list brokers online (reisource.com , so on) or you can often have a title company pull you a list (as long as you give them your business). I use First American Title, but i'm not sure if they are in NY (I cannot imagine them not to be though). From this list, you can also see what they are actually buying. But call them up and ask them. Try to have some other deals from that area in your pocket when you do call them, even if they are not your own.

Unless you are in a rapidly appreciating market, the general rule is:

ARV *.65 - Repair costs - your profit.

The more competitive the area the higher that percentage is. Go to a REIA and ask around. In your area, it might be 100% of after repair value - costs because in 6 months the value in that neighborhood are expected to increase 30%. In that case it might be ARV * 1.0 - Repair costs - your profit.

This is learned from spending time in the market. A good realtor can let you know, but calling the buyers directly I think is the best.

One last hint, learn to create a good professional scope of work. This adds huge value to you are a wholesaler. It is a lot of work, but if you are good at it, serious investors will appreciate it and you will sell properties faster. And once you get a reputation, and your scopes are spot on, they will start to make purchases based off your recommendations. But that is about relationship billing and takes time to develop.

Good luck

Phil Cutting

@Jean-Paul Israel about finders fees.

You can often get away with that. But it's still infringing on the problem that @Matt Devincenzo is talking about and can land you in trouble. Matt, how many people have you actually seen prosecuted for that?

I've seen people use marketing fees to try to get around this and I have not heard of any problems with that, but it is still on a very dark gray vector especially if you are getting any payment in result of performance and not just for consistent effort (like per call, or per house that you market to even if it doesn't close or result in a purchase).

Have you considered getting a RE license? You may actually enjoy it and be very successful combining your talent for finding deals and buyers. As a realtor people will respect your opinion more and it will open more doors for you!

In the end, I think you just need to learn to get lots of deals under contract (ethically obviously).

Good luck

Phil Cutting

Hi @Jean-Paul Israel

That's a fair question. After all you are investing a lot of time to find good deals. @Matt Devincenzo is right about having it under contract. This is how you protect yourself.

In addition to having it under contract for purchase, have them give you an option to outbid anyone that gives them an offer (right of first refusal). The way this works is once they have an offer that they accepted, you have the right to give them $1 (or $50 or $1,000, what ever you agree to) and purchase it using those terms. Make sure you make this option "assignable". This option will cost you some cash, because you have to give something of equitable consideration (value) in exchange for the option for it to be a valid option contract, but if you sell it's value right then you can probably get it for $20 or something. You would have to have an attorney draft this up for you, but it could be worth it for you. It's a document that you would file with the state register office if you do not end up closing on it.

The benefits of this to the seller is that they always have a chance to get a better price for their house and they don't have to feel bad about negotiating with buyers.

The benefits to you is that someone cannot go in and undercut you even if you do have a contract that expires.

But one thing to consider while you are starting is to build up some good faith. Even if you don't have your own properties, don't be afraid to pimp out some other wholesalers properties when you are building your buyers list. The way this works, is that when you are calling buyers to build your list, and you ask them what they are looking for, if you don't have something they like, recommend someone else's deal. That way you don't leave the buyer empty handed and waisted their time, and they will respect you for providing value and be warmer to you the next time you call them. On that note, try to work out something with other wholesalers in your area. There will always be lots of deals to go around.

Finally, if someone does decide to go around you, they will almost always find a way to do so. Don't let it get you down, keep working and moving forward and you will be very successful!

Phil Cutting

@ANISH TOLIA that's a great way to leverage yourself as a lender and in that case you hope the borrower can cash out many times quickly. There is a balance between points, interest rate charged, terms and risk that borrower and lender have to consider.

More experienced lenders often get points for just that reason (and to cover the costs and efforts of moving money).

While less experienced lenders tend to focus on interest rates and emotionally perceived risk of the investment and relationship to the borrower (how much they like them).

That said, I'm not sure if points are necessary to a loan. Though if those are your lending terms I am interested :)

Thanks

Phil Cutting

{sent from my smart phone}

Hi Bill,

Yes, maybe, and no by default.

Yes because the lender had planned to make care free income for 15 years, and now you are making them work by having to get that money back into play again (thus it's your job to send them another investment opportunity along with the check, and to give them a heads up). If there was no "official" prepayment penalty, consider giving them a gift for having to go through the effort of re-lending you the funds for your next investment.

Maybe because it depends on the terms of the loan that you set-up before hand. It may or may not have prepayment penalties. When you do a private loan, you make a promissory note and it should outline the details (rules) of the loan. Because it is private there is a lot of lead way. Also there are a lot of restrictions (regulations) on lending and borrowing private money, but that's a different subject.

By default, there is no prepayment penalty for private money loans.

When I borrow private loans, I don't have the lender put in a prepayment penalty. One reason being that they may ask me to get the money out early or that I may want to pay the loan off early. So what I do to be fair is to give at least 3 months of interest even if I somehow flip or refi the house right away. Lenders deserve to make money on their effort and have a plan when they lend it so it's good to respect that. Then your job is to get it back into play right away. I also send my lenders cards (thank you notes) and small gifts to let them know I appreciate it and to show respect.

In the end, if there is no prepayment penalty written into the loan, then you do not HAVE to pay anything more and everyone did their job once you paid what you promised too.

By the way, 15 yr notes are hard to find, they happen, I have some, but they are rare. It's normal to have 3 to 7 year notes. Even some as short as 6 to 18 months. There are no rules on how long they must be, so you have have loans that are just for a few hours, like transactional lending...

I'll try to add more detail about this later, but I have to run for now.

Phil Cutting